<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OUTSOURCING SERVICES GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7839 33-0597491
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) Number)
</TABLE>
--------------------------
425 SOUTH NINTH AVENUE
CITY OF INDUSTRY, CALIFORNIA 91746
(626) 968-8531
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
JOSEPH W. SORTAIS
CHIEF FINANCIAL OFFICER AND SECRETARY
OUTSOURCING SERVICES GROUP, INC.
425 SOUTH NINTH AVENUE
CITY OF INDUSTRY, CALIFORNIA 91746
(626) 968-8531
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
--------------------------
COPIES TO:
JEROME L. COBEN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
--------------------------
<TABLE>
<CAPTION>
JURISDICTION PRIMARY STANDARD I.R.S. EMPLOYER
NAME OF ADDITIONAL OF INDUSTRIAL CLASSIFICATION IDENTIFICATION
REGISTRANTS* INCORPORATION NUMBER NUMBER
- ----------------------------- ------------- -------------------------- --------------------
<S> <C> <C> <C>
Aerosol Services Company, California 7839 33-0597492
Inc.
Kolmar Laboratories, Inc. Delaware 2844 14-1439595
Piedmont Laboratories, Inc. Georgia 7839 59-2539969
</TABLE>
- --------------------------
* Address and telephone number of principal executive offices are the same as
those of Outsourcing Services Group, Inc.
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 7/8% Series B Senior Subordinated Notes
due 2006.................................. $105,000,000 100% $105,000,000 $30,975
Guarantees of the 10 7/8% Series B Senior
Subordinated Notes due 2006 by Registrants
Other than Outsourcing Services Group,
Inc....................................... $105,000,000 (2) (2) (2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 457(n), no separate registration fee is required with
respect to the Guarantees.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
OFFER TO EXCHANGE
10 7/8% SENIOR SUBORDINATED NOTES DUE 2006 FOR
10 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
OF
OSG OUTSOURCING SERVICES GROUP, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
--------------------------
Outsourcing Services Group, Inc. ("OSG" or the "Company") hereby offers,
upon the terms and subject to the conditions set forth in this prospectus (this
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal," which together with this Prospectus constitute the "Exchange
Offer"), to exchange an aggregate principal amount of up to $105,000,000 of its
10 7/8% Series B Senior Subordinated Notes due 2006 (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
10 7/8% Senior Subordinated Notes due 2006 (the "Old Notes" and, together with
the New Notes, the "Notes") from the holders (the "Holders") thereof. The terms
of the New Notes are identical in all material respects to the Old Notes except
(i) that the New Notes have been registered under the Securities Act, (ii) for
certain transfer restrictions and registration rights relating to the Old Notes
and (iii) that the New Notes will not contain certain provisions relating to
Liquidated Damages (as defined) to be paid to Holders of Old Notes under certain
circumstances relating to the timing of the Exchange Offer and other
registration requirements. The Company issued $105,000,000 aggregate principal
amount of Old Notes on March 3, 1998 pursuant to exemptions from, or
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws (the "Offering").
Interest on the Notes will be payable semiannually in arrears on March 1 and
September 1 of each year, commencing September 1, 1998, at the rate of 10 7/8%
per annum. For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. The New Notes will bear interest from the most recent date
to which interest has been paid on the Old Notes or, if no interest has been
paid on the Old Notes, from March 3, 1998. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the Exchange
Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not
receive any payment in respect of accrued interest on such Old Notes. The Notes
are redeemable in whole or in part, at the option of the Company, on or after
March 1, 2003 at the redemption prices set forth herein plus accrued and unpaid
interest to the redemption date. In addition, at any time on or prior to March
1, 2001, the Company, at its option may redeem up to 35% of the aggregate
principal amount of the Notes originally issued with the net cash proceeds of
one or more Equity Offerings (as defined), at the redemption price equal to
110.875% of the aggregate principal amount to be redeemed plus accrued and
unpaid interest to the redemption date; PROVIDED that at least 65% of the
aggregate principal amount of the New Notes issued hereunder together with the
Old Notes originally issued and not exchanged in the Exchange Offer remains
outstanding immediately after any such redemption.
The Old Notes, are and the New Notes will be, unsecured senior subordinated
obligations of the Company and the Old Notes are, and the New Notes will be,
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company. The Old Notes are, and the New Notes will be,
effectively subordinated to all secured indebtedness of the Company to the
extent of the assets securing such indebtedness. The Old Notes are, and the New
Notes will be, unconditionally guaranteed by each of the current United States
subsidiaries and certain future subsidiaries of the Company (the "Guarantors")
on an unsecured senior subordinated basis (the "Guarantees"). Each of the
Guarantees will be effectively subordinated to all secured indebtedness of such
Guarantor to the extent of the assets securing such indebtedness. The Old Notes
and the Guarantees rank PARI PASSU with, and the New Notes and their Guarantees
will rank PARI PASSU with, any future senior subordinated indebtedness of the
Company or the Guarantors, respectively and rank or will rank, as the case may
be, senior in right of payment to all other subordinated obligations of the
Company or the Guarantors, respectively. As of March 28, 1998, neither the
Guarantors nor the Company had outstanding Guarantor Senior Debt (as defined) or
Senior Debt, respectively, and the Guarantors had approximately $51.4 million of
availability under the Senior Secured Credit Facility (as defined). In addition,
as of March 28, 1998, the Company's subsidiaries that are not Guarantors had
approximately $6.6 million of indebtedness and accrued liabilities, including
trade payables, which are structurally senior to the Notes. See "Description of
Notes."
Upon the occurrence of a Change of Control (as defined), each holder of
Notes will have the right to require that the Company purchase all or a portion
of such holder's Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of purchase. In addition,
the Company will be obligated to offer to purchase the Notes at 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of purchase in the event of certain asset sales. See "Description of
Notes."
--------------------------
SEE "RISK FACTORS" BEGINNING AT PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES IN THE
EXCHANGE OFFER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is , 1998
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined herein). Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission"), as set forth in no-action letters issued
to third parties, the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by Holders thereof (other than any Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Holder's business and such Holder, other than
broker-dealers, has no arrangement with any person to engage in a distribution
of such New Notes. The Company has not sought and does not intend to seek its
own no-action letter in connection with the Exchange Offer and there can be no
assurance that the Commission would make a similar determination with respect to
the Exchange Offer. Each Holder, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage in, a distribution of
such New Notes and has no arrangement or understanding to participate in a
distribution of New Notes. If any holder is an affiliate of the Company and is
engaged in or intends to engage in or has any arrangement with any person to
participate in the distribution of the New Notes to be acquired pursuant to the
Exchange Offer, then such Holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 90 days after the Expiration Date (as defined herein), it will make
this prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. If the Company terminates the Exchange Offer and does not
accept for exchange any Old Notes, the Company will promptly return the Old
Notes to the Holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes. BT
Alex. Brown Incorporated ("BT") has advised the Company that it currently
intends to make a market in the New Notes. BT is not obligated to do so,
however, and any market-making with respect to the New Notes may be discontinued
at any time without notice. The Company does not intend to apply for listing or
quotation of the New Notes on any securities exchange or to register or qualify
the New Notes for offer and sale in any jurisdiction (other than the
registration of the New Notes under the Securities Act).
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The New Notes will be available initially only in book-entry form. The
Company expects that the New Notes issued pursuant to the Exchange Offer will be
issued in the form of one or more Global Notes (as defined) that will be
deposited with, or on behalf of, the Depository Trust Company ("DTC" or the
i
<PAGE>
"Depository") and registered in its name or in the name of Cede & Co., as its
nominee. Beneficial interests in the Global Note representing the New Notes will
be shown on, and transfers thereof will be effected only through, records
maintained by the Depository and its participants. So long as DTC or its nominee
is the registered owner or holder of the Global Note, DTC 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 (as
defined). Payments of the principal of, premium (if any), interest and
Liquidated Damages (if any) on, the Global Note will be made to DTC or its
nominee, as the case may be, as the registered owners thereof. None of the
Company, the Trustee (as defined) or any Paying Agent (as defined) will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest. After the initial issuance of such Global Note,
New Notes in certificated form will be issued in exchange for the Global Note
only in accordance with the terms and conditions set forth in the Indenture. See
"Description of Notes--Book Entry; Delivery and Form."
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New Notes
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the New Notes offered hereby,
reference is made to the Registration Statement. Any statements made in this
Prospectus concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement otherwise filed with the
Commission.
Upon the effectiveness of the Registration Statement, the Company will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and in accordance therewith will file
reports and other information with the Commission. The Registration Statement,
the exhibits forming a part thereof and the reports and other information filed
by the Company with the Commission in accordance with the Exchange Act may be
inspected, without charge, at the Public Reference Section of the Commission
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: 7 World Trade Center, 13th Floor,
New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the material may be obtained
from the Public Reference Section of the Commission upon payment of the
prescribed fees. The Commission also maintains a site on the World Wide Web that
contains reports, proxy and information statements and other information at
HTTP://WWW.SEC.GOV.
In the event that the Company is not required to be subject to the reporting
requirements of the Exchange Act in the future, as required under the Indenture
pursuant to which the Old Notes were, and the New Notes will be, issued, the
Company has agreed that, for so long as any of the Notes remain outstanding, it
will 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 Notes remain outstanding,
the Company has agreed to make available to any prospective purchaser of the
Notes or beneficial owner of the Notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA," "SELECTED
HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
THE FINANCIAL STATEMENTS (AS DEFINED) INCLUDED ELSEWHERE IN THIS PROSPECTUS.
UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) REFERENCES TO "OSG" AND THE "COMPANY"
REFER TO OUTSOURCING SERVICES GROUP, INC. AND ALL OF ITS SUBSIDIARIES, INCLUDING
AEROSOL SERVICES COMPANY, INC. ("ASC"), PIEDMONT LABORATORIES, INC. ("PIEDMONT")
AND KOLMAR LABORATORIES, INC. ("KOLMAR"), (II) REFERENCES TO THE KOLMAR GROUP
INCLUDE KOLMAR, KOLMAR'S WHOLLY-OWNED SUBSIDIARIES, KOLMAR DE MEXICO, S.A. DE
C.V. AND KOLMAR (AUST.) PTY. LIMITED AND KOLMAR CANADA, FORMERLY A DIVISION OF
CCL (AS DEFINED) (UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO KOLMAR
INCLUDE REFERENCES TO THE KOLMAR GROUP), (III) REFERENCES TO FINANCIAL STATEMENT
BALANCES ARE DETERMINED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES ("GAAP"), AND (IV) REFERENCES TO "PRO FORMA BASIS" MEAN
THE APPLICATION OF THE PRO FORMA ADJUSTMENTS DESCRIBED UNDER THE HEADING
"UNAUDITED PRO FORMA COMBINED FINANCIAL DATA." THE MARKET POSITION AND OTHER
INDUSTRY DATA CONTAINED HEREIN, BOTH WITH RESPECT TO THE UNITED STATES AND NORTH
AMERICA, HAVE BEEN DERIVED FROM INDUSTRY AND OTHER SOURCES AVAILABLE TO THE
COMPANY, INCLUDING MANAGEMENT'S INDUSTRY EXPERIENCE. WHILE MANAGEMENT BELIEVES
THAT ITS ESTIMATES DERIVED FROM SUCH SOURCES, INCLUDING AS TO MARKET POSITION,
ARE REASONABLE, NO ASSURANCES CAN BE GIVEN AS TO THE ACCURACY THEREOF.
THE COMPANY
The Company is a leading provider of outsourced manufacturing and packaging
services to the North American health and beauty aid market. Over 75% of the
Company's revenues are derived from the manufacturing and packaging of health
and beauty aid products, including lipstick, face powder, eye shadow, mascara,
nail enamel, skin care cream and lotion, hair spray and gel, shampoo and shaving
cream and gel. Other products manufactured and packaged by the Company include
household and automotive products such as lubricant, household cleaners and
lighter fluid. OSG offers its customers a complete range of services, including
product conceptualization, formulation, manufacturing, filling and packaging. It
also provides ancillary services such as materials procurement, warehousing and
distribution of finished goods. The Company is a recognized leader in product
formulation and has developed hundreds of proprietary products that have been
placed into distribution by its customers in national and international consumer
markets. Management estimates that a majority of the Company's revenues are
derived from products that OSG has formulated. The Company has six manufacturing
facilities strategically located in the United States and Canada, in addition to
facilities in Australia and Mexico. Management believes OSG is the largest
independent contract manufacturer and packager of color cosmetics, high-end
salon aerosol hair care products and shaving creams and gels in North America.
The Company had revenues and EBITDA (as defined) of $53.9 million and $5.0
million, respectively, for the three month period ended March 28, 1998.
The Company's customers include over 350 companies that market branded
and/or private label consumer products in the health and beauty aid, household
and automotive markets. Customers include Avon, Elizabeth Arden, Estee Lauder,
Gillette, Helene Curtis, Kingsford, L'Oreal, Mary Kay, Paul Mitchell, Procter &
Gamble, Sebastian and WD-40, as well as other nationally branded marketers and
numerous regional or niche marketers. The Company's top ten customers have been
with the Company for 17 years on average, and nine of those top ten have been
customers for at least ten years. The Company believes that its ability to
develop long-term relationships is due to its product formulation expertise,
manufacturing reliability, consistent product quality and timely delivery. Many
of OSG's customers lack in-house manufacturing capabilities and outsource their
manufacturing and packaging requirements in order to focus on marketing.
Management estimates that a majority of the Company's revenues are derived from
customers that do not have in-house manufacturing capabilities for the products
OSG manufactures. Companies with the necessary in-house manufacturing
capabilities utilize the Company's services for new product launches, lower
volume brands and to supplement internal capacity.
1
<PAGE>
Contract manufacturers and packagers manufacture products to customer
specifications and fill containers for a wide range of industries. Contract
manufacturers typically charge a per-unit fee which varies depending on: (i) the
type of product, (ii) the type of services provided (filling only versus product
development, formulation, materials procurement, etc.), (iii) the container size
and order quantity, and (iv) the complexity of the manufacturing and packaging
process. The contract manufacturing and packaging industry is highly fragmented,
with hundreds of independent companies typically providing a narrow scope of
services in limited geographic areas. Competition is based principally on
formulation capabilities, product quality, reputation, service, dependability,
and cost-effectiveness. When the cost of distribution is a significant factor in
the total product cost or if customers desire geographic proximity to suppliers,
competition tends to be regionally based. Management believes that few
competitors offer the scale, expertise, reputation and range of services that
the Company provides.
The Company specializes in the manufacturing and packaging of color
cosmetic, aerosol, cream, lotion and liquid products:
COLOR COSMETIC PRODUCTS. Color cosmetic products include lipstick, face
powder, eye shadow, mascara and nail enamel. The Company manufactures and
packages color cosmetics for the entire range of cosmetic market sectors from
budget to high-end. According to Frost & Sullivan, retail revenues in the color
cosmetics industry were estimated at $3.3 billion in 1996 (representing a 3.6%
annual growth rate since 1993). In order to respond to and drive fashion trends,
marketers continually change their product offerings. By offering product
conceptualization and formulation expertise and manufacturing flexibility, the
Company helps its customers remain current with market trends. Management
believes that the Company is the largest independent contract manufacturer of
color cosmetics in North America. For the three month period ended March 28,
1998, OSG's revenues from color cosmetic products were $15.1 million,
representing approximately 28.1% of revenues.
AEROSOL PRODUCTS. Aerosol products include a broad range of products such
as hair spray, shaving cream and gel, lubricant, non-stick cooking spray and
household cleaning products. The aerosol system is one of the most effective
forms of delivering products in a cost-effective manner, while providing dosage
control, sanitary use and convenience. The Chemical Specialty Manufacturing
Association ("CSMA") estimates that in 1996, over 3.2 billion aerosol units were
filled in the United States (representing a 1.8% annual growth rate since 1990).
The aerosol products market has undergone significant change as certain states
have enacted regulations requiring reduced Volatile Organic Chemicals ("VOC")
emissions, resulting in the reformulation of aerosol products to meet these new
standards. The Company has reformulated over 100 products in response to
legislative changes. Not only must packagers of aerosol products obtain
government permits, but the packaging process also requires specialized
equipment and expertise. Management believes that the Company is the second
largest independent aerosol contract manufacturer and packager in North America,
the largest in shaving creams and gels and the largest in high-end salon aerosol
hair care products. For the three month period ended March 28, 1998, OSG's
revenues from aerosol products were $22.9 million, representing approximately
42.5% of revenues.
CREAM, LOTION AND LIQUID PRODUCTS. Creams and lotions consist of skin care
products such as facial preparations, hand and body care products, sun care and
anti-aging products. According to Frost & Sullivan, the skin care market is one
of the largest and fastest growing sectors of the health and beauty aid market,
estimated at $6 billion in revenues in 1996 (representing a 7.5% annual growth
rate since 1993). The Company began emphasizing skin care products in 1994 after
recognizing the growth potential of this market, and such products have grown to
approximately 20% of the Company's revenues. Other liquid products manufactured
and packaged by OSG include shampoo, conditioner, fragrance, pump hair spray and
gel and non-aerosol deodorant, as well as products for the household and
automotive markets such as lighter fluid, lubricant and cleaning products. For
the three month period ended March 28, 1998, OSG's revenues from cream, lotion
and liquid products were $15.9 million, representing approximately 29.5% of
revenues.
2
<PAGE>
COMPETITIVE STRENGTHS
OSG attributes its leading market position to the following factors:
FORMULATION EXPERTISE. Management believes that OSG is highly regarded for
its product formulation capabilities. OSG's research and development chemists
have developed hundreds of proprietary products on behalf of its customers that
have been placed into distribution. Products developed by OSG include numerous
hair care products, such as hair sprays for the high-end salon market, color
cosmetics, such as long-lasting silicone lipstick and other products, including
a new product for WD-40. In addition, OSG is at the forefront of the
reformulation of aerosol products in response to changing government
regulations. Management believes that the Company's formulation expertise is
highly valued by its customers, resulting in greater customer loyalty and the
opportunity for revenue growth. Management estimates that a majority of the
Company's revenues are derived from products that OSG has formulated.
LONG-STANDING CUSTOMER RELATIONSHIPS. The Company believes that its strong,
long-standing customer relationships provide it with a distinct competitive
advantage. OSG provides contract manufacturing and packaging services to over
350 customers worldwide, including some of the best-known and most successful
consumer product companies. OSG's top ten customers have been customers for over
17 years on average, and include Sebastian, Mary Kay, WD-40, Nu-Skin,
Warner-Lambert, Procter & Gamble, Paul Mitchell, Helene Curtis, Fashion Fair and
Alberto-Culver (Cosmetics Labs). All but one of the top-ten customers have used
the Company's services for more than ten years.
LEADER IN NICHE MARKETS. The Company focuses on market sectors requiring
specialized manufacturing and/or formulation capabilities such as color
cosmetics, high-end salon aerosol hair care products and shaving creams and
gels. As a result of its value-added manufacturing and formulation services,
management believes that it is able to retain customers and obtain higher profit
margins than contract packagers who focus primarily on commodity-type products.
Management believes the Company is the leading contract manufacturer and
packager of color cosmetics, high-end salon aerosol hair care products and
shaving creams and gels in North America.
FULL SERVICE CAPABILITIES. The Company offers a full array of services,
including materials procurement, blending, filling, packaging, warehousing and
distribution. The Company's full service product offering and manufacturing
expertise provides it with a competitive advantage in keeping existing customers
and attracting new ones. OSG's size, capabilities and reputation make it one of
the few contract manufacturers and packagers in the health and beauty aid
markets capable of supporting large scale production runs and product launches
for customers such as Procter & Gamble, Mary Kay, L'Oreal and Gillette.
MANUFACTURING EXPERTISE. The Company has the equipment and manufacturing
expertise required to manufacture and package a wide variety of color cosmetic,
aerosol, cream, lotion and liquid products while adhering to strict product
specifications for its customers. For example, the Company is able to fill
complex containers such as barrier packs (pressurized, non-aerosol containers),
which have made it a leader in manufacturing and packaging products such as
shaving gels. As a result of these capabilities, the Company is a highly valued
partner to its customers, providing consistently high quality products in a
timely, cost-effective manner. As further evidence of OSG's manufacturing
expertise and quality operations, all four of the Company's facilities that
manufacture and package products for Procter & Gamble have been awarded Procter
& Gamble's prestigious Pinnacle Award for Good Manufacturing Practices.
STRATEGIC LOCATIONS. OSG's facilities are strategically located to service
regional, national and international customers. With its largest color cosmetics
facility located near New York City, the Company is close to the fashion and
cosmetic industry. In addition, management believes the Company is the largest
independent aerosol packager on the West Coast and in the Southeast. OSG can
manufacture and package various products at each of its facilities, creating
flexibility in servicing its geographically diverse customers
3
<PAGE>
in a cost-effective manner. The Company's facilities in Mexico and Australia
serve the requirements of both international and local customers.
EXPERIENCED MANAGEMENT TEAM. OSG's management team, headed by the former
President of Kolmar, Christopher Denney, has extensive industry experience. Upon
joining Kolmar in 1994, Mr. Denney implemented numerous initiatives that
increased sales and returned Kolmar to profitability. Members of senior
management have spent a majority of their careers in the packaging industry,
averaging 24 years of experience. In addition, Walter K. Lim, the founder of
ASC, serves as Chairman of OSG, and Samuel D. Garretson, the founder of
Piedmont, serves as a director of OSG.
BUSINESS STRATEGY
The Company intends to increase its sales and profitability by capitalizing
on its product conceptualization and formulation expertise and its
cost-effective, quality manufacturing capabilities. In addition, management
believes that it can continue to improve the Company's operating results by
implementing the following strategies:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. OSG intends to capitalize on the
combination of each of its subsidiaries' respective customer bases, product
lines and geographic locations. The Company expects to increase product
penetration of its customer base by capturing business that previously exceeded
each of its subsidiaries' particular areas of expertise. For example, the
Company has developed proprietary color cosmetics formulations for Sebastian, a
customer that traditionally focused on hair care products, and expects to offer
color cosmetic products to other hair care product customers. In addition, the
Company can offer its aerosol capabilities to its color cosmetics customers. The
geographic diversity of OSG's facilities allows the Company to offer its
customers multiple production locations.
CENTRALIZE SALES AND MARKETING. Historically, OSG has managed its sales
efforts at the plant level. The Company plans to centralize the management of
its sales efforts in order to improve communication with customers, to
cross-sell services to customers and to ensure uniform pricing and sales
strategies. The Company plans to establish a group specifically focused on
promoting innovation within OSG and to its customers. This innovation group will
be responsible for identifying market trends and assisting customers with new
product ideas, as well as promoting the Company through customer presentations,
advertising and trade shows. Local sales and management staff will continue to
maintain close ties with customers and production facilities. The centralized
sales effort will enable the Company to serve national accounts more effectively
and to pursue customers located outside the local marketing reach of the
individual plants.
INCREASE INTERNATIONAL PRESENCE. As a result of increased international
demand for cosmetic products, global cosmetics companies have started to expand
into markets such as Eastern Europe, Latin America and the Asia-Pacific region.
OSG intends to capitalize on this trend by increasing its export sales and
selectively entering into joint ventures and licensing agreements. The Company
currently has licensing agreements in Japan, Korea, Thailand and Poland. In
addition, the Company plans to continue to develop its own "control"
brands--brands for which OSG owns the formulas and manufactures and packages the
products to its own specifications, leaving the marketing, promotion and
distribution to its customer. To date, OSG has developed two control brands
which are manufactured at its Mexico facility--"Veronique," which is primarily
exported to Russia, and "Maria," a brand targeted at Latin American markets.
REDUCE MANUFACTURING COSTS. The Company continues to improve its
cost-effectiveness by investing in productivity enhancements and implementing
operational improvements. The Company believes that the combination of ASC,
Kolmar and Piedmont will result in cost reductions from (i) allocating
production among facilities to better optimize the use of labor and equipment;
(ii) eliminating redundant administrative operations; and (iii) in certain
cases, purchasing larger amounts of raw materials on more favorable terms.
4
<PAGE>
PURSUE STRATEGIC ACQUISITIONS. Management intends to pursue acquisitions to
expand into new product lines, niche markets and new geographic areas. The
Kolmar Acquisition represents a continuation of OSG's strategy to provide more
services to existing and potential customers in the highly fragmented contract
manufacturing and packaging industry. OSG plans to acquire companies that will
provide additional cross-selling and cost-reduction opportunities.
SUMMARY OF THE KOLMAR ACQUISITION
THE INVESTORS
The key investors in the Company include Gordon+Morris Investment
Partnership, L.P. ("GMIP"), HarbourVest Partners IV-Direct Fund L.P. ("HVP-IV")
and HarbourVest Partners V-Direct Fund L.P. ("HVP-V").
The Gordon+Morris Group ("G+MG") is a merchant banking firm that sponsors
leveraged acquisitions and leveraged buildups in partnership with experienced
management teams. Founded in 1992, G+MG manages GMIP, which has $61.2 million in
committed capital. G+MG's principals have a proven track record investing in
middle market companies. Prior to forming G+MG, two of the three principals were
general partners of Kelso & Company, where they were responsible for completing
16 middle market transactions. Since 1980, the principals have completed 24
transactions with an average transaction value of approximately $75 million.
G+MG's investment philosophy is to empower management through equity ownership,
provide access to growth capital, and support management's long-term strategies.
G+MG invests in opportunities where, either alone or in conjunction with other
institutional investors, it has majority control of the acquired company.
Leveraged acquisitions made by the principals of G+MG include International
House of Pancakes, Arkansas Best Corporation and Landstar Systems, as well as
CST/Star Products, Inc., which is a current GMIP portfolio company. The
principal offices of G+MG are located at 840 Newport Center Drive, Suite 600,
Newport Beach, CA 92660.
HarbourVest Partners, LLC ("HarbourVest") was formed by the management team
of Hancock Venture Partners, Inc. ("HVP") in January 1997 to become the
successor company to HVP. HVP was founded in 1982 as a subsidiary of John
Hancock Mutual Life Insurance Company for the purpose of managing diversified
private equity investment portfolios. Today, HarbourVest manages in excess of $3
billion of private equity capital on a worldwide basis and has offices in
Boston, London, and Hong Kong. Most of HarbourVest's twelve managing directors
have worked together as a team for more than ten years. HarbourVest invests in
all types of private equity funds as well as directly into operating companies.
When making direct investments, HarbourVest seeks companies with successful
financial track records and experienced management teams pursuing compelling
market opportunities. The managing directors of HarbourVest are currently active
on the boards of over 30 portfolio companies and have developed expertise in the
areas of telecommunications, software and information technology, and management
buyouts of operating companies. HVP-IV is a private equity fund with $156.2
million in committed capital, and HVP-V is a private equity fund with $300.0
million in committed capital. Both HVP-IV and HVP-V are directly managed by
HarbourVest. HarbourVest's principal offices are located at One Financial
Center, 44th floor, Boston, MA 02111.
COMPANY HISTORY
The Company currently owns and operates three wholly-owned subsidiaries:
ASC, Piedmont and Kolmar. Located in the City of Industry, California, ASC was
founded in 1966 by Walter K. Lim, OSG's Chairman. The Company acquired ASC on
February 14, 1994 for $35.0 million. Located in Gainesville, Georgia, Piedmont
was founded in 1985 by Samuel D. Garretson, a director of the Company. An
affiliate of the Company acquired Piedmont on September 30, 1996 for $14.1
million. Such affiliate was merged into the Company on June 30, 1997. Kolmar was
founded in 1921 and was acquired in 1991 by CCL Industries Inc. ("CCL"), a
publicly held Canadian contract packaging and manufacturing company.
5
<PAGE>
Kolmar's main manufacturing facility is located in Port Jervis, New York, and
other smaller facilities are located in California, Pennsylvania, Canada, Mexico
and Australia.
THE KOLMAR ACQUISITION
On January 9, 1998, OSG acquired from CCL and its wholly-owned indirect
subsidiary, CCL Industries Corporation ("CCL Industries"), all of the
outstanding shares of Kolmar Laboratories, Inc. and the net assets of Kolmar
Canada Inc. (the "Kolmar Acquisition"). The terms of the Kolmar Acquisition
Agreement (as defined) provide that the Kolmar Acquisition was effective as of
January 1, 1998 and the financial data presented herein gives effect to the
acquisition as of such date. Unless the context otherwise requires, references
to CCL include references to CCL Industries. The purchase price for the Kolmar
Acquisition was $78.0 million, subject to certain post-closing adjustments. In
conjunction with the Kolmar Acquisition, the Company refinanced all of its
existing indebtedness totaling $34.6 million. The purchase price and the
refinanced indebtedness, plus $7.4 million of fees and expenses, was financed
through $30.0 million of borrowings under the Senior Secured Credit Facility,
$70.0 million of borrowings under the senior subordinated credit agreement,
dated as of January 9, 1998, among the Company, Bankers Trust Company ("BTCo"),
as agent, and certain other parties (the "Subordinated Bridge Facility") and the
issuance of $20.9 million of the Company's common stock ("Common Stock") to
existing shareholders of the Company.
6
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STRUCTURE OF THE COMPANY
The chart below illustrates the organizational structure of the Company:
Chart setting forth (i) the subsidiaries of the Company: Aerosol Services
Company, Inc., Kolmar Laboratories, Inc. and Piedmont Laboratories, Inc; and
(ii) the subsidiaries of Kolmar Laboratories, Inc.,: Kolmar (Aust.)Pty. Limited,
Kolmar de Mexico, S.A. de C.V. and Kolmar Canada Inc.
OSG is incorporated in Delaware, and its principal executive offices are
located at 425 South Ninth Avenue, City of Industry, CA 91746. Its telephone
number is (626) 968-8531.
7
<PAGE>
THE EXCHANGE OFFER
On March 3, 1998, the Company issued $105.0 million aggregate principal
amount of Old Notes. The Old Notes were sold pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws, in order to enable the Company to raise
funds on a more expeditious basis than necessarily would have been possible had
the initial sale been pursuant to an offering registered under the Securities
Act. BT, as a condition to its purchase of the Old Notes, requested that the
Company agree to commence the Exchange Offer following the Offering.
<TABLE>
<S> <C>
Notes Offered................. Up to $105,000,000 principal amount of 10 7/8% Series B
Senior Subordinated Notes due 2006, which have been
registered under the Securities Act.
The Exchange Offer............ The New Notes are being offered in exchange for a like
principal amount of Old Notes. Old Notes may be tendered
only in integral multiples of $1,000. The issuance of the
New Notes is intended to satisfy obligations of the Company
and the Guarantors contained in the Registration Rights
Agreement, dated as of March 3, 1998, among the Company, the
Guarantors listed therein and BT (the "Registration Rights
Agreement"). For procedures for tendering, see "The Exchange
Offer."
Tenders, Expiration Date;
Withdrawal.................. The Exchange Offer will expire at 5:00 p.m. New York City
time, on [ ], 1998, or such later date and time to
which it is extended. Each Holder tendering Old Notes must
acknowledge that he is not engaging in, nor intends to
engage in, a distribution of the New Notes. The tender of
Old Notes pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. Any Old Note not
accepted for exchange for any reason will be returned
without expense to the tendering Holder thereof as promptly
as practicable after the expiration or termination of the
Exchange Offer.
Conditions to Exchange
Offer....................... The Exchange Offer shall not be subject to any condition
other than that the Exchange Offer does not violate any
applicable law or regulation or interpretation of the staff
of the Commission.
Federal Income Tax
Considerations.............. The exchange pursuant to the Exchange Offer should not
result in any income, gain or loss to the Holders or the
Company for Federal income tax purposes. See "Certain
Federal Tax Consequences."
Use of Proceeds............... There will be no proceeds to the Company from the exchange
pursuant to the Exchange Offer. See "Use of Proceeds" and
"Capitalization."
Exchange Agent................ U.S. Bank Trust National Association (formerly First Trust
National Association) (the "Exchange Agent") is serving as
exchange agent in connection with the Exchange Offer.
Shelf Registration
Statement................... Under certain circumstances, certain holders of Notes
(including holders of Old Notes who are not permitted to
participate in the Exchange Offer or holders who may not
freely resell New Notes received in the Exchange Offer) may
require the Company to file and cause to become effective, a
Shelf Registration Statement (as defined), which would cover
resales of Notes by such holders. See "Description of
Notes--Exchange Offer; Registration Rights."
</TABLE>
8
<PAGE>
CONSEQUENCES OF EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Subject to certain limited exceptions, holders
of Old Notes who do not exchange their Old Notes for New Notes in the Exchange
Offer will no longer have registration rights with respect to their Old Notes.
The Company does not currently anticipate that it will register the Old Notes
under the Securities Act. See "Description of Notes--Exchange Offer;
Registration Rights." Based on interpretations by the staff of the Commission,
as set forth in no-action letters issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold or otherwise transferred by Holders thereof
(other than any Holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such Holder's business and such
Holder, other than a broker-dealer, has no arrangement with any person to
participate in the distribution of such New Notes. The Company has not sought
and does not intend to seek its own no-action letter in connection with the
Exchange Offer and there can be no assurance that the Commission would make a
similar determination with respect to the Exchange Offer. Each Holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of such New Notes and has no arrangement or
understanding to participate in a distribution of New Notes. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
this Prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for sale or register thereunder
the New Notes prior to offering or selling such New Notes. The Company has
agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Notes for offer or
sale under all applicable state securities or Blue Sky laws before the time the
Registration Statement (of which this Prospectus forms a part) is declared
effective by the Commission. See "The Exchange Offer--Consequences of Exchanging
Old Notes" and "Description of Notes-- Exchange Offer; Registration Rights."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except (i) that the New Notes have been registered under the
Securities Act, (ii) for certain transfer restrictions and registration rights
relating to the Old Notes and (iii) that the New Notes will not contain certain
provisions relating to Liquidated Damages to be paid to Holders of Old Notes
under certain circumstances relating to the timing of the Exchange Offer and to
other registration requirements. See "Description of Notes-- Exchange Offer;
Registration Rights." The New Notes will bear interest from the most recent date
to which interest has been paid on the Old Notes or, if no interest has been
paid on the Old Notes, from March 3, 1998. Accordingly, registered Holders of
New Notes on the relevant record date for the first interest payment date
following the consummation of the Exchange Offer will receive interest accruing
from the most recent date to which interest has been paid or, if no interest has
been paid, from March 3, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders whose Old Notes are accepted for exchange will not receive any payment
in respect of interest on such Old Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
9
<PAGE>
<TABLE>
<S> <C>
Notes Offered................. Up to $105,000,000 aggregate principal amount of 10 7/8%
Series B Senior Subordinated Notes due 2006.
Issuer........................ Outsourcing Services Group, Inc.
Maturity Date................. March 1, 2006.
Interest Rate and Payment The New Notes will bear interest at the rate of 10 7/8% per
Dates......................... annum. Interest on the New Notes will be payable
semi-annually on each March 1 and September 1, commencing
[ ].
Optional Redemption........... The New Notes will be redeemable, in whole or in part, at
the option of the Company on or after March 1, 2003, at the
redemption prices set forth herein plus accrued and unpaid
interest to the date of redemption. In addition, at any time
on or prior to March 1, 2001, the Company may redeem, at its
option, up to 35.0% of the aggregate principal amount of the
New Notes with the net cash proceeds of one or more Equity
Offerings (as defined), at a redemption price equal to
110.875% of the aggregate principal amount of the New Notes
to be redeemed, plus accrued and unpaid interest to the
redemption date; PROVIDED that at least 65.0% of the
aggregate initial principal amount of the New Notes issued
hereunder together with the Old Notes originally issued and
not exchanged in the Exchange Offer remains outstanding
immediately after any such redemption. See "Description of
Notes--Redemption."
Change of Control............. Upon the occurrence of a Change of Control, each holder of
New Notes will have the right to require the Company to
repurchase such holder's New Notes at a purchase price equal
to 101.0% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. See
"Description of Notes--Change of Control."
Offers to Purchase............ In the event of certain asset sales, the Company will be
required to offer to repurchase the New Notes to the extent
of the net cash proceeds from such asset sales at a price
equal to 100.0% of the principal amount of the New Notes,
plus accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes--Certain
Covenants--Limitation on Asset Sales."
Guarantees.................... The New Notes will be unconditionally guaranteed on a senior
subordinated basis by the Guarantors. The Guarantees will be
unsecured senior subordinated obligations of the Guarantors
and will be subordinated in right of payment to all existing
and future Guarantor Senior Debt (including indebtedness
under the Senior Secured Credit Facility). As of March 28,
1998, the Guarantors had no Guarantor Senior Debt
outstanding and approximately $51.4 million of availability
under the Senior Secured Credit Facility. See "Description
of Notes--Guarantees."
Ranking....................... The New Notes will be unsecured senior subordinated
obligations of the Company and will be subordinated in right
of payment to all existing and future Senior Debt of the
Company. The New Notes will also be effectively subordinated
to all secured indebtedness of either the Company or any of
its subsidiaries to the extent of the assets
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
securing such indebtedness. The New Notes will rank PARI
PASSU with any future senior subordinated indebtedness of
the Company and will rank senior in right of payment to all
other subordinated obligations of the Company. As of March
28, 1998, the Company had no Senior Debt outstanding but has
an obligation to guarantee, on a senior basis, debt of the
Guarantors incurred under the Senior Secured Credit
Facility. In addition, as of March 28, 1998, the Company's
subsidiaries that are not Guarantors had approximately $6.6
million of indebtedness and accrued liabilities, including
trade payables, which would be structurally senior to the
New Notes. See "Description of Notes--Subordination."
Certain Covenants............. The Indenture governing the New Notes (the "Indenture") will
contain certain covenants that limit the ability of the
Company and its subsidiaries to, among other things, incur
additional indebtedness, pay dividends or make certain other
Restricted Payments (as defined), consummate certain asset
sales, enter into certain transactions with affiliates,
incur liens, create restrictions on the ability of a
subsidiary to pay dividends or make certain payments, sell
or issue preferred stock of subsidiaries to third parties,
merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company, and engage
in other lines of business. See "Description of
Notes--Certain Covenants."
</TABLE>
For additional information regarding the New Notes, see "Description of
Notes."
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors set forth under "Risk Factors" which begin on page 16 before
making a decision to tender their Old Notes in the Exchange Offer.
11
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The summary financial data for the Company set forth below for the fiscal
years ended December 31, 1993, 1994, 1995, 1996 and 1997 are derived from the
audited financial statements of the Company and its predecessors. Such data for
the three months ended March 30, 1997 and March 28, 1998 are derived from the
unaudited interim financial statements of the Company, which include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of the results of operations for the
periods presented. The results for the three month period ended March 28, 1998
are not necessarily indicative of the results to be expected for the year ending
December 31, 1998 or for any future period. OSG, previously Aerosol Services
Holding Corporation ("ASHC"), was formed to acquire ASC effective February 14,
1994. OSG had no operations prior to the acquisition. Consequently, the
financial data set forth below for the fiscal year ended December 31, 1994
includes the audited results of OSG for the period from inception, February 15,
1994 to December 31, 1994 and the unaudited balances of ASC for the period from
January 1, 1994 to February 14, 1994. Amounts in 1993 reflect the operating
results and financial position of ASC, prior to its acquisition by OSG.
The summary financial data for Piedmont set forth below for the fiscal years
ended September 30, 1993, 1994, 1995 and 1996 are derived from the audited
financial statements of Piedmont. Such data for Kolmar for the fiscal years
ended December 31, 1995, 1996 and 1997 are derived from audited combined
financial statements. Kolmar financial data for the years ended December 31,
1993 and 1994 are derived from Kolmar's unaudited financial statements. The
unaudited financial statements for the years ended December 31, 1993 and 1994
include all adjustments (consisting only of normal recurring adjustments) which
management of Kolmar considers necessary for a fair presentation of the
financial data for the periods presented.
The summary unaudited pro forma combined financial data of the Company for
the fiscal year ended December 31, 1997 are derived from the Unaudited Pro Forma
Condensed Combined Financial Data included elsewhere in this Prospectus. Such
data give effect to (i) the Kolmar Acquisition and the repayment of existing
debt of the Company in conjunction therewith; and (ii) the completion of the
Offering and application of the proceeds therefrom, as if each had occurred at
the beginning of the year ended December 31, 1997 and before changes in
accounting principles and extraordinary items. The related pro forma balance
sheet data give effect to (i) and (ii) as if each had occurred on December 31,
1997.
The following information should be read in conjunction with the "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements of the
Company, Kolmar and Piedmont and the related notes thereto (collectively, the
"Financial Statements") included elsewhere in this Prospectus.
12
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
OUTSOURCING SERVICES GROUP, INC. AND PREDECESSOR
<TABLE>
<CAPTION>
PREDECESSOR OSG
------------------------- --------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------------------------------------ ----------------------
MARCH
MARCH 30, 28,
1993 1994 1995 1996(a) 1997 1997(a) 1998(a)
----------- ----------- ----------- -------- -------- ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE
DATA) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................. $ 50,615 $ 52,730 $ 60,633 $ 79,832 $110,328 $ 26,538 $53,875
Gross profit............................. 8,720 7,955 8,258 11,084 15,117 3,615 8,001
Income from operations................... 5,770 3,981 3,650 5,089 4,333 1,236 3,028
Interest expense, net.................... 208 3,116 3,689 3,646 4,221 1,341 2,829
Net income (loss) (b).................... 12 540 52 (6,247) (1,516) (181) (2,577 )
Net income (loss) per share.............. 131.87 0.99 0.11 (9.06) (1.17) (0.14) (0.82 )
OTHER DATA:
Adjusted EBITDA (c)...................... $ 6,298 $ 5,410 $ 5,530 $ 7,584 $ 8,551 $ 2,275 $ 4,962
Net cash provided by (used in) operating
activities............................. 5,856 932 1,381 454 6,048 4,856 (5,918 )
Depreciation and amortization............ 428 1,429 1,880 2,495 4,218 1,039 1,934
Capital expenditures..................... 431 2,049 429 638 1,486 254 369
</TABLE>
PIEDMONT LABORATORIES, INC.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,(d)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE --------------------------------------------------
DATA) 1993 1994 1995 1996
----------- ----------- ----------- --------
STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................. $ 22,583 $ 34,121 $ 32,305 $ 35,541
Gross profit............................. 4,352 5,350 5,081 5,212
Income from operations................... 1,441 2,194 1,722 2,112
Interest expense, net.................... 290 227 200 223
Net income............................... 719 1,200 916 1,152
OTHER DATA:
Adjusted EBITDA (c)...................... $ 2,232 $ 2,969 $ 2,505 $ 2,877
Net cash provided by operating
activities............................. 1,517 1,042 1,885 1,450
Depreciation and amortization............ 791 775 783 765
Capital expenditures..................... 515 739 932 992
</TABLE>
KOLMAR LABORATORIES, INC.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,(d)
------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................. $ 73,248 $ 63,782 $ 74,307 $103,316 $103,141
Gross profit............................. 10,133 9,821 14,001 20,061 16,968
Income (loss) from operations (e)........ (19,298) (23,209) 4,841 9,910 8,857
Interest expense, net.................... 1,357 1,801 3,133 3,697 4,164
Net income (loss) (e).................... (22,810) (16,593) 1,042 5,071 3,398
OTHER DATA:
Adjusted EBITDA (c)...................... $ (137) $ 5,965 $ 6,944 $ 12,178 $ 11,614
Net cash provided by (used in) operating
activities............................. 2,477 2,953 (8,955) 4,515 (1,044)
Depreciation and amortization............ 2,263 4,924 2,103 2,268 2,757
Capital expenditures..................... 4,613 2,598 3,559 3,836 2,866
</TABLE>
13
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SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA (F)
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
DECEMBER
31, 1997
-----------
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE
DATA)
<S> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................. $ 213,469
Gross profit............................. 32,085
Income from operations................... 13,082
Interest expense, net (g)................ 12,554
Net loss (h)............................. (857)
Net loss per share....................... (0.26)
OTHER DATA:
Adjusted EBITDA (i)...................... 21,413
Depreciation and amortization............ 8,193
Capital expenditures..................... 4,352
Ratio of earnings to fixed charges....... 1.04
BALANCE SHEET DATA:
Cash and short-term investments.......... 3,432
Working capital.......................... 25,559
Total assets............................. 179,929
Total debt............................... 107,332
Redeemable preferred stock............... 4,259
Stockholders' equity..................... 12,212
</TABLE>
NOTES TO SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(a) The Piedmont and Kolmar acquisitions were effective on September 30, 1996
and January 1, 1998, respectively. Consequently, the Company's Statements of
Operations Data and Other Data for the year ended December 31, 1997 and for
the three months ended March 28, 1998 (which includes the acquired
operations for the entire period) are not directly comparable to the
Statements of Operations Data and Other Data for the comparable periods in
prior years. Additionally, the results of operations for the fiscal year
ended December 31, 1996 include the acquired operations for the three-month
period subsequent to the Piedmont acquisition.
(b) Net income of OSG for the fiscal year ended December 31, 1993 reflects $5.5
million of owners' bonus compensation prior to the acquisition of ASC by the
Company. Net loss of OSG for the fiscal year ended December 31, 1996
includes a $7.0 million charge associated with the cumulative effect of a
change in accounting principle. Net loss for the year ended December 31,
1997 and for the three-months ended March 28, 1998 includes $1.1 million and
$2.1 million of extraordinary items, respectively, net of tax, associated
with charges for early retirement of debt.
(c) Adjusted EBITDA represents the sum of income from operations and
depreciation and amortization. For the fiscal year ended December 31, 1993,
the predecessor company to OSG paid its owners a bonus of $5.5 million. Such
payment has not been reflected in adjusted EBITDA. In addition, adjusted
EBITDA for the fiscal year ended December 31, 1993 excludes the loss from
operations from a discontinued operation totaling $100,000. The assets of
such operation were not purchased by OSG. Adjusted EBITDA for Kolmar
excludes a write-off of goodwill of $12,963,000 and a charge for
restructuring costs of $3,935,000 for the fiscal year ended December 31,
1993 and a $24,100,000 write-down of assets for the fiscal year ended
December 31, 1994.
Adjusted EBITDA is not intended to represent cash flows from operations as
defined by GAAP and should not be considered as an alternative to net income
as an indicator of the Company's operating performance or to cash flows as a
measure of liquidity. Adjusted EBITDA is included herein as it is a basis
upon which the Company assesses its financial performance and its ability to
service indebtedness. Adjusted EBITDA as calculated herein differs from the
definition of the term "Consolidated EBITDA" used in the Indenture under
which the New Notes are to be issued. See "Description of Notes--Certain
Definitions."
(d) Piedmont and Kolmar use 52-53 week fiscal years. For presentation purposes,
Piedmont's fiscal year has been reflected as if it ended on September 30.
Kolmar's fiscal year has been reflected as if it ended on December 31.
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(e) Net loss for Kolmar for the fiscal year ended December 31, 1993 reflects
charges for restructuring costs of $3,935,000 and a write-off of $12,963,000
of goodwill. Net loss for Kolmar for the fiscal year ended December 31, 1994
reflects a $24,100,000 write-down of assets.
(f) See "Unaudited Pro Forma Condensed Combined Financial Data" for information
related to pro forma adjustments.
(g) Unaudited pro forma combined interest expense includes amortization of
deferred financing costs of $1.1 million for the fiscal year ended December
31, 1997.
(h) Unaudited pro forma combined net income is computed excluding the effects of
extraordinary items and the cumulative effects of a change in accounting
principle.
(i) Unaudited pro forma combined adjusted EBITDA represents the sum of income
from operations and depreciation and amortization and excludes non-recurring
charges, consisting primarily of salary expenses of $1.1 million for the
termination of certain OSG management concurrent with the Kolmar Acquisition
and broken deal costs of $138,000 for the fiscal year ended December 31,
1997.
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RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE FOLLOWING SPECIFIC RISK
FACTORS, AS WELL AS THE OTHER INFORMATION SET FORTH IN THE PROSPECTUS, BEFORE
TENDERING THEIR OLD NOTES IN THE EXCHANGE OFFER.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
As a result of the Offering, the Company is highly leveraged. The Company's
indebtedness was $105.0 million and stockholders' equity was $14.6 million, as
of March 28, 1998. In addition, subject to the restrictions in the Senior
Secured Credit Facility and the Indenture, the Company and its subsidiaries may
incur additional indebtedness (including additional Senior Debt and Guarantor
Senior Debt) from time to time to finance acquisitions, working capital, capital
expenditures or other purposes. For the year ended December 31, 1997 and the
three month period ended March 28, 1998, the Company's ratio of earnings to
fixed charges were 1.02 and 1.07, respectively.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including, but not limited to the following: (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 working capital,
capital expenditures, research and development or acquisitions may be limited;
(iii) to the extent that the Company's subsidiaries borrow under the Senior
Secured Credit Facility, they do so at floating rates of interest which could
result in higher interest expense in the event of an increase in interest rates;
and (iv) the Company's substantial leverage may make it more vulnerable to
adverse economic conditions and may limit its ability to withstand competitive
pressures or take advantage of business opportunities. Certain of the Company's
competitors are currently less leveraged and may have significantly greater
operating and financing flexibility than the Company.
The Company's ability to pay principal and interest on the Notes and to
satisfy its other debt obligations will depend upon the future operating
performance of its subsidiaries, which will be affected by prevailing economic
conditions and financial, business and other factors, certain of which are
beyond their control, as well as the availability of borrowings under the Senior
Secured Credit Facility or a successor facility. The Company currently
anticipates that its operating cash flow, together with borrowings by its
subsidiaries under the Senior Secured Credit Facility, will be sufficient to
meet its operating expenses and to service its debt requirements as they become
due. If the Company is unable to service its indebtedness, it will be forced to
take actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness (which could include the Notes),
or seeking additional debt or equity capital. There is no assurance that any of
these remedies can be effected on satisfactory terms, if at all. Factors which
could affect the Company's or its subsidiaries' access to the capital markets,
or the cost of such capital, include changes in interest rates, general economic
conditions, the perception in the capital markets of the Company's business,
results of operations, leverage, financial condition and business prospects. In
addition, the Senior Secured Credit Facility and the covenants with respect to
the Notes significantly restrict the Company's and its subsidiaries' ability to
incur additional indebtedness, including refinancing indebtedness, and to sell
assets. See "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Description of the Senior Secured Credit
Facility" and "Description of Notes."
HOLDING COMPANY STRUCTURE; EFFECTS OF ASSET ENCUMBRANCE
The Company is a holding company whose only material assets are the stock of
its subsidiaries. The Company's cash flow and, consequently, its ability to
service debt, including the Notes, is dependent upon the earnings of its
subsidiaries and the payment of funds by those subsidiaries to the Company in
the form of loans, dividends or otherwise. There can be no assurance that any
such payments will be adequate to fund the interest and principal payments on
the Notes when due. The Old Notes are, and the New Notes
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<PAGE>
will be, guaranteed on an unsecured senior subordinated basis by the Guarantors
and, as a result, should the Company fail to satisfy any payment obligation
under the Notes, the holders would have a direct claim therefor against the
Guarantors. However, the Guarantors are obligors with respect to substantial
indebtedness, including in their capacity as borrowers under the Senior Secured
Credit Facility on a senior basis, and the capital stock of the Guarantors is
pledged to secure amounts borrowed thereunder. Accordingly, there may be
insufficient assets remaining after payment of senior and/or secured claims to
pay amounts due on the Notes. The Company's non-Guarantor subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make funds
available therefor, whether in the form of loans, dividends or otherwise. The
Indenture will permit the Company and its subsidiaries (including non-Guarantor
subsidiaries) to incur additional indebtedness, subject to certain restrictions.
See "Description of Notes--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness." Any right of the Company to participate in any
distribution of the assets of any of the non-Guarantor subsidiaries upon the
liquidation, reorganization or insolvency of such subsidiary (and the consequent
availability of such assets to service indebtedness of the Company, including
under the Notes) will be subject to the claims of creditors (including trade
creditors) and preferred stockholders, if any, of such non-Guarantor subsidiary,
except to the extent that the Company has a claim against such non-Guarantor
subsidiary as a creditor of such non-Guarantor subsidiary. Moreover, the payment
of dividends and the making of loan advances to the Company by its subsidiaries
are subject to restrictive covenants in agreements entered into by certain of
such subsidiaries including under the Senior Secured Credit Facility, and may be
restricted upon an event of default thereunder. The Guarantee of the Notes by
any Guarantor will be discharged upon the sale of such Guarantor in accordance
with the provisions of the Indenture. See "Description of Notes--Guarantees."
SUBORDINATION OF THE NOTES AND THE GUARANTEES
The Notes and the Guarantees will be subordinated in right of payment to all
existing and future Senior Debt of the Company and to all existing and future
Guarantor Senior Debt of the Guarantors, (including borrowings under the Senior
Secured Credit Facility), respectively. In the event of the bankruptcy,
liquidation or reorganization of the Company, the assets of the Company or the
Guarantors will be available to pay obligations on the Notes only after all
Senior Debt of the Company and all Guarantor Senior Debt of the Guarantors, as
the case may be, has been paid in full. Any assets of the Company or the
Guarantors which may remain may not be sufficient to pay the amounts due on the
Notes then outstanding. The Notes will also be effectively subordinated to all
secured indebtedness of either the Company or any of its subsidiaries to the
extent of the assets securing any such indebtedness. As of March 28, 1998,
neither the Guarantors nor the Company had Guarantor Senior Debt or Senior Debt,
respectively, outstanding and the Guarantors had approximately $51.4 million of
availability under the Senior Secured Credit Facility. The Company has an
obligation to guarantee, on a senior basis, all amounts borrowed by its
subsidiaries under the Senior Secured Credit Facility. As of March 28, 1998,
subsidiaries of the Company that are not Guarantors, had approximately $6.6
million of indebtedness and accrued liabilities, including trade payables, which
would have been structurally senior to the Notes. Additional Senior Debt may be
incurred by the Company and additional Guarantor Senior Debt may be incurred by
the Guarantors from time to time, subject to certain restrictions.
The Company may not pay principal of, premium, if any, or interest on or
other amounts owing in respect of the Notes, make any deposit pursuant to any
defeasance provisions or repurchase, redeem or otherwise retire any of the Notes
if certain Senior Debt or Guarantor Senior Debt is not paid when due or any
other default on such Senior Debt or Guarantor Senior Debt occurs and the
maturity of such debt is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived, any such acceleration has
been rescinded or such debt has been paid in full. Moreover, under certain
circumstances, if any non-payment default exists with respect to Designated
Senior Debt (as defined) which would permit the holders of such Designated
Senior Debt to accelerate the maturity thereof, the Company may not make any
payments on the Notes for a specified time, unless such default is cured or
17
<PAGE>
waived, or such Designated Senior Debt is paid in full. See "Description of
Notes--Subordination" and "Description of the Senior Secured Credit Facility."
The holders of the Notes will have no direct claim against the Guarantors other
than the claim created by the Guarantees. The rights of holders of the Notes to
participate in any distribution of assets of any Guarantor upon liquidation,
bankruptcy or reorganization may, as is the case with other unsecured creditors
of the Company, be subject to prior claims against such Guarantor. The
Guarantees may themselves be subject to legal challenge in the event of the
bankruptcy or insolvency of a Guarantor, or in certain other circumstances. If
such a challenge were upheld, the Guarantees would be invalidated and
unenforceable. See "--Fraudulent Transfer Considerations."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture will restrict, among other things, the Company's and its
subsidiaries' ability to: incur additional indebtedness; incur liens; pay
dividends or make certain other restricted payments; consummate certain asset
sales; enter into certain transactions with affiliates; incur indebtedness that
is subordinate in right of payment to any Senior Debt and senior in right of
payment to the Notes; create or cause to exist restrictions on the ability of a
subsidiary to pay dividends or make certain payments to the company; merge or
consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company. See
"Description of Notes--Certain Covenants." In addition, the Senior Secured
Credit Facility contains other and more restrictive covenants and will prohibit
the Company in all circumstances from prepaying certain of its indebtedness
(including the Notes). The Senior Secured Credit Facility also requires the
Company to maintain specified financial ratios and to satisfy certain financial
condition tests. The Company's ability to meet those financial ratios and tests
can be affected by events beyond its control, and there can be no assurance that
the Company will meet those tests. A breach of any of these covenants could
result in a default under the Senior Secured Credit Facility and/or the
Indenture. Upon the occurrence of an event of default under the Senior Secured
Credit Facility, the lenders could elect to declare all amounts outstanding
under the Senior Secured Credit Facility, together with accrued interest, to be
immediately due and payable. If the Company's subsidiaries were unable to repay
those amounts, the lenders could proceed against the collateral granted to them
to secure that indebtedness or against the Company under its guarantee of the
Senior Secured Credit Facility. If the debt outstanding under the Senior Secured
Credit Facility were to be accelerated, there can be no assurance that the
assets of the Company and its subsidiaries would be sufficient to repay the
obligations under the Senior Secured Credit Facility, other Senior Debt,
Guarantor Senior Debt or the Notes. Substantially all the assets of the Company
and its subsidiaries are pledged as security under the Senior Secured Credit
Facility. See "Description of the Senior Secured Credit Facility."
INDUSTRY CONDITIONS AND COMPETITION
The contract manufacturing and packaging industry is highly competitive. The
color cosmetic, aerosol, cream, lotion and liquid products sectors of this
industry are highly fragmented, with hundreds of independent contract
manufacturers typically providing a narrow scope of services in limited
geographic areas. Competitors include a large number of other contract
packagers, a few of which are larger than the Company and have substantially
greater resources. In addition, the Company's competitive position could be
adversely affected by any significant consolidation of companies operating in
the health and beauty aid, household and automotive products markets, and from
marketers with in-house manufacturing capabilities. In certain instances, the
Company's customers that have in-house manufacturing capabilities have increased
their own in-house manufacturing operations. Any significant increase in
in-house manufacturing by the Company's customers could adversely affect the
Company's business, results of operations or financial condition. See
"Business--Competition."
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<PAGE>
LACK OF COMBINED OPERATING HISTORY AND INTEGRATION OF ACQUISITIONS
ASC, Piedmont and Kolmar do not have any consolidated financial operating
history. The Company's future operating results depend in large part on its
ability to integrate the business of Kolmar with its existing business. Even
though the Company intends to operate ASC, Piedmont and Kolmar as an integrated
entity, no assurance can be given that the integration of Kolmar or future
acquisitions will be successful or that the anticipated strategic benefits of
Kolmar or of future acquisitions will be realized. If the Company is unable
successfully to integrate Kolmar or future acquisitions, the Company's business,
results of operations or financial condition, may be adversely affected. The
assimilation of acquisitions, including the Kolmar Acquisition, requires certain
non-recurring expenditures. There can be no assurance that the operations
acquired will be sufficiently profitable to offset such expenditures, or that
the operations of the acquired companies (or the historical business of the
Company) will not be adversely affected as a result of any such acquisition.
The Company has undertaken a strategy to consolidate a portion of the highly
fragmented contract packaging industry through acquisitions. Therefore, the
Company is continually involved in the investigation and evaluation of potential
acquisitions and at any time may be discussing possible transactions, conducting
due diligence investigations or otherwise pursuing acquisition opportunities. To
this effect, the Company may from time to time enter into letters of intent
regarding potential acquisitions which may or may not come to fruition. The
Company historically has financed its acquisitions through a combination of
borrowings under bank credit facilities, seller-provided financing,
internally-generated cash flow and the issuance of equity securities. The
Company's future growth and financial success may depend upon a number of
factors, including, among others, its ability to identify acceptable acquisition
candidates, to consummate the acquisitions on favorable terms, improve the
financial performance of acquired companies and to integrate them into the
Company's operations and to attract and retain customers.
The Company's ability to execute its growth strategy depends to a
significant degree upon its ability to obtain additional long-term debt and
equity capital. Other than borrowings by the Company's subsidiaries under the
Senior Secured Credit Facility, the Company has no commitments for additional
borrowings or sales of equity, and there can be no assurance that the Company
will be successful in consummating any such future financing transactions on
terms favorable to the Company, if at all.
ENVIRONMENTAL COMPLIANCE AND GOVERNMENT REGULATION
ENVIRONMENTAL REGULATION AND COMPLIANCE. The Company's operations and
properties are subject to extensive federal, state, local and foreign
environmental laws and regulations concerning, among other things, emissions to
air, discharges to water, the remediation of contaminated soil and groundwater,
and the generation, handling, storage, transportation, treatment and disposal of
waste and other materials (collectively, "Environmental Laws"). Based upon the
Company's experience to date, as well as certain indemnification agreements
obtained in connection with the Company's acquisitions, the Company believes
that the future cost of compliance with existing Environmental Laws and its
liability for identified environmental claims will not have a material adverse
effect on the Company's business, results of operations or financial condition.
There can be no assurance, however, that the Company's obligations in this
regard will not have such an effect or that the existing indemnities will be
sufficient to fund such liabilities. Furthermore, future events, such as new
information or changes in Environmental Laws (or in their interpretation or
enforcement by courts or governmental agencies) may give rise to additional
costs or claims that could have a material adverse effect on the Company's
business, results of operations or financial condition.
Certain environmental laws, such as the federal Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA") and
analogous state laws impose strict, and in some circumstances, joint and
several, liability for the investigation and remediation of hazardous substances
released into the environment and related damages to natural resources. In that
regard, the
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Company or its affiliates have been identified as potentially responsible
parties ("PRPs") at several sites currently under investigation by the United
States Environmental Protection Agency ("EPA") and similar state agencies. Based
on indemnities obtained in connection with the Company's acquisitions and
environmental insurance obtained with respect to Kolmar, as well as presently
available information regarding each such site, the Company does not believe
that its related liability will have a material adverse effect on the Company's
business, results of operations or financial condition. There can be no
assurance, however, that these matters will not have such an effect, or that the
Company will not incur liability at additional similar sites in the future. See
"Business--Environmental Issues, Compliance and Government Regulation."
The Company also faces risks relating to federal and state environmental
regulation of VOCs. Recently enacted or future legislation requiring reductions
in the use of these propellants could materially adversely affect the Company's
business if the industry does not develop propellant technology and product
formulations to meet such future standards. California and New York recently
have mandated reductions in VOCs in aerosol products, and it is possible that
Georgia and other states may in the future pass similar legislation or enact
regulations. All of the Company's products meet the current regulatory
standards, and management believes, although there can be no assurance, that
propellant technology and product formulations will be developed that meet the
future standards. See "Business--Environmental Issues, Compliance and Government
Regulation."
EMPLOYEE HEALTH AND SAFETY REGULATION. The Company's operations are subject
to a variety of worker safety laws. The United States Occupational Safety and
Health Act of 1970 ("OSHA") and analogous laws mandate general requirements for
safe workplaces for all employees. The Company believes that its operations are
in material compliance with applicable employee health and safety laws.
STATE AND FEDERAL REGULATION. The Company's manufacturing and packaging of
over-the-counter pharmaceuticals, which accounts for a small percentage of
revenues, and cosmetics is subject to regulation by the Food and Drug
Administration ("FDA") and by various state agencies, especially the California
Department of Health Services. Any failure by the Company to remain in
compliance with the regulations promulgated by these agencies could have a
material adverse effect on the Company's business.
The Company must also adhere to state and federal regulations governing
"good manufacturing practices," including testing, quality control,
manufacturing, inspection, and documentation requirements for certain products.
Although the Company has had no difficulty in complying with these regulations
to date, if violations of such regulations are noted during inspections of the
Company's manufacturing facilities, the Company may be required or may elect to
cease manufacturing and packaging at the facility in violation, pending
resolution of the violation. In these circumstances, the Company may also be
required or may elect to recall products that were manufactured under improper
conditions. Although the Company has had no difficulty in complying with these
regulations to date, there can be no assurance that any future federal or state
regulation of the Company's business will not have a material adverse impact on
the Company's business, financial condition or results of operations.
MINIMUM WAGES. The Company utilizes local labor contractors at its various
facilities to provide a significant portion of its production labor force. The
Company is subject to the Fair Labor Standards Act as well as various federal,
state and local regulations that govern such matters as minimum wage
requirements, overtime and working conditions. A large number of the Company's
employees, including those provided by local labor contractors, are paid at or
just above the federal minimum wage level and, accordingly, changes in these
laws, regulations or ordinances could have a material adverse effect on the
Company by increasing the Company's costs.
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DEPENDENCE ON KEY PERSONNEL
The Company's success will continue to depend to a significant extent on its
executive officers and other key personnel, including certain development
chemists. The loss of the services of these key personnel could have a material
adverse effect on the Company, and there can be no assurance that the Company
would be able to find replacements with appropriate business experience and
skills. In addition, the success of any acquisition by the Company (including
the Kolmar Acquisition) may depend, in part, on the Company's ability to retain
management personnel of the acquired companies. The Company has entered into
employment agreements with certain of its executive officers and/or other key
employees. See "Management--Employment Agreements." The Company currently
maintains a "key man" insurance policy in respect of its Chief Executive
Officer. The loss of the services of key senior management, or the Company's
inability to attract and retain additional management personnel, could have a
material adverse effect on the Company's business, results of operations or
financial condition. See "Management" and "Certain Relationships and Related
Transactions."
RELIANCE ON MAJOR CUSTOMERS
A small number of customers account for a significant portion of the
Company's sales. For the three month period ended March 28, 1998, Sebastian
International Inc., The Gillette Co. and WD-40 Co. accounted for 14.0%, 9.4% and
7.8%, respectively, of the Company's revenues during this period. The Company
currently sells most of its products to customers pursuant to individually
negotiated purchase orders. The Company generally does not enter into long-term
contracts with its customers, and, therefore, such customers are not obligated
to purchase products from the Company for any specific period, in any specific
quantity or at any specified price, except as may be provided in a particular
purchase order. For the three month period ended March 28, 1998, approximately
52.9% of the Company's net revenues were derived from sales to its top ten
customers. Although the Company believes that its overall relations with
customers are good, there can be no assurance that such customers will continue
to purchase the Company's services, continue with a particular product line
which requires services which the Company offers or contract for the Company's
services in connection with any new or successor product lines. The loss of any
of the Company's major customers or a significant decrease in demand for certain
products sold by such major customers, could have a material adverse effect on
the Company's business, results of operations or financial condition. See
"Business--Customers and Products."
PRODUCT LIABILITY
The sale of any product can expose the seller of such product to product
liability claims. The Company manufactures products principally for marketers
who sell such products to the public. However, there can be no assurance that
the Company will not be named in a product liability lawsuit involving a product
it produces. Although no material product liability claims have been asserted
against the Company to date, there can be no assurance that such claims will not
arise in the future. The Company now maintains product liability insurance which
provides coverage in the amount of $51 million per occurrence (above a $25,000
per occurrence self-insured retention) and $52 million in the aggregate for all
claims arising in a policy year (above a $250,000 annual aggregate self-insured
retention). A product liability claim that results in a judgment or settlement
in excess of the Company's insurance coverage could have a material adverse
effect on the Company's business, results of operations or financial condition.
See "Business-- Legal Proceedings."
CONTROL BY PRINCIPAL STOCKHOLDERS; CHANGE OF CONTROL
GMIP and HarbourVest (through HVP-IV and HVP-V) beneficially own an
aggregate of approximately 80% of the outstanding capital stock of the Company
on a fully-diluted basis. Accordingly, these stockholders have the ability,
acting together, to control fundamental corporate transactions requiring
stockholder approval, including without limitation, approval of merger
transactions involving the Company
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and sales of all or substantially all of the Company's assets. There can be no
assurance that the interests of GMIP and HarbourVest (or their respective
affiliates) either individually or collectively, will not conflict with the
interests of the holders of the Notes. See "Management" and "Security Ownership
of Certain Beneficial Owners and Management." In addition, GMIP and HVP-IV (and
its affiliates, which would include HVP-V) are party to the Stockholder
Agreement (as defined), pursuant to which GMIP, HVP-IV and HVP-V, acting
together, may force a sale of the Company and take or block certain other
actions. See "Certain Relationships and Related Transactions--Stockholder
Agreement and Registration Rights Agreement."
Upon a Change of Control, each holder of the Notes will have certain rights
to require the Company to repurchase all or a portion of such holder's Notes.
See "Description of Notes." If a Change of Control were to occur, there can be
no assurance that the Company would have sufficient funds to pay the repurchase
price for all Notes tendered by the holders thereof; such failure would result
in an event of default under the Indenture. In addition, a Change of Control
would constitute a default under the Senior Secured Credit Facility (which
agreement would also prohibit payment of the Notes upon a Change of Control) and
may be prohibited or limited by, or create an event of default under, the terms
of other agreements relating to borrowings which either the Company may enter
into from time to time, including other agreements relating to secured
indebtedness or Senior Debt, or the Company's subsidiaries may enter into from
time to time, including other agreements relating to secured indebtedness or
Guarantor Senior Debt.
FRAUDULENT TRANSFER CONSIDERATIONS
The obligation of any Guarantor under its guarantee of the Notes may be
subject to review under state or federal fraudulent transfer laws in the event
of the Guarantor's bankruptcy or other financial difficulty. Under those laws,
in a lawsuit by an unpaid creditor or representative of creditors of a
Guarantor, such as a trustee in bankruptcy or the Guarantor as debtor in
possession, if a court were to find that when the Guarantor entered into its
Guarantee, it (a) received less than fair consideration or reasonably equivalent
value therefore, and (b) either (i) was insolvent, (ii) was rendered insolvent,
(iii) was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital, or (iv) intended to
incur or believed that it would incur debts beyond its ability to pay as such
debts matured, the court could avoid such Guarantee and the Guarantee and the
Guarantor's obligations thereunder, and direct the return of any amounts paid
thereunder to the Guarantor or to a fund for the benefit of its creditors.
Moreover, regardless of the factors identified in the foregoing clauses (i)
through (iv), the court could avoid a Guarantee and direct such repayment if it
found that the Guarantee was entered into with actual intent to hinder, delay,
or defraud the Guarantor's creditors.
To the extent that a Guarantor's obligation under its Guarantee exceeds the
actual benefit that it receives for the issuance of the Notes, such Guarantor
may be deemed not to have received fair consideration or reasonably equivalent
value for its Guarantee. The Indenture will contain a savings clause that will
generally limit the obligation of each Guarantor under its Guarantee to the
maximum amount (if any) of the obligation that the Guarantor could incur without
that obligation being subject to avoidance as a fraudulent transfer, taking into
account all of the Guarantor's other obligations. There can be no assurance that
the savings clause would permit a Guarantee to survive a fraudulent transfer
attack, even in a reduced amount. If effective, the savings clause may reduce,
perhaps substantially, the obligations of one or more Guarantors under their
respective Guarantees to an amount less than required to pay the Notes in full.
If any Guarantee is avoided or reduced as a result of a fraudulent transfer
attack, holders of the Notes would have to look to the assets of the Company and
any of the remaining Guarantors for payment. There can be no assurance that
there would remain sufficient assets to satisfy the claims of the holders of the
Notes.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its
22
<PAGE>
debts (including contingent or unliquidated debts) is greater than all of its
property at a fair valuation or if the present fair salable value of its assets
is less than the amount that will be required to pay its probable liability on
its existing debts as they become absolute and matured.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any other
securities laws of any jurisdiction and, therefore, may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws or pursuant to
exemptions from, or in transactions not subject to, those requirements and, in
each case, in compliance with certain other conditions and restrictions. Holders
of Old Notes who do not exchange their Old Notes for New Notes pursuant to the
Exchange Offer will continue to be subject to such restrictions on transfer of
such Old Notes as set forth in the legend thereon. In addition, upon
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes registered
under the Securities Act or to any similar rights under the Registration Rights
Agreement (subject to certain limited exceptions). The Company does not
currently anticipate that it will register or qualify any Old Notes which remain
outstanding after consummation of the Exchange Offer for offer or sale in any
jurisdiction (subject to limited exceptions, if applicable). As a result of
these factors, to the extent that Old Notes are not tendered and accepted in the
Exchange Offer, a holder's ability to sell such Old Notes could be adversely
affected.
The New Notes and any Old Notes which remain outstanding after consummation
of the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage thereof have taken
certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, holders of Old Notes will not be
entitled to any Liquidated Damages or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See
"Description of Notes--Exchange Offer; Registration Rights."
ABSENCE OF PUBLIC MARKET
The Old Notes were issued to, and the Company believes such securities are
currently owned by, a relatively small number of beneficial owners. The Old
Notes have not been registered under the Securities Act and will be subject to
restrictions on transferability if they are not exchanged for the New Notes.
Although the New Notes may be resold or otherwise transferred by the holders
(who are not affiliates of the Company) without compliance with the registration
requirements under the Securities Act, they will constitute a new issue of
securities with no established trading market. There can be an assurance that
such a market will develop. In addition, the New Notes will not be listed on any
national securities exchange. The New Notes may trade at a discount from the
initial offering price of the Old Notes, depending upon prevailing interest
rates, the market for similar securities, the Company's operating results and
other factors. The Company has been advised by BT that it currently intends to
make a market in the New Notes, as permitted by applicable laws and regulations;
however, BT is not obligated to do so, and any such market-making activities may
be discontinued at any time without notice. In addition, such market-making
activity may be limited during the pendency of any Shelf Registration Statement.
Therefore, there can be no assurance that an active market for any of the New
Notes will develop, either prior to or after the Company's performance of its
obligations under the Registration Rights Agreement. If an active public market
does not develop, the market price and liquidity of the New Notes may be
adversely affected.
If a public trading market develops for the New Notes, future trading prices
will depend on many factors, including, among other things, prevailing interest
rates, the financial condition of the Company and the Guarantors, and the market
for similar securities. Depending on these and other factors, the New Notes may
trade at a discount.
23
<PAGE>
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the New Notes.
Notwithstanding the registration of the New Notes in the Exchange Offer,
holders who are "affiliates" (as defined under Rule 405 of the Securities Act)
of the Company may publicly offer for sale or resell the New Notes only in
compliance with the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution."
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, both domestic and foreign;
industry and market capacity; fashion industry changes; wage rates; existing
government regulations and changes in, or the failure to comply with, government
regulations; liability and other claims asserted against the Company;
competition; the loss of any significant customers; change in operating strategy
or development plans; the ability to attract and retain qualified personnel; the
significant indebtedness of the Company; the availability and terms of capital
to fund the expansion of the Company's business; and other factors referenced in
this Prospectus. Certain of these factors are discussed in more detail elsewhere
in this Prospectus, including, without limitation, under the captions
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained herein to reflect future events
or developments.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer.
24
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of March 28, 1998. This table should be read in conjunction with the Selected
Historical and Unaudited Pro Forma Combined Financial Data, the Unaudited Pro
Forma Condensed Combined Financial Data and the Financial Statements included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 28, 1998
--------------
<S> <C>
(DOLLARS IN THOUSANDS)
Long-term debt (including current portion)(a):
Notes........................................................................................... $ 105,000
--------------
Redeemable Series A Preferred Stock, $.001 par value; 3,750 shares authorized, 3,750 shares issued
and outstanding.................................................................................. 384
Redeemable Series B Preferred Stock, $.001 par value; 26,250 shares issued and outstanding........ 3,937
Stockholders' equity including paid-in capital:
Common Stock, $.001 par value; 6,000,000 shares authorized, 1,267,174 (historical) and 3,360,174
shares issued and outstanding, as adjusted.................................................... 3
Common Stock warrants........................................................................... 828
Additional paid-in capital...................................................................... 33,590
Accumulated deficit(b).......................................................................... (11,741)
Equity adjustment for foreign currency translation.............................................. 1,608
Predecessor carryover basis adjustment(c)....................................................... (9,715)
--------------
Stockholders' equity........................................................................ 14,573
--------------
Total capitalization...................................................................... $ 123,894
--------------
--------------
</TABLE>
- ------------------------
(a) As of March 28, 1998, the Company, on a consolidated basis, had
approximately $51.4 million of availability under the Senior Secured Credit
Facility. The Company has an obligation to guarantee, on a senior basis, all
amounts borrowed by its subsidiaries under the Senior Secured Credit
Facility.
(b) Accumulated deficit includes the cumulative effect of a change in accounting
principle of $7.0 million recorded in the year ended December 31, 1996, and
a loss from early extinguishment of debt of $1.1 million and $2.1 million,
net of tax recorded in the fiscal year ended December 31, 1997 and the three
months ended March 28, 1998, respectively.
(c) See "Notes to Consolidated Financial Statements of Outsourcing Services
Group, Inc. and Subsidiaries."
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data (the "Unaudited
Pro Forma Combined Financial Data") for the the fiscal year ended December 31,
1997 have been derived by the application of pro forma adjustments to the
financial statements of the Company included elsewhere in this Prospectus. The
pro forma statement of operations data give effect to: (i) the Kolmar
Acquisition and the repayment of existing debt of the Company in conjunction
therewith; and (ii) the completion of the Offering and application of the
proceeds therefrom, as if each had occurred at the beginning of the year ended
December 31, 1997 and before changes in accounting principles and extraordinary
items. The related pro forma balance sheet data give effect to (i) and (ii) as
if each had occurred on December 31, 1997. The adjustments are described in the
accompanying notes. The Unaudited Pro Forma Condensed Combined Financial Data do
not purport to represent what the Company's results of operations actually would
have been if those transactions had been consummated on the dates indicated, or
what such results will be for any future date or for any future period. In
addition, the Unaudited Pro Forma Condensed Combined Financial Data have been
prepared by Company management and are presented for informational purposes
only. The pro forma adjustments are based on management's current assumptions
regarding purchase accounting adjustments for the Kolmar Acquisition based on
presently available information and may change should additional information
become available. The Unaudited Pro Forma Condensed Combined Financial Data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
included elsewhere in this Prospectus. Pro forma statement of operations data
for the three months ended March 28, 1998 are not included herein because the
adjustments required to give effect to the Offering and the application of the
proceeds therefrom are not considered to be material to the overall
understanding of the financial data presented herein. If pro forma statement of
operations data for the three months ended March 28, 1998 had been presented,
interest expense and net income (net of taxes) for the Company would have
increased by $25,000 and decreased by $15,000, respectively.
26
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
(DOLLARS IN THOUSANDS) OSG KOLMAR ADJUSTMENTS COMBINED
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and short-term investments.............................. $ 588 $ 9,555 $ (6,711)(a) $ 3,432
Accounts receivable, net..................................... 17,649 17,338 (445)(b) 34,542
Inventories, net............................................. 12,125 12,631 (1,394)(b) 23,362
Prepaid expenses and other current assets.................... 550 1,629 (72)(i) 1,834
(273)(b)
--------- --------- ----------- -----------
Total current assets....................................... 30,912 41,153 (8,895) 63,170
Property and equipment, net.................................... 10,188 19,253 226(c) 29,667
Other long-term assets......................................... 1,870 8,605 1,154(e) 18,502
10,265(h)
(3,392)(l)
Due from CCL................................................... 3,376(d) 3,376
Deferred income taxes.......................................... 1,014 372 4,694(f) 6,080
Goodwill, net.................................................. 7,857 3,472 47,805(g) 59,134
--------- --------- ----------- -----------
Total Assets................................................... $ 51,841 $ 72,855 $ 55,233 $ 179,929
--------- --------- ----------- -----------
--------- --------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable............................................. $ 13,349 $ 9,199 $ -- $ 22,548
Current portion of long-term debt due to affiliate........... -- 34,483 (34,483)(i) --
Due to Affiliate............................................. -- 90 (90)(i) --
Current maturities of long-term debt......................... 1,600 -- (1,600)(a) --
Accrued expenses and other liabilities....................... 3,368 5,691 366(b) 15,063
(1,606)(e)
2,652(j)
2,292(m)
2,300(n)
--------- --------- ----------- -----------
Total current liabilities.................................. 18,317 49,463 (30,169) 37,611
Other liabilities:
Environmental contingency.................................... -- 14,500 -- 14,500
Other liabilities............................................ -- 3,159 350(j) 3,509
Deferred income taxes........................................ -- 506 -- 506
Long-term debt due to affiliates............................. -- 22,637 (20,305)(i) 2,332
Long-term debt............................................... 34,591 -- 105,000(a) 105,000
(34,591)(i)
--------- --------- ----------- -----------
Total liabilities.............................................. 52,908 90,265 20,285 163,458
Redeemable preferred stock..................................... 4,259 -- -- 4,259
Stockholders' equity:
Common stock................................................. 1 17,000 2(a) 3
(17,000)(k)
Common stock warrants........................................ 828 -- -- 828
Additional paid in capital................................... 12,662 -- 20,928(a) 33,590
Accumulated deficit.......................................... (9,102) (28,311) 28,311(k) (12,494)
(3,392)(l)
Translation adjustment....................................... -- (6,099) 6,099(k) --
Predecessor carryover basis adjustment....................... (9,715) -- -- (9,715)
--------- --------- ----------- -----------
Total stockholders' equity (deficit)........................... (5,326) (17,410) 34,948 12,212
--------- --------- ----------- -----------
Total liabilities and stockholders' equity (deficit)........... $ 51,841 $ 72,855 $ 55,233 $ 179,929
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
See notes to unaudited pro forma condensed combined balance sheet.
27
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(a) The pro forma adjustment is comprised of various adjustments to cash as
follows:
<TABLE>
<S> <C>
(DOLLARS IN THOUSANDS)
Sources of cash in conjunction with the Kolmar
Acquisition:
Senior Secured Credit Facility......................... $ 29,735
Subordinated Bridge Facility........................... 70,000
Proceeds from issuance of common stock................. 20,930
-----------------
Sources of cash.................................... 120,665
Uses of cash in conjunction with the Kolmar Acquisition:
Purchase price of Kolmar Acquisition................... (78,000)
Retirement of existing debt............................ (36,191)
Payment of financing costs............................. (5,559)
Payment of acquisition costs........................... (1,826)
-----------------
Uses of cash....................................... (121,576)
Post Kolmar Acquisition entries consist of the following:
Gross proceeds from the Old Notes...................... 105,000
Repayment of Senior Secured Credit Facility............ (29,735)
Repayment of Subordinated Bridge Facility.............. (70,000)
Payment of financing costs............................. (4,706)
-----------------
Proceeds from the Old Notes after repayment of debt and
financing costs........................................ 559
Adjustments to repay CCL for acquired cash............... (6,359)
-----------------
Net adjustment to cash............................. $ (6,711)
-----------------
-----------------
</TABLE>
(b) The adjustment is to conform accounting policies and accounting methods for
various accruals and allowances.
(c) The adjustment represents the recording of acquired Kolmar property and
equipment at fair value.
(d) The adjustment represents the recording of a receivable for the uninsured
portion of environmental liabilities for which OSG is indemnified by CCL
pursuant to the terms of the Kolmar Acquisition Agreement (as defined). The
amount of the receivable has been reduced for deductibles in accordance with
the Kolmar Acquisition Agreement for which OSG is not indemnified.
(e) The adjustment is to reflect the funded status of Kolmar's pension plan
after the write-off of the prior service benefit and the unrecognized gain
in accordance with purchase accounting.
(f) The adjustment represents the reversal of a portion of the tax valuation
allowance to reflect the corresponding deferred tax assets to be realized in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, Accounting for Income Taxes.
28
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
(g) The adjustment represents the allocation to goodwill of the excess of the
purchase price for the Kolmar Acquisition over net assets acquired.
<TABLE>
<S> <C>
(DOLLARS IN THOUSANDS)
Kolmar Acquisition price.......................................... $ 78,000
Kolmar Acquisition costs.......................................... 1,826
---------
Total acquisition costs....................................... 79,826
Allocation of purchase price:
Net deficit of Kolmar........................................... (17,410)
Cancellation of intercompany debt(i):
Current portion of debt due to affiliate...................... 34,483
Amounts due to affiliate...................................... 20,323
Adjustment to conform accounting policies(b).................. (2,478)
Adjustment of tax valuation allowance(f)........................ 4,694
Kolmar cash not acquired........................................ (6,359)
---------
Adjusted net worth................................................ 33,253
---------
Amount to be allocated............................................ 46,573
Adjustment to reflect funded status of Kolmar pension plan after
write-off of prior service benefit and unrecognized net gain
($1,154 adjustment to other long-term assets and $1,606
adjustment to accrued expenses and other long-term
liabilities)(e)................................................. (2,760)
Adjustment to conform benefit plans(m)............................ 2,292
Write down of assets to be disposed of(n)......................... 2,300
Recognition of indemnity receivable from CCL for environmental
liabilities, net(d)............................................. (3,376)
Deferred taxes associated with basis difference(j)................ 3,002
Step-up in basis of fixed assets(c)............................... (226)
---------
Less amount allocated............................................. 1,232
---------
Purchase price in excess of net assets acquired................... $ 47,805
---------
---------
</TABLE>
(h) The adjustment represents costs associated with obtaining Subordinated
Bridge Facility, the Senior Secured Credit Facility and issuing the Notes.
(i) The adjustment represents the cancellation of intercompany payables due to
CCL pursuant to the terms of the Kolmar Acquisition Agreement.
(j) The adjustment represents the impact on deferred taxes as a result of the
difference between the tax basis and book basis of the net assets of Kolmar
giving effect to the proposed purchase price allocations.
(k) The adjustments represent the elimination of Kolmar's equity balances.
(l) The adjustment represents the write-off of the deferred financing costs
associated with obtaining the Subordinated Bridge Facility, which were paid
off upon the issuance of the Old Notes.
(m) The adjustment is to conform accounting policies and methods for Kolmar's
benefit plans.
(n) The adjustment is to properly reflect the net realizable value of certain
divisional operations.
29
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) OSG KOLMAR ADJUSTMENTS COMBINED
- --------------------------------------------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................... $ 110,328 $ 103,141 $ -- $ 213,469
Cost of goods sold............................................. 95,211 86,173 -- 181,384
---------- ---------- ----------- -----------
Gross Profit................................................... 15,117 16,968 -- 32,085
Selling, general and administrative expenses................... 10,784 8,111 108(a) 19,003
---------- ---------- ----------- -----------
Income from operations......................................... 4,333 8,857 (108) 13,082
Interest expense, net.......................................... 4,221 4,164 3,034(b) 12,554
1,135(c)
---------- ---------- ----------- -----------
Other income, net
Income before income tax provision and extraordinary item...... 112 4,693 (4,277) 528
Provision for income taxes..................................... 568 1,295 (478)(d) 1,385
---------- ---------- ----------- -----------
Income (loss) before extraordinary item........................ $ (456) $ 3,398 $ (3,799) $ (857)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Loss before extraordinary item per share....................... (0.35) -- -- (0.26)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
OTHER DATA:
EBITDA(e)...................................................... $ 8,551 $ 11,614 $ 1,248(e) $ 21,413
Depreciation and amortization.................................. 4,218 2,757 1,218 8,193
Capital expenditures........................................... 1,486 2,866 -- 4,352
Ratio of earnings to fixed charges............................. 1.04
</TABLE>
See notes to unaudited pro forma combined statements of operations.
30
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(a) The adjustment is comprised of the following adjustments to selling, general
and administrative expenses:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
DECEMBER 31,
(DOLLARS IN THOUSANDS) 1997
-------------
<S> <C>
Amortization expense of goodwill related to Kolmar Acquisition determined using a
40-year useful life................................................................... $ 1,195
Additional depreciation expense related to step-up in Kolmar fixed assets............... 23
Reduced salaries expense for the termination of certain OSG management concurrent with
the Kolmar Acquisition................................................................ (1,110)
------
Total adjustment...................................................................... $ 108
------
------
</TABLE>
(b) The adjustment represents the net effect on interest expense associated with
the Notes (computed at 10.875%) and the repayment of existing debt.
(c) The adjustment represents amortization of deferred financing costs related
to obtaining the Senior Secured Credit Facility and the Notes using a
weighted average seven-year useful life.
(d) The adjustment represents the additional income tax effects associated with
the Kolmar Acquisition and the corresponding pro forma adjustments.
(e) Unaudited pro forma combined EBITDA represents the sum of income from
operations and depreciation and amortization and excludes non-recurring
charges as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
(DOLLARS IN THOUSANDS) DECEMBER 31, 1997
--------------------
<S> <C>
Broken deal costs......... $138
Reduced salaries expense
for the termination of
certain OSG management
concurrent with the
Kolmar Acquisition...... 1,110
------
Total adjustments......... 1$,248
------
------
</TABLE>
EBITDA is not intended to represent cash flows from operations as defined by
GAAP and should not be considered as an alternative to net income as an
indicator of the Company's operating performance or to cash flows as a
measure of liquidity. Pro forma combined EBITDA is included herein as it is
a basis upon which the Company assesses its pro forma financial performance
and its ability to service pro forma indebtedness. The calculation of pro
forma combined EBITDA differs from the definition of the term "Consolidated
EBITDA," as defined in the Indenture. See "Description of Notes-- Certain
Definitions."
31
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The selected financial data set forth below for the fiscal years ended
December 31, 1993, 1994, 1995, 1996 and 1997 are derived from the audited
financial statements of the Company and its predecessors. Such data for the
three months ended March 30, 1997 and March 28, 1998 are derived from the
unaudited interim financial statements of the Company, which include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of the results of operations for the
periods presented. The results for the three month period ended March 28, 1998
are not necessarily indicative of the results to be expected for the year ending
December 31, 1998 or for any future period. OSG, previously ASHC, was formed to
acquire ASC effective February 14, 1994. OSG had no operations prior to the
acquisition. Consequently, the financial data set forth below for the fiscal
year ended December 31, 1994 includes the audited results of OSG for the period
from inception, February 15, 1994 to December 31, 1994 and the unaudited
balances of ASC for the period from January 1, 1994 to February 14, 1994.
Amounts in 1993 reflect the operating results and financial position of ASC,
prior to its acquisition by OSG.
The selected financial data for Piedmont set forth below for the fiscal
years ended September 30, 1993, 1994, 1995 and 1996 are derived from the audited
financial statements of Piedmont. Such data for Kolmar for the fiscal years
ended December 31, 1995, 1996 and 1997 are derived from audited combined
financial statements. Kolmar financial data for the years ended December 31,
1993 and 1994 are derived from Kolmar's unaudited financial statements. The
unaudited financial statements for the years ended December 31, 1993 and 1994
include all adjustments (consisting only of normal recurring adjustments) which
management of Kolmar considers necessary for a fair presentation of the
financial data for the periods presented.
The selected unaudited pro forma combined financial data of the Company for
the fiscal year ended December 31, 1997 are derived from the Unaudited Pro Forma
Condensed Combined Financial Data included elsewhere in this Prospectus. Such
data give effect to (i) the Kolmar Acquisition and the repayment of existing
debt of the Company in conjunction therewith; and (ii) the completion of the
Offering and application of the proceeds therefrom, as if each had occurred at
the beginning of the year ended December 31, 1997 and before changes in
accounting principles and extraordinary items. The related pro forma balance
sheet data give effect to (i) and (ii) as if each had occurred on December 31,
1997.
The following information should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements included elsewhere in this Prospectus.
32
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
OUTSOURCING SERVICES GROUP, INC. AND PREDECESSOR
<TABLE>
<CAPTION>
PREDECESSOR OSG
---------------------- ---------------------------------------------------------
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE ------------------------------------------------------- MARCH 30, MARCH 28,
DATA) 1993 1994 1995 1996(a) 1997 1997(a) 1998(a)
--------- ----------- --------- --------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................. $ 50,615 $ 52,730 $ 60,633 $ 79,832 $ 110,328 $ 26,538 $ 53,875
Gross profit............................. 8,720 7,955 8,258 11,084 15,117 3,615 8,001
Income from operations................... 5,770 3,981 3,650 5,089 4,333 1,236 3,028
Interest expense, net.................... 208 3,116 3,689 3,646 4,221 1,341 2,829
Net income (loss) (b).................... 12 540 52 (6,247) (1,516) (181) (2,577)
Net income (loss) per share.............. 131.87 0.99 0.11 (9.06) (1.17) (0.14) (0.82)
OTHER DATA:
Adjusted EBITDA (c)...................... $ 6,298 $ 5,410 $ 5,530 $ 7,584 $ 8,551 $ 2,275 $ 4,962
Net cash provided by (used in) operating
activities............................. 5,856 932 1,381 454 6,048 4,856 (5,918)
Depreciation and amortization............ 428 1,429 1,880 2,495 4,218 1,039 1,934
Capital expenditures..................... 431 2,049 429 638 1,486 254 369
Ratio of earnings to fixed charges....... 1.02 1.18 1.02 1.36 1.02 0.93 1.07
BALANCE SHEET DATA (AT PERIOD END):
Cash and short-term investments.......... $ 604 $ 4 $ 32 $ 610 $ 588 $ 776 $ 3,885
Working capital.......................... 2,693 4,927 5,436 13,426 12,595 9,475 28,573
Total assets............................. 13,927 37,793 39,100 52,351 51,841 51,864 184,591
Total debt............................... 5,746 30,354 29,013 38,704 36,191 34,268 105,031
Redeemable preferred stock............... -- 3,204 3,633 4,118 4,259 4,118 4,321
Stockholders' equity (deficit)........... 3,353 (3,301) (3,608) (3,340) (5,326) (3,522) 14,573
</TABLE>
PIEDMONT LABORATORIES, INC.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,(d)
--------------------------------------------
(DOLLARS IN THOUSANDS) 1993 1994 1995 1996
--------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues....................... $ 22,583 $ 34,121 $ 32,305 $ 35,541
Gross profit....................... 4,352 5,350 5,081 5,212
Income from operations............. 1,441 2,194 1,722 2,112
Interest expense, net.............. 290 227 200 223
Net income......................... 719 1,200 916 1,152
OTHER DATA:
Adjusted EBITDA (c)................ $ 2,232 $ 2,969 $ 2,505 $ 2,877
Net cash provided by operating
activities....................... 1,517 1,042 1,885 1,450
Depreciation and amortization...... 791 775 783 765
Capital expenditures............... 515 739 932 992
BALANCE SHEET DATA (AT PERIOD END):
Cash and short-term investments.... $ 3 $ 206 $ 13 $ 27
Working capital.................... 539 1,197 1,280 1,871
Total assets....................... 10,086 12,225 11,714 13,919
Total debt......................... 3,629 2,698 2,116 1,869
Stockholders' equity............... 4,163 5,363 6,278 7,431
</TABLE>
33
<PAGE>
KOLMAR LABORATORIES, INC.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,(d)
---------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- --------- --------- ---------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues................................................. $ 73,248 $ 63,782 $ 74,307 $ 103,316 $ 103,141
Gross profit................................................. 10,133 9,821 14,001 20,061 16,968
Income (loss) from operations (e)............................ (19,298) (23,209) 4,841 9,910 8,857
Interest expense, net........................................ 1,357 1,801 3,133 3,697 4,164
Net income (loss) (e)........................................ (22,810) (16,593) 1,042 5,071 3,398
OTHER DATA:
Adjusted EBITDA (c).......................................... $ (137) $ 5,965 $ 6,944 $ 12,178 $ 11,614
Net cash provided by (used in) operating activities.......... 2,477 2,953 (8,955) 4,515 (1,044)
Depreciation and amortization................................ 2,263 4,924 2,103 2,268 2,757
Capital expenditures......................................... 4,613 2,598 3,559 3,836 2,866
BALANCE SHEET DATA (AT PERIOD END):
Cash and short-term investments.............................. $ 3,137 $ 2,458 $ 3,030 $ 5,366 $ 9,555
Working capital.............................................. 6,949 (10,066) (7,170) (11,894) (8,310)
Total assets................................................. 48,537 38,057 53,663 67,972 72,855
Total debt................................................... 24,802 30,313 39,933 49,124 57,120
Stockholders' equity (deficit)............................... 217 (19,297) (24,454) (19,175) (17,410)
</TABLE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA (F)
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
DECEMBER 31,
1997
------------
(DOLLARS IN THOUSANDS)
<S> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................. $ 213,469
Gross profit............................. 32,085
Income from operations................... 13,082
Interest expense, net (g)................ 12,554
Net income (loss) (h).................... (857)
Net income (loss) per share.............. (0.26)
OTHER DATA:
EBITDA (i)............................... 21,413
Depreciation and amortization............ 8,193
Capital expenditures..................... 4,352
Ratio of earnings to fixed charges....... 1.04
BALANCE SHEET DATA:
Cash and short-term investments.......... 3,432
Working capital.......................... 25,559
Total assets............................. 179,929
Total debt............................... 107,332
Redeemable preferred stock............... 4,259
Stockholders' equity..................... 12,212
</TABLE>
34
<PAGE>
NOTES TO SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(a) The Piedmont and Kolmar acquisitions were effective on September 30, 1996
and January 1, 1998, respectively. Consequently, the Company's Statements of
Operations Data and Other Data for the year ended December 31, 1997 and for
the three months ended March 28, 1998 (which includes the acquired
operations for the entire period) are not directly comparable to the
Statements of Operations Data and Other Data for the comparable periods in
prior years. Additionally, the results of operations for the fiscal year
ended December 31, 1996 include the acquired operations for the three-month
period subsequent to the Piedmont acquisition.
(b) Net income of OSG for the fiscal year ended December 31, 1993 reflects $5.5
million of owners' bonus compensation prior to the acquisition of ASC by the
Company. Net loss of OSG for the fiscal year ended December 31, 1996
includes a $7.0 million charge associated with the cumulative effect of a
change in accounting principle. Net loss for the year ended December 31,
1997 and for the three-months ended March 28, 1998 includes $1.1 million and
$2.1 million of extraordinary items, respectively, net of tax, associated
with charges for early retirement of debt.
(c) Adjusted EBITDA represents the sum of income from operations and
depreciation and amortization. For the fiscal year ended December 31, 1993,
the predecessor company to OSG paid its owners a bonus of $5.5 million. Such
payment has not been reflected in adjusted EBITDA. In addition, adjusted
EBITDA for the fiscal year ended December 31, 1993 excludes the loss from
operations from a discontinued operation totaling $100,000. The assets of
such operation were not purchased by OSG. Adjusted EBITDA for Kolmar
excludes a write-off of goodwill of $12,963,000 and a charge for
restructuring costs of $3,935,000 for the fiscal year ended December 31,
1993 and a $24,100,000 write-down of assets for the fiscal year ended
December 31, 1994.
Adjusted EBITDA is not intended to represent cash flows from operations as
defined by GAAP and should not be considered as an alternative to net income
as an indicator of the Company's operating performance or to cash flows as a
measure of liquidity. Adjusted EBITDA is included herein as it is a basis
upon which the Company assesses its financial performance and its ability to
service indebtedness. Adjusted EBITDA as calculated herein differs from the
definition of the term "Consolidated EBITDA" used in the Indenture under
which the New Notes are to be issued. See "Description of Notes--Certain
Definitions."
(d) Piedmont and Kolmar use 52-53 week fiscal years. For presentation purposes,
Piedmont's fiscal year has been reflected as if it ended on September 30.
Kolmar's fiscal year has been reflected as if it ended on December 31.
(e) Net loss for Kolmar for the fiscal year ended December 31, 1993 reflects
charges for restructuring costs of $3,935,000 and a write-off of $12,963,000
of goodwill. Net loss for Kolmar for the fiscal year ended December 31, 1994
reflects a $24,100,000 write-down of assets.
(f) See "Unaudited Pro Forma Condensed Combined Financial Data" for information
related to pro forma adjustments.
(g) Unaudited pro forma combined interest expense includes amortization of
deferred financing costs of $1.1 million for the fiscal year ended December
31, 1997.
(h) Unaudited pro forma combined net income is computed excluding the effects of
extraordinary items and the cumulative effects of a change in accounting
principle.
(i) Unaudited pro forma combined adjusted EBITDA represents the sum of income
from operations and depreciation and amortization and excludes non-recurring
charges, consisting primarily of salary expenses of $1.1 million for the
termination of certain OSG management concurrent with the Kolmar Acquisition
and broken deal costs of $138,000 for the fiscal year ended December 31,
1997.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
OSG, through its operating subsidiaries, ASC, Piedmont and Kolmar, is a
full-service contract manufacturer and packager of consumer products for
marketers in the health and beauty aid, household and automotive consumer
product markets. The Company manufactures and packages a broad range of products
including color cosmetics (such as lipstick, face powders and eye shadow),
aerosols (such as hair spray, shaving cream and gel and lubricants) and creams,
lotions and liquids (such as skin care products, shampoo, pump hair spray and
lighter fluid). Management believes OSG is the largest independent contract
manufacturer and packager of color cosmetics, high-end salon aerosol hair care
products and shaving creams and gels in North America.
The Company typically charges a per-unit fee which varies depending on: (i)
the type of product, (ii) the type of services provided (filling only versus
product development, formulation, materials procurement, etc.), (iii) the
container size and order quantity, and (iv) the complexity of the manufacturing
and packaging process. In many cases, the Company purchases the raw and
packaging materials on behalf of its customers. In such instances, the Company
passes the costs of such materials on to its customers and charges a handling
fee in addition to the fill fee. The percentage of materials purchased directly
by customers versus purchased by the Company on behalf of customers may have an
impact on total revenues and cost of goods sold.
The predecessor to OSG, ASHC, was organized on February 14, 1994 to acquire
ASC from its founders. On September 30, 1996, GMIP, HVP-IV and certain members
of management independently acquired Piedmont in a purchase of stock from its
founder. On June 30, 1997, Piedmont's holding company, ACHC, was merged with and
into ASHC (the "Merger"). The Merger was accounted for similar to a pooling of
interests and ASHC's name was changed to OSG. As a result, the Company's
historical statements of operations for the period from September 30, 1996 (the
time of the GMIP and HVP-IV investments) through June 30, 1997 were restated to
include the statements of operations of Piedmont. Because of the accounting
structure of the acquisition of Piedmont, the Company's financial results for
the year ended December 31, 1996 include only three months of Piedmont's
operations. Similarly, the financial results for the nine months ended September
30, 1996 include only the operating results of ASC. The financial results for
the fiscal year ended December 31, 1997 and the three months ended March 30,
1997 and March 28, 1998 include the results of both Piedmont and ASC.
The Company's results of operations for the periods presented herein are not
readily comparable due to the acquisition of Piedmont as of September 30, 1996
and due to the acquisition of Kolmar as of January 1, 1998. The results of
operations for the fiscal years 1995 through 1997 for OSG and Kolmar are
discussed separately below. The financial results for the three month period
ended March 28, 1998 includes the results of ASC, Piedmont and Kolmar.
36
<PAGE>
RESULTS OF OPERATIONS
OSG
The following table sets for the the Company's statements of operations for
the periods indicated and the percentage relationship of each item to net
revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, --------------------
---------------------------------------------------------------- MARCH 30, 1997
(DOLLARS IN THOUSANDS) 1995 1996 1997
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues......................... $ 60,633 100.0% $ 79,832 100.0% $ 110,328 100.0% $ 26,538 100.0%
Cost of goods sold................... 52,375 86.4 68,748 86.1 95,211 86.3 22,923 86.4
Selling, general and administrative
expenses........................... 4,608 7.6 5,995 7.5 10,784 9.8 2,379 9.0
Income from operations............... 3,650 6.0 5,089 6.4 4,333 3.9 1,236 4.7
Interest expense, net................ 3,689 6.1 3,646 4.6 4,221 3.8 1,341 5.1
Extraordinary item................... -- -- -- -- 1,060 1.0 -- --
Cummulative effect of a change in
accounting principal............... -- -- 7,000 8.8 -- -- -- --
Net income (loss).................... 52 0.1 (6,247) (7.8) (1,516) (1.4) (181) (0.7)
OTHER DATA:
Adjusted EBITDA...................... 5,530 9.1 7,584 9.5 8,551 7.8 2,275 8.6
Capital expenditures................. 429 -- 638 -- 1,486 -- 254 --
<CAPTION>
MARCH 28, 1998
(DOLLARS IN THOUSANDS)
--------------------
<S> <C> <C>
Net revenues......................... $ 53,875 100.0%
Cost of goods sold................... 45,874 85.1
Selling, general and administrative
expenses........................... 4,973 9.2
Income from operations............... 3,028 5.6
Interest expense, net................ 2,829 5.3
Extraordinary item................... 2,145 4.0
Cummulative effect of a change in
accounting principal............... -- --
Net income (loss).................... (2,577) (4.8)
OTHER DATA:
Adjusted EBITDA...................... 4,957 9.2
Capital expenditures................. 369 --
</TABLE>
THREE MONTHS ENDED MARCH 28, 1998 VERSUS THREE MONTHS ENDED MARCH 30, 1997
NET REVENUES. Net revenues increased $27.3 million, or 103.0% to $53.9
million for the three months ended March 28, 1998 from $26.5 million for the
three months ended March 30, 1997. The increase was primarily attributable to
the acquisition of Kolmar effective January 1, 1998, which accounted for $22.0
million or 80.6% of the increase in net revenues. Without the acquisition of
Kolmar, net revenues increased approximately $5.3 million or 20.1%, due
primarily to an increase in net revenues from creams, lotions and liquids.
COST OF GOODS SOLD. Cost of goods sold increased $23.0 million, or 100.4%
to $45.9 million for the three months ended March 28, 1998 from $22.9 million
for the three months ended March 30, 1997. The increase was primarily
attributable to the acquisition of Kolmar, which accounted for $17.6 million or
76.5% of the increase in cost of goods sold. Without the acquisition of Kolmar,
cost of goods sold increased approximately $5.3 million or 23.2%, due primarily
to an increase in creams, lotions and liquids. As a percentage of net revenues,
cost of goods sold declined to 85.1% for the three months ended March 28, 1998
from 86.4% for the three months ended March 30, 1997. This was primarily
attributable to the fact that Kolmar's cost of goods sold as a percentage of net
revenue was lower than ASC's and Piedmont's, since ASC and Piedmont purchase raw
materials for a higher percentage of their customers. Additionally, ASC's cost
of goods increased as a result of an increase in the minimum wage in California
(March 1997) as well as a continuing shift toward purchasing more raw material
for its customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") increased $2.6 million or 108.3% to $5.0
million for the three months ended March 28, 1998 from $2.4 million for the
three months ended March 30, 1997. The increase was primarily attributable to
the acquisition of Kolmar, which accounted for $2.7 million, or 103.8% of the
increase in SG&A. As a percentage of net revenues, SG&A increased to 9.2% for
the three months ended March 28, 1998 from 9.0% for the three months ended March
30, 1997. The increase was primarily attributable to the acquistion of Kolmar.
INTEREST EXPENSE. Interest expense increased $1.5 million, or 115.4% to
$2.8 million for the three months ended March 28, 1998 from $1.3 million for the
three months ended March 30, 1997. The increase
37
<PAGE>
was primarily attributable to the acquisition of Kolmar, which accounted for
$1.7 million, or 113.3% of the increase. This increase was partially offset by
the refinancing (the "January 1998 Refinancing") of the Company's existing
indebtedness with the Senior Secured Credit Facility and the Subordinated Bridge
Facility which reduced the average interest rate on the Company's outstanding
indebtedness from 14.7% to 12.3% for the three months ended March 28, 1998,
resulting in a decrease in interest expense of $0.2 million.
EXTRAORDINARY ITEM. As a result of the January 1998 Refinancing and the
March 3, 1998 refinancing of all indebtedness then outstanding under the Senior
Secured Credit Facility and the Subordinated Bridge Facility, with $105.0
million of Notes, the Company wrote off deferred financing charges of $2.2
million, net of $1.4 million of taxes, related to the prior indebtedness.
ADJUSTED EBITDA. EBITDA increased $2.7 million, or 117.4% to $5.0 million
for the three months ended March 28, 1998 from $2.3 million for the three months
ended March 30, 1997. The increase was primarily attributable to the acquisition
of Kolmar, which accounted for $2.5 million of the increase in EBITDA, which was
partially offset by a decline in volume attributable to household products.
CAPITAL EXPENDITURES. Capital expenditures for the three months ended March
28, 1998 were $0.4 million and consisted primarily of maintenance oriented
projects, new customer requirements and various cost savings expenditures.
FISCAL YEAR ENDED DECEMBER 31, 1997 VERSUS FISCAL YEAR ENDED DECEMBER 31, 1996
NET REVENUES. Net revenues increased $30.5 million, or 38.2% to $110.3
million for the year ended December 31, 1997 from $79.8 million for the year
ended December 31, 1996. The increase was primarily attributable to the
acquisition of Piedmont on September 30, 1996, which accounted for $36.1 million
or 118.4% of the increase in net revenues. Without the acquisition of Piedmont,
net revenues decreased approximately $5.7 million, or 7.1% due to a decline in
net revenues from household products, which was partially offset by an increase
in personal care products.
COST OF GOODS SOLD. Cost of goods sold increased $26.5 million, or 38.6% to
$95.2 million for the year ended December 31, 1997 from $68.7 million for the
year ended December 31, 1996. The increase was primarily attributable to the
acquisition of Piedmont, which accounted for $30.9 million, or 116.6 % of the
increase in cost of goods sold. Without the acquisition of Piedmont, cost of
goods sold decreased approximately $4.2 million or 6.1% primarily as a result of
a decline in net revenues at ASC. As a percentage of net revenues, cost of goods
sold increased to 86.3% for the year ended December 31, 1997 from 86.1% for the
year ended December 31, 1996. This was primarily attributable to the fact that
ASC's cost of goods increased as a result of an increase in the cost of labor
due to the minimum wage increase in September 1996 (Federal) and March 1997
(California), and a continuing shift toward purchasing more raw material for its
customers, which was partially offset by the fact that Piedmont's cost of goods
sold as a percentage of net revenues was lower than ASC's given ASC purchased
raw materials for a higher percentage of customers.
SG&A. SG&A increased $4.8 million or 80% to $10.8 million for the year
ended December 31, 1997 from $6.0 million for the year ended December 31, 1997.
The increase was primarily attributable to the acquisition of Piedmont, which
accounted for $4.4 million, or 91.7% of the increase in SG&A. As a percentage of
net revenues, SG&A increased to 9.8% for the year ended December 31, 1997 from
7.5% for the year ended December 31, 1996. In addition to the acquisition of
Piedmont, the increase in SG&A was attributable to costs associated with staff
additions in senior management and research and development and an upgrade in
the Company's computer system, as well as expenses related to an unsuccessful
acquisition bid.
38
<PAGE>
INTEREST EXPENSE. Interest expense increased $0.6 million, or 16.6% to $4.2
million for the year ended December 31, 1997 from $3.6 million for the year
ended December 31, 1996. The increase was partially attributable to the
acquisition of Piedmont, which accounted for $0.2 million, or 33.3 % of the
increase, as well as additional borrowing to meet increased working capital
requirements.
EXTRAORDINARY ITEM. On June 30, 1997, the Company refinanced its credit
agreement concurrent with the formation of OSG and the merger. As a result of
this refinancing, the Company wrote off deferred financing charges of $1.1
million, net of $0.6 million of taxes, related to the prior indebtedness.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. During fiscal 1996,
the Company changed its accounting policy for evaluating the recoverability of
intangible assets. Previously, the Company determined the recoverability of
intangible assets by considering estimated future operating income of the
Company on an undiscounted cash flow basis. Under its new policy, the Company
evaluates the recoverability of intangible assets based on the estimated fair
market value of the Company. The cumulative effect of the change in accounting
policy has resulted in a write down of goodwill associated with the acquisition
of ASC of $7.0 million.
ADJUSTED EBITDA. EBITDA increased $1.0 million, or 13.2% to $8.6 million
for the year ended December 31, 1997 from $7.6 million for the year ended
December 31, 1996. The increase was primarily attributable to the acquisition of
Piedmont, which accounted for $2.8 million of the increase in EBITDA, which was
offset by a decline in volume attributable to household products, costs
attributable to staff additions in senior management and an upgrade in the
Company's computer systems as well as expenses related to an unsuccessful
acquisition bid.
CAPITAL EXPENDITURES. Capital expenditures for the year ended December 31,
1997 were $1.5 million and consisted primarily of maintenance oriented projects,
new customer requirements and various cost savings expenditures.
FISCAL YEAR ENDED DECEMBER 31, 1996 VERSUS FISCAL YEAR ENDED DECEMBER 31, 1995
NET REVENUES. Net revenues increased $19.2 million, or 31.7% to $79.8
million for the year ended December 31, 1996 from $60.6 million for the year
ended December 31, 1995. The acquisition of Piedmont accounted for $7.5 million,
or 39.1% of the increase in net revenues. Without the acquisition of Piedmont,
net revenues increased approximately $11.7 million, or 19.3%, due to a strong
market for personal care and household products. This included new product
launches of premium hair care products for several key customers in the high-end
salon market.
COST OF GOODS SOLD. Cost of goods sold increased $16.3 million, or 31.1% to
$68.7 million for the year ended December 31, 1996 from $52.4 million for the
year ended December 31, 1995. The acquisition of Piedmont accounted for $6.3
million, or 38.7% of the increase in cost of goods sold. As a percentage of net
revenues, cost of goods sold declined from 86.4% to 86.1%. This is primarily
attributable to the fact that Piedmont's cost of goods sold margin is lower than
ASC's, since ASC purchases raw materials for a higher percentage of its
customers. Excluding the effects of the acquisition of Piedmont, cost of goods
sold as a percentage of net revenues remained essentially unchanged at 86.3% for
the year ended December 31, 1996 compared to 86.4% for the year ended December
31, 1995.
SG&A. SG&A increased $1.4 million, or 30.4% to $6.0 million for the year
ended December 31, 1996 from $4.6 million for the year ended December 31, 1995.
The increase was primarily attributable to the acquisition of Piedmont, which
accounted for $1.1 million, or 78.6% of the increase in SG&A. As a percentage of
net revenues, SG&A decreased to 7.5% for the year ended December 31, 1996 from
7.6% for the year ended December 31, 1995. Excluding the acquisition of
Piedmont, SG&A as a percentage of net revenues declined to 6.1% for the year
ended December 31, 1996 from 7.6% for the year ended
39
<PAGE>
December 31, 1995. The decline in SG&A as a percentage of net revenues was
largely attributable to economies of scale realized with the significant
increase in net revenues.
INTEREST EXPENSE. Interest expense remained essentially unchanged at $3.6
million for the year ended December 31, 1996 despite a $0.2 million increase due
to the acquisition of Piedmont which was offset by a decline in interest expense
attributable to lower average borrowings.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE During fiscal 1996, the
Company changed its accounting policy for evaluating the recoverability of
intangible assets. Previously, the Company determined the recoverability of
intangible assets by considering estimated future operating income of the
Company on an undiscounted cash flow basis. Under its new policy, the Company
evaluates the recoverability of intangible assets based on the estimated fair
market value of the Company. The cumulative effect of the change in accounting
policy has resulted in a write-down of goodwill associated with the acquisition
of ASC of $7.0 million.
ADJUSTED EBITDA. EBITDA increased $2.1 million, or 38.2% to $7.6 million
for the year ended December 31, 1996 from $5.5 million for the year ended
December 31, 1995. The acquisition of Piedmont accounted for $0.6 million, or
28.6% of the increase in EBITDA.
CAPITAL EXPENDITURES. Capital expenditures for the year ended December 31,
1996 were $0.6 million and consisted primarily of maintenance oriented projects,
new customer requirements and various cost savings expenditures as well as an
upgrade of the Company's MIS system.
KOLMAR
The following table sets forth Kolmar's statements of operations for the
periods indicated and the percentage relationship of each item to net revenues:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------
DECEMBER
DECEMBER 30, DECEMBER 31, 31,
(DOLLARS IN THOUSANDS) 1995 1996 1997
-------------------- -------------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues....................................................... $ 74,307 100.0% $ 103,316 100.0% $ 103,141
Cost of goods sold................................................. 60,306 81.1 83,255 80.6 86,173
Selling, general and administrative expenses....................... 9,160 12.3 10,151 9.8 8,111
Income from operations............................................. 4,841 6.5 9,910 9.6 8,857
Interest expense, net.............................................. 3,133 4.2 3,697 3.6 4,164
Net income (loss).................................................. 1,042 1.4 5,071 4.9 3,398
Adjusted EBITDA.................................................... 6,944 9.4 12,178 11.8 11,614
Capital Expenditures............................................... 3,559 -- 3,836 -- 2,866
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Net revenues....................................................... 100.0%
Cost of goods sold................................................. 83.5
Selling, general and administrative expenses....................... 7.9
Income from operations............................................. 8.6
Interest expense, net.............................................. 4.0
Net income (loss).................................................. 3.3
Adjusted EBITDA.................................................... 11.3
Capital Expenditures............................................... --
</TABLE>
FISCAL YEARS ENDED DECEMBER 31, 1997 VERSUS FISCAL YEARS ENDED DECEMBER 31, 1996
NET REVENUES. Net revenues decreased $0.2 million, or 0.2% to $103.1
million for the year ended December 31, 1997 from $103.3 million for the year
ended December 31, 1996. The decrease in net revenues was a result of certain
customers taking business in-house which was partially offset by new business
with existing and new customers as well as an increase in the percentage of
customers for whom the Company purchased raw materials and packaging components.
COST OF GOODS SOLD. Cost of goods sold increased $2.9 million, or 3.5% to
$86.2 million for the year ended December 31, 1997 from $83.3 million for the
year ended December 31, 1996. As a percentage of net revenues, cost of goods
sold increased to 83.5% from 80.6%. The increase was primarily due to a change
in the product mix sold and to an increase in the percentage of customers for
whom Kolmar purchased raw materials and packaging components.
40
<PAGE>
SG&A. As a result of management's continued effort to reduce costs, SG&A
decreased $2.1 million or 20.6% to $8.1 million for the year ended December 31,
1997 from $10.2 million for the year ended December 31, 1996. As a percentage of
net revenues, SG&A decreased to 7.9% for the year ended December 31, 1997 from
9.8% for the year ended December 31, 1996. The improvement was due in large part
to a more cost effective worker's compensation program adopted in 1997, as well
as staff reductions and other cost reductions.
INTEREST EXPENSE. Interest expense increased $0.5 million, or 13.5% to $4.2
million for the year ended December 31, 1997 from $3.7 million for the year
ended December 31, 1996. Such interest expense was related to obligations owed
to Kolmar's former owner, CCL.
ADJUSTED EBITDA. EBITDA decreased $0.6 million, or 4.9% to $11.6 million
for the year ended December 31, 1997 from $12.2 million for the year ended
December 31, 1996.
CAPITAL EXPENDITURES. Capital expenditures for the year ended December 31,
1997 were $2.9 million and consisted primarily of maintenance oriented projects,
new customer requirements, cost reduction expenditures, information systems and
environmental safety and regulation expenditures.
FISCAL YEAR ENDED DECEMBER 31, 1996 VERSUS FISCAL YEAR ENDED DECEMBER 30, 1995
NET REVENUES. Net revenues increased $29.0 million, or 39.0% to $103.3
million for the year ended December 31, 1996 from $74.3 million for the year
ended December 30, 1995. The acquisition of Imperial Cosmetics Services
("Imperial") on January 4, 1996 accounted for $6.9 million, or 23.8% of the
increase in net revenues. Excluding the acquisition of Imperial, net revenues
increased approximately $22.1 million, or 29.7%, due to a strong market for
color cosmetic, particularly lipsticks, and skin care products. In addition, net
revenues increased due to a higher percentage of customers for whom Kolmar
purchased all raw and packaging materials.
COST OF GOODS SOLD. Cost of goods sold increased $23.0 million, or 38.1% to
$83.3 million for the year ended December 31, 1996 from $60.3 million for the
year ended December 30, 1995. The acquisition of Imperial accounted for $5.3
million, or 23.0% of the increase in cost of goods sold. As a percentage of net
revenues, cost of goods sold declined from 81.2% to 80.6%. This was primarily
due to economies of scale from the increase in net revenues as well as an
improvement in product mix. Excluding the acquisition of Imperial, cost of goods
sold as a percentage of net revenues improved to 80.9% for the year ended
December 31, 1996 from 81.2% for the year ended December 30, 1995.
SG&A. SG&A increased $1.0 million, or 10.9% to $10.2 million for the year
ended December 31, 1996 from $9.2 million for the year ended December 30, 1995.
The increase was entirely attributable to the acquisition of Imperial, which
accounted for $1.0 million, or 100% of the increase in SG&A. As a percentage of
net revenues, SG&A decreased to 9.9% for the year ended December 31, 1996 from
12.4% for the year ended December 30, 1995. Excluding the acquisition of
Imperial, SG&A as a percentage of net revenues declined to 9.5% for the year
ended December 31, 1996 from 12.4% for the year ended December 30, 1995. The
decline in SG&A as a percentage of net revenues was largely attributable to
economies of scale realized with the increase in net revenues, as well as a
continuation of cost reduction efforts.
INTEREST EXPENSE. Interest expense was $3.7 million for the year ended
December 31, 1996, versus $3.1 million for the year ended December 31, 1995. The
increase was due to higher borrowings from CCL for working capital and capital
expenditures.
ADJUSTED EBITDA. EBITDA increased $5.3 million, or 76.8% to $12.2 million
for the year ended December 31, 1996 from $6.9 million for the year ended
December 31, 1995. The acquisition of Imperial accounted for approximately $1.1
million, or 20.8% of the increase in EBITDA.
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<PAGE>
CAPITAL EXPENDITURES. Capital expenditures for the year ended December 31,
1996 were $3.8 million and consisted primarily of new customer requirements,
maintenance oriented projects, cost reduction expenditures, information systems
and environmental, safety and regulation expenditures.
LIQUIDITY AND CAPITAL RESOURCES
As of March 28, 1998, the Company had cash and short-term investments of
$3.8 million and long-term debt of $105.0 million. The primary sources of cash
were from financing and investing activities. Cash (used in) provided by
operations was $(5.9) million and $4.9 million for the three months ended March
28, 1998 and March 30, 1997, respectively. Principal uses of cash were for
capital expenditures and debt repayment. Net repayments under the Company's
working capital facilities were $38.1 million, $1.5 million and $2.1 million for
the three months March 28, 1998 and March 30, 1997, and for the year ended
December 31, 1997, respectively.
As of January 1, 1998, the Company consummated the Kolmar Acquisition. The
purchase price for the Kolmar Acquisition was $78.0 million, subject to certain
post-closing adjustments. In conjunction with the Kolmar Acquisition, the
Company refinanced all of it's existing indebtedness totaling $36.2 million. The
purchase price and refinanced indebtedness, plus $7.4 million of fees and
expenses, was financed through approximately $30 million of borrowings under the
Senior Secured Credit Facility, $70.0 million of borrowings under the
Subordinated Bridge Facility and the issuance of $20.9 million of Common Stock
to existing stockholders of the Company.
On March 3, 1998, OSG refinanced all of it's existing indebtedness totaling
$99.8 million. The refinanced indebtedness, plus $3.3 million of fees and
expenses, was financed with the proceeds from the issuance of $105.0 million
aggregate principal amount of the Old Notes.
As a result of the Offering, the Company is highly leveraged. As of March
28, 1998, the Company's indebtedness was $105.0 million, all of which bears an
interest rate of 10 7/8% per annum, and stockholders' equity was $14.6 million.
In addition as of March 28, 1998, the Company's subsidiaries had $51.4 million
of availability under the Senior Secured Credit Facility. The Senior Secured
Credit Facility bears interest at a floating rate based on (i) the Prime Lending
Rate (defined as the rate which BTCo (as defined) announces as its prime lending
rate from time to time), plus 0.75% or (ii) the Eurodollar Rate (defined as the
rate of the offered quotation, if any, to first class banks in the Eurodollar
market by BTCo for U.S. dollar deposits) for one, two, three or six months, in
each case plus 2.25%. See "Description of the Senior Secured Credit Facility."
The obligations of the Company's subsidiaries under the Senior Secured Credit
Facility are secured by a security interest in substantially all of their
assets, and the Company's obligations under its guarantee of the Senior Secured
Credit Facility are secured by substantially all of its assets. The terms of the
Notes and the Senior Secured Credit Facility have restrictive covenants that
restrict the Company's ability to pay dividends, sell certain assets, and incur
additional borrowings. Furthermore, the Company is required to maintain certain
financial ratios and satisfy financial condition tests. The Company's ability to
pay principal and interest on its indebtedness, including the Notes, will depend
upon the future operating performance of its subsidiaries and will require a
substantial portion of the Company's cash flow from operations. For the three
months ended March 28, 1998, and for the year ended December 31, 1997 the
Company's ratios of earnings to fixed charges were 1.07 and 1.02, respectively.
The Company anticipates that its primary uses of working capital in future
periods will be to service it's indebtedness and provide funds for operations
and future acquisitions. Should the Company seek to acquire additional
businesses, it will have to incure additional indebtedness and possibly raise
additional equity. The Company's ability to grow through acquisitions is
dependent upon the availability of such financing as well as the availability of
acquisition candidates and the terms on which such candidates may be acquired,
which may be adversely affected by competition for such acquisitions.
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The Company believes that cash on hand, cash flow from operations and
available borrowings under its Senior Secured Credit Facility, will be
sufficient to meet the Company's presently anticipated working capital and
capital expenditure needs for at least the next twelve months.
The Company's capital expenditures are expected to decline slightly from
historical levels as a result of the significant historical spending on
information system upgrades and major cost-saving programs. The Company's
capital expenditures will be primarily for new customer requirements,
maintenance, cost-saving projects, environmental safety and regulations
expenditures.
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
use of computer programs which have been written using two digits, rather than
four, to define the applicable year of business transactions. The Company's
principal inventory management systems are licensed from and maintained by third
party software development companies, which companies are currently modifying
their software products to address the Year 2000 issue; accordingly, management
does not anticipate any significant costs, problems or uncertainties associated
with becoming Year 2000 compliant. The Company is currently developing a plan to
ensure that its other internally generated operating systems are similarly
modified on a timely basis. Suppliers, customers and creditors of the Company
face similar Year 2000 issues. Should these entities be unable to successfully
address their Year 2000 issues, the Company may face adverse consequences.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the Exchange
Offer), the Company will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City
time, on [ ].
As of the date of this Prospectus, $105,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date hereof, to all Holders of
the Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions as
set forth under "--Certain Conditions to the Exchange Offer" below. Any Old
Notes not accepted for exchange for any reason will be returned without expense
to the tendering Holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "--Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the Holders of the Notes as promptly as practicable, such notice
in the case of any extension to be issued by means of a press release or other
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal or (in the case of a book-entry transfer)
an Agent's Message in lieu of such Letter of Transmittal, to the Exchange Agent
at the address set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, or (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at DTC (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 with the Letter of Transmittal or an Agent's
Message in lieu of such Letter of Transmittal, or (iii) the Holder must comply
with the guaranteed delivery procedures described below. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by the Letter of
Transmittal and that the Company may enforce such Letter of Transmittal against
such participant. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS.
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IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a Holder of the Old Notes who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered national securities exchange
with the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
their counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any Holder who seeks to tender Old Notes
in the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Note either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by powers of attorney, in either case signed exactly as the name or
names of the registered Holder or Holders that appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorneys are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted with the Letter of Transmittal.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the Holder and that neither the Holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the New Notes. If any Holder or any such other person is
an "affiliate", as defined under Rule 405 of the Securities Act, of the Company
and is engaged in or intends to engage in or has an arrangement or understanding
with any person to participate in a distribution of such New Notes to be
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<PAGE>
acquired pursuant to the Exchange Offer, then such Holder or any such other
person (i) could not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver this Prospectus in connection with any resale of such New Notes.
See "Plan of Distribution." The Letter of Transmittal states that by so
acknowledging and by delivering this Prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction of all of the conditions to the Exchange Offer, the
Company will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "--Certain Conditions to the Exchange Offer" below. For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral
(promptly confirmed in writing) or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered Holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to which
interest has been paid or, if no interest has been paid, from March 3, 1998. Old
Notes accepted for exchange will cease to accrue interest from and after the
date of consummation of the Exchange Offer. Pursuant to the Registration Rights
Agreement, certain Liquidated Damages are required to be made to Holders of Old
Notes under certain circumstances relating to the timing of the Exchange Offer
and to other registration requirements contained therein. Holders of Old Notes,
who tender such Notes in the Exchange Offer agree to waive any accrued but
unpaid Liquidated Damages on such Old Notes. An amount equal to the amount of
accrued and unpaid Liquidated Damages on Old Notes tendered in the Exchange
Offer shall be payable to registered holders of New Notes on the record date for
the first interest payment following the consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, (ii) a properly completed and duly executed
Letter of Transmittal or an Agent's Message in lieu thereof and (iii) all other
required documents. If any tendered Old Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old Notes are
submitted for a greater principal amount than the Holder desires to exchange,
such unaccepted or non-exchanged Old Notes will be returned without expense to
the tendering Holder thereof (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry procedures described below, such
non-exchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFERS
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer Facility
systems must make book-entry delivery of Old Notes by causing the Book-Entry
Transfer Facility to transfer such Old Notes into the Exchange Agent's accounts
at the Book-Entry Transfer Facility in accordance with such
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<PAGE>
Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP")
procedures for transfer. Such participant using ATOP should transmit its
acceptance to the Book-Entry Transfer Facility on or prior to the Expiration
Date or comply with the guaranteed delivery procedures described below. The
Book-Entry Transfer Facility will verify such acceptance, execute a book-entry
transfer of the tendered Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility and then send to the Exchange Agent confirmation of
such book-entry transfer, including an Agent's Message confirming that the
Book-Entry Transfer Facility has received an express acknowledgment from such
participant that such participant has received and agrees to be bound by the
Letter of Transmittal and that the Company may enforce the Letter of Transmittal
against such participant. However, although delivery of Old Notes may be
effected through book-entry transfer at the Book-Entry Transfer Facility, an
Agent's Message and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth below
under "--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a Holder of the Old Notes desires to tender such Old Notes and the Old
Notes are not immediately available, or time will not permit such Holders' Old
Notes or other required documents to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if (i) the tender is made through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
received from such Eligible Institution a Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of the
Holder of the Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed appropriate Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) with any
required signature guarantees and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed appropriate Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) with any
required signature guarantees and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent." Any such notice of
withdrawal must (i) specify the name of the person having tendered the Old Notes
to be withdrawn, (ii) identify the Old Notes to be withdrawn (including the
principal amount of such Old Notes), and (iii) (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes are registered,
if different from that of the withdrawing Holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of such certificates the withdrawing Holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such Holder is an Eligible Institution. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt)
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<PAGE>
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the Holder thereof without cost to such
Holder (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with such Book-Entry Transfer Facility for the Old
Notes), as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Old Notes" above at any time on or prior to 5:00 p.m., New York City
time, on the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes, the Exchange Offer violates any
applicable law or regulation or interpretation of the Staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
EXCHANGE AGENT
U.S. Bank Trust National Association has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at the address set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
Delivery to: U.S. Bank Trust National Association,
As Exchange Agent
<TABLE>
<CAPTION>
BY HAND: BY MAIL:
<S> <C>
U.S. Bank Trust National Association U.S. Bank Trust National Association
Attn: Specialized Finance Attn: Specialized Finance
180 East Fifth Street 180 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
BY OVERNIGHT COURIER: BY FACSIMILE:
U.S. Bank Trust National Association (612) 244-1537
Attn: Specialized Finance Attn: Specialized Finance
180 East Fifth Street Telephone: (612) 244-0721
St. Paul, Minnesota 55101
</TABLE>
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DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer except for reimbursement of mailing
expenses.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $400,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will be obligated to pay any
transfer taxes in connection with that exchange, as well as any other sale or
disposition of the Old Notes. Holders who instruct the Company to register New
Notes in the name of, or request that Old Notes not tendered or not accepted in
the Exchange Offer be returned to, a person other than the registered tendering
Holder will be responsible for the payment of any applicable transfer tax
thereon.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
they will register under the Securities Act any Old Notes which remain
outstanding after consummation of the Exchange Offer (subject to such limited
exceptions, if applicable). To the extent that Old Notes are not tendered and
accepted in the Exchange Offer, a holder's ability to sell such untendered Old
Notes could be adversely affected.
Holders of the New Notes and any Old Notes which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage thereof have
taken certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, holders of Old Notes will not be
entitled to any Liquidated Damages or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See
"Description of Notes--Exchange Offer; Registration Rights."
CONSEQUENCES OF EXCHANGING OLD NOTES
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by Holders thereof (other than any
such Holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. However, the Commission has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
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<PAGE>
with respect to the Exchange Offer as in such other circumstances. Each Holder,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage in, a distribution of such New Notes and has no arrangement
or understanding to participate in a distribution of New Notes. If any Holder is
an affiliate of the Company and is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on
the applicable interpretations of the staff of the Commission and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
this Prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions (including any jurisdiction outside the United States), the New
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdiction or an exemption from registration or qualification
is available and is complied with. The Company has agreed, pursuant to the
Registration Rights Agreement, subject to certain limitations specified therein,
to register or qualify the New Notes for offer or sale under all applicable
state or Blue Sky securities laws by the time the Registration Statement (of
which this Prospectus forms a part) is declared effective by the Commission.
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BUSINESS
THE COMPANY
The Company is a leading provider of outsourced manufacturing and packaging
services to the North American health and beauty aid market. Over 75% of the
Company's revenues are derived from the manufacturing and packaging of health
and beauty aid products, including lipstick, face powder, eye shadow, mascara,
nail enamel, skin care cream and lotion, hair spray and gel, shampoo and shaving
cream and gel. Other products manufactured and packaged by the Company include
household and automotive products such as lubricant, household cleaners and
lighter fluid. OSG offers its customers a complete range of services, including
product conceptualization, formulation, manufacturing, filling and packaging. It
also provides ancillary services such as materials procurement, warehousing and
distribution of finished goods. The Company is a recognized leader in product
formulation and has developed hundreds of proprietary products that have been
placed into distribution by its customers in national and international consumer
markets. Management estimates that a majority of the Company's revenues are
derived from products that OSG has formulated. The Company has six manufacturing
facilities strategically located in the United States and Canada, in addition to
facilities in Australia and Mexico. Management believes OSG is the largest
independent contract manufacturer and packager of color cosmetics, high-end
salon aerosol hair care products and shaving creams and gels in North America.
The Company had revenues and EBITDA (as defined) of $53.9 million and $5.0
million, respectively, for the three month period ended March 28, 1998.
The Company's customers include over 350 companies that market branded
and/or private label consumer products in the health and beauty aid, household
and automotive markets. Customers include Avon Products, Inc. ("Avon"),
Elizabeth Arden Co. ("Elizabeth Arden"), Estee Lauder Cos., Inc. ("Estee
Lauder"), Helene Curtis Inc. ("Helene Curtis"), John Paul Mitchell Systems
("Paul Mitchell"), Kingsford Manufacturing Co. ("Kingsford"), L'Oreal S.A.
("L'Oreal"), Mary Kay Corp. ("Mary Kay"), Procter & Gamble Co. ("Procter &
Gamble"), Sebastian International Inc. ("Sebastian") The Gillette Co.
("Gillette"), and WD-40 Co. ("WD-40"), as well as other nationally branded
marketers and numerous regional or niche marketers. The Company's top ten
customers have been with the Company for 17 years on average, and nine of those
top ten have been customers for at least ten years. The Company believes that
its ability to develop long-term relationships is due to its product formulation
expertise, manufacturing reliability, consistent product quality and timely
delivery. Many of OSG's customers lack in-house manufacturing capabilities and
outsource their manufacturing and packaging requirements in order to focus on
marketing. Management estimates that a majority of the Company's revenues are
derived from customers that do not have in-house manufacturing capabilities for
the products OSG manufactures. Companies with the necessary in-house
manufacturing capabilities utilize the Company's services for new product
launches, lower volume brands and to supplement internal capacity.
Contract manufacturers and packagers manufacture products to customer
specifications and fill containers for a wide range of industries. Contract
manufacturers typically charge a per-unit fee which varies depending on: (i) the
type of product, (ii) the type of services provided (filling only versus product
development, formulation, materials procurement, etc.), (iii) the container size
and order quantity, and (iv) the complexity of the manufacturing and packaging
process. The contract manufacturing and packaging industry is highly fragmented,
with hundreds of independent companies typically providing a narrow scope of
services in limited geographic areas. Competition is based principally on
formulation capabilities, product quality, reputation, service, dependability,
and cost-effectiveness. When the cost of distribution is a significant factor in
the total product cost or if customers desire geographic proximity to suppliers,
competition tends to be regionally based. Management believes that few
competitors offer the scale, expertise, reputation and range of services that
the Company provides.
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COMPETITIVE STRENGTHS
OSG attributes its leading market position to the following factors:
FORMULATION EXPERTISE. Management believes that OSG is highly regarded for
its product formulation capabilities. OSG's research and development chemists
have developed hundreds of proprietary products on behalf of its customers that
have been placed into distribution. Products developed by OSG include numerous
hair care products, such as hair sprays for the high-end salon market, color
cosmetics, such as long-lasting silicone lipstick and other products, including
a new product for WD-40. In addition, OSG is at the forefront of the
reformulation of aerosol products in response to changing government
regulations. Management believes that the Company's formulation expertise is
highly valued by its customers, resulting in greater customer loyalty and the
opportunity for revenue growth. Management estimates that a majority of the
Company's revenues are derived from products that OSG has formulated.
LONG-STANDING CUSTOMER RELATIONSHIPS. The Company believes that its strong,
long-standing customer relationships provide it with a distinct competitive
advantage. OSG provides contract manufacturing and packaging services to over
350 customers worldwide, including some of the best-known and most successful
consumer product companies. OSG's top ten customers have been customers for over
17 years on average, and include Sebastian, Mary Kay, WD-40, Nu-Skin
International, Inc. ("Nu-Skin"), Warner-Lambert Company ("Warner Lambert"),
Procter & Gamble, Paul Mitchell, Helene Curtis, Fashion Fair Cosmetics ("Fashion
Fair") and Alberto-Culver Companies ("Alberto-Culver"). All but one of the
top-ten customers have used the Company's services for more than ten years.
LEADER IN NICHE MARKETS. The Company focuses on market sectors requiring
specialized manufacturing and/or formulation capabilities such as color
cosmetics, high-end salon aerosol hair care products and shaving creams and
gels. As a result of its value-added manufacturing and formulation services,
management believes that it is able to retain customers and obtain higher profit
margins than contract packagers of commodity-type products. Management believes
the Company is the leading contract manufacturer and packager of color
cosmetics, high-end salon aerosol hair care products and shaving creams and gels
in North America.
FULL SERVICE CAPABILITIES. The Company offers a full array of services,
including materials procurement, blending, filling, packaging, warehousing and
distribution. The Company's full service product offering and manufacturing
expertise provides it with a competitive advantage in keeping existing customers
and attracting new ones. OSG's size, capabilities and reputation make it one of
the few contract manufacturers and packagers in the health and beauty aid
markets capable of supporting large scale production runs and product launches
for customers such as Procter & Gamble, Mary Kay, L'Oreal and Gillette.
MANUFACTURING EXPERTISE. The Company has the equipment and manufacturing
expertise required to manufacture and package a wide variety of color cosmetic,
aerosol, cream, lotion and liquid products while adhering to strict product
specifications for its customers. For example, the Company is able to fill
complex containers such as barrier packs (pressurized, non-aerosol containers),
which have made it a leader in manufacturing and packaging products such as
shaving gels. As a result of these capabilities, the Company is a highly valued
partner to its customers, providing consistently high quality products in a
timely, cost-effective manner. As further evidence of OSG's manufacturing
expertise and quality operations, all four of the Company's facilities that
manufacture and package products for Procter & Gamble, have been awarded Procter
& Gamble's prestigious Pinnacle Award for Good Manufacturing Practices.
STRATEGIC LOCATIONS. OSG's facilities are strategically located to service
regional, national and international customers. With its largest color cosmetics
facility located in New York City, the Company is close to the fashion and
cosmetic industry. In addition, management believes the Company is the largest
independent aerosol packager on the West Coast and in the Southeast. OSG can
manufacture and package various
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products at each of its facilities, creating flexibility in servicing its
geographically diverse customers in a cost-effective manner. The Company's
facilities in Mexico and Australia serve the requirements of both international
and local customers.
EXPERIENCED MANAGEMENT TEAM. OSG's management team, headed by the former
President of Kolmar, Christopher Denney, has extensive industry experience. Upon
joining Kolmar in 1994, Mr. Denney implemented numerous initiatives that
increased sales and returned Kolmar to profitability. Members of senior
management have spent a majority of their careers in the packaging industry,
averaging 24 years of experience. In addition, Walter K. Lim, the founder of
ASC, serves as Chairman of OSG, and Samuel D. Garretson, the founder of
Piedmont, serves as a director of OSG.
BUSINESS STRATEGY
The Company intends to increase its sales and profitability by capitalizing
on its product conceptualization and formulation expertise and its
cost-effective, quality manufacturing capabilities. In addition, management
believes that it can continue to improve the Company's operating results by
implementing the following strategies:
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES. OSG intends to capitalize on the
combination of each of its subsidiaries' respective customer bases, product
lines and geographical locations. The Company expects to increase product
penetration of its customer base by capturing business that previously exceeded
each of its subsidiaries' particular areas of expertise. For example, the
Company has developed proprietary color cosmetics formulations for Sebastian
International, Inc., a customer that traditionally focused on hair care
products, and expects to offer color cosmetic products to other hair care
product customers. In addition, the Company can offer its aerosol capabilities
to its color cosmetics customers. The geographic diversity of OSG's facilities
allows the Company to offer its customers multiple production locations.
CENTRALIZE SALES AND MARKETING. Historically, OSG has managed its sales
efforts at the plant level. The Company plans to centralize the management of
its sales efforts in order to improve communication with customers, to
cross-sell services to customers and to ensure uniform pricing and sales
strategies. The Company plans to establish a group specifically focused on
promoting innovation within OSG and to its customers. This innovation group will
be responsible for identifying market trends and assisting customers with new
product ideas, as well as promoting the Company through customer presentations,
advertising and trade shows. Local sales and management staff will continue to
maintain close ties with customers and production facilities. The centralized
sales effort will enable the Company to serve national accounts more effectively
and to pursue customers located outside the local marketing reach of each
individual plant.
INCREASE INTERNATIONAL PRESENCE. As a result of increased international
demand for cosmetic products, global cosmetics companies have started to expand
into markets such as Eastern Europe, Latin America and the Asia-Pacific region.
OSG intends to capitalize on this trend by increasing its export sales and
selectively entering into joint ventures and licensing agreements. The Company
currently has licensing agreements in Japan, Korea, Thailand and Poland. In
addition, the Company plans to continue to develop its own "control" brands --
brands for which OSG owns the formulas and manufactures and packages the
products to its own specifications, leaving the marketing, promotion and
distribution to its customer. To date, OSG has developed two control brands
which are manufactured at its Mexico facility--"Veronique," which is primarily
exported to Russia, and "Maria," a brand targeted at Latin American markets.
REDUCE MANUFACTURING COSTS. The Company continues to improve its
cost-effectiveness by investing in productivity enhancements and implementing
operational improvements. The Company believes that the combination of ASC,
Kolmar and Piedmont will result in cost reductions from (i) allocating
production among facilities to better optimize the use of labor and equipment;
(ii) eliminating redundant administrative operations; and (iii) in certain
cases, purchasing larger amounts of raw materials on more favorable terms.
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PURSUE STRATEGIC ACQUISITIONS. Management intends to pursue acquisitions to
expand into new product lines, niche markets and new geographic areas. The
Kolmar Acquisition represents a continuation of OSG's strategy to provide more
services to existing and potential customers in the highly fragmented contract
manufacturing and packaging industry. OSG plans to acquire companies that will
provide additional cross-selling and cost-reduction opportunities.
CUSTOMERS AND PRODUCTS
The Company's customers include over 350 companies that market branded
and/or private label consumer products in the health and beauty aid, household
and automotive markets. OSG's customers vary in size from large, international,
branded consumer product companies with diverse product lines to small,
entrepreneurial companies with narrower product offerings. The Company
specializes in the manufacturing of color cosmetic, aerosol, cream, lotion and
liquid products.
COLOR COSMETIC PRODUCTS. Color cosmetic products include lipstick, face
powder, eye shadow, mascara and nail enamel. The Company manufactures and
packages color cosmetics for the entire range of major cosmetic market sectors
from budget to high-end. According to Frost & Sullivan, retail revenues in the
color cosmetics industry were estimated at $3.3 billion in 1996 (representing a
3.6% annual growth rate since 1993). In order to respond to and drive fashion
trends, marketers continually change their product offerings. By offering
product conceptualization and formulation expertise and manufacturing
flexibility, the Company helps its customers remain current with market trends.
Management believes that the Company is the largest independent contract
manufacturer of color cosmetics in North America. For the three month period
ended March 28, 1998, 1997 and 1996, OSG's revenues from color cosmetic products
were $15.1 million, $14.6 million and $15.0 million, representing approximately
28.1%, 27.5% and 30.6% of revenues, respectively.
OSG's customers for color cosmetic products include:
<TABLE>
<CAPTION>
<S> <C>
- - Aveda Corporation - L'Oreal
- - Avon - Mary Kay
- - Elizabeth Arden - Nutri-Metics International (USA) Inc.
- - Estee Lauder - Nu-Skin
- - Fashion Fair - Procter & Gamble
- - Jordana Cosmetics Corporation - Sebastian
</TABLE>
AEROSOL PRODUCTS. Aerosol products include a broad range of products such
as hair spray, shaving cream and gel, lubricant, non-stick cooking spray and
household cleaning products. The aerosol system is one of the most effective
forms of delivering products in a cost-effective manner, while providing dosage
control, sanitary use and convenience. The CSMA estimates that in 1996, over 3.2
billion aerosol units were filled in the United States (representing a 1.8%
annual growth rate since 1990). The aerosol products market has undergone
significant change as certain states have enacted regulations requiring reduced
VOC emissions, resulting in the reformulation of aerosol products to meet these
new standards. The Company has reformulated over 100 products in response to
legislative changes. Not only must packagers of aerosol products obtain
government permits, but the packaging process also requires specialized
equipment and expertise.
The Company's success in the aerosol market is enhanced by its product
conceptualization, formulation and technological capabilities. The Company has
technological expertise with complex delivery systems such as barrier packs
(non-aerosol, pressurized products). In addition, many high-end salon aerosol
hair care companies rely on the Company's formulation expertise, making it the
largest aerosol contract manufacturer and packager of high-end hair care
products in North America.
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In addition to its success in the health and beauty aid industry, the
Company produces several aerosol products for the household and automotive
markets, including lubricants, bathroom cleaners, tire sealers and dry wall
repair products.
Management believes that the Company is the second largest independent
aerosol contract manufacturer and packager in North America and the largest in
shaving creams and gels. For the three month period ended March 28, 1998, 1997,
and 1996, OSG's revenues from aerosol products were $22.9 million, $22.2 million
and $21.4 million, representing approximately 42.5%, 41.9% and 43.7% of
revenues, respectively.
OSG's customers for aerosol products include:
<TABLE>
<CAPTION>
HAIR CARE: SHAVING CREAM AND GEL: HOUSEHOLD AND AUTOMOTIVE:
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
- - Graham Webb International - Gillette - Dow Chemical Co.
Corporation - Pfizer, Inc. - Radiator Specialty Co.
- - Helene Curtis - S.C. Johnson & Son, Inc. - S.C. Johnson & Son, Inc.
- - L'Oreal (Redken) - Warner-Lambert - Spraytex, Inc.
- - Nexxus Products Company - WD-40
- - Paul Mitchell
- - Redmond Products Inc.
- - Sebastian
</TABLE>
CREAM, LOTION AND LIQUID PRODUCTS. Creams and lotions consist of skin care
products such as facial preparations, hand and body care products, sun care and
anti-aging products. According to Frost & Sullivan, the skin care market is one
of the largest and fastest growing sectors of the health and beauty aid market,
estimated at $6 billion in revenues in 1996 (representing a 7.5% annual growth
rate since 1993). The Company began emphasizing skin care products in 1994 after
recognizing the growth potential in this market, and such products have grown to
approximately 20% of the Company's revenues. Other liquid products manufactured
and packaged by OSG include shampoo, conditioner, fragrance, pump hair spray and
gel and non-aerosol deodorant, as well as products for the household and
automotive markets such as lighter fluid, lubricant and cleaning products.
For the three month period ended March 28, 1998, 1997, and 1996, OSG's
revenues from cream, lotion and liquid products were $15.9 million, $16.2
million and $12.6 million, representing approximately 29.4%, 30.6% and 25.7% of
revenues, respectively.
OSG's customers for cream, lotion and liquid products include:
<TABLE>
<CAPTION>
CREAMS AND LOTIONS: LIQUIDS:
- ---------------------------------------------- ----------------------------------------------
<S> <C>
- - Alberto-Culver (Cosmetic Labs) - Dow Chemical Co.
- - B.F. Ascher & Company, Inc. - Kingsford
- - Estee Lauder - Paul Mitchell
- - Freeman Cosmetics, Inc. - S.C. Johnson & Son, Inc.
- - Nu-Skin - Sebastian
- WD-40 (3-in-1 Oil)
</TABLE>
MARKETING AND SALES
The Company has 14 full-time sales representatives located at the Company's
various manufacturing facilities. The Company's sales efforts are supported by
35 in-house customer service representatives who ensure timely delivery of
products and services. The Company plans to centralize the management of its
sales efforts in order to improve its communications with customers, to
cross-sell its services to customers, and to ensure uniform pricing and sales
strategies. Coordination of these efforts will occur at the national
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level and at each facility. Marketing will include a small group specifically
focused on promoting innovation within OSG and to its customers. This innovation
group will be responsible for increasing customer demand for OSG products by
following market trends, suggesting new product ideas and promoting the Company
through customer presentations, advertising and trade shows. Other members of
the sales and management staff will continue to be located at each plant in
order to maintain close ties with local customers and the production side of the
business.
FORMULATION
Management believes that OSG is highly regarded for its product formulation
capabilities. The Company's laboratory facilities are staffed with development
chemists and microbiologists who have developed hundreds of proprietary products
on behalf of the Company's customers that have been placed into distribution.
Products developed by OSG include numerous hair care products, such as hair
spray for the high-end salon market, color cosmetics, such as long-lasting
silicone lipstick and other products, including a new product for WD-40. The
Company's formulation expertise allows it to adapt customer formulations, which
may have been originally developed on a small scale, into formulas that can be
manufactured in large scale batch formulations. Additionally, the Company is
able to act as a fast-follower in developing products for customers shortly
after such products have been successfully launched by other marketers. OSG is
also at the forefront of the reformulation of aerosol products in response to
changing government regulations. Management believes that the Company's
formulation expertise is highly valued by its customers, resulting in greater
customer loyalty and opportunity for revenue growth. Management estimates that a
majority of the Company's revenues are derived from products that OSG has
formulated.
RAW MATERIALS
Some of OSG's customers provide raw materials for product manufacturing and
packaging, while in other cases, OSG procures raw materials for its customers.
If customers supply raw materials, the Company charges only a per unit fill fee
for its services. In the event OSG purchases raw materials from third party
suppliers, OSG passes the cost of such materials on to its customers, and
charges a handling fee in addition to the fill fee. Raw materials are purchased
from approved suppliers by the Company's buyers to meet specific production
requirements and customer specifications. The Company's primary raw materials
consist of cans, propellants, chemicals, valves, oils, talc, wax, colorants,
fragrances, thickeners, caps, bottles, cartons and tubes. While OSG strives to
maintain close relationships with its suppliers, the Company generally does not
enter into long-term contracts with them. The Company is not reliant on any one
supplier for any of its raw materials. Additionally, certain key customers have
recently changed the way materials are sourced, resulting in greater reliance on
the Company. This gives OSG greater control over its production planning and
inventory levels.
PRODUCTION AND MANUFACTURING
The Company's manufacturing process results in timely delivery of high
quality products to customers on a cost-effective basis. OSG provides its
customers with a full range of services including product conceptualization,
formulation, manufacturing, filling and packaging, materials procurement,
warehousing and shipping of finished goods. The manufacturing process
incorporates several distinct steps which require coordination in order to
ensure flexibility and short lead times, match product standards and achieve
high throughput. Certain manufacturing operations within the facilities are
compartmentalized (e.g., all lipsticks are manufactured and packaged in one area
of the facility) in order to enhance quality control and minimize the potential
for cross contamination of products.
In connection with each order, OSG procures raw materials for products and
packaging or accepts delivery of such materials from its customers. The raw
materials are inspected by quality control, after which OSG manufactures the
product in batches. When the batch is complete, quality assurance testing is
performed. In addition to the Company's own rigorous quality assurance
procedures, several of OSG's
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<PAGE>
customers specify additional levels of testing throughout the formulation and
manufacturing process. OSG fills the product into packaging containers for
shipment to customers or in some instances ships the final product batch in bulk
form to its customers.
COMPETITION
The contract manufacturing and packaging industry is highly fragmented. OSG
not only competes with other independent contract manufacturers, but also with
marketers that have self-manufacturing capabilities. Competition is based
principally on formulation capabilities, quality, reputation, service,
dependability, and cost-effectiveness. When the cost of distribution is a
significant factor in the total product cost, or if customers desire geographic
proximity to suppliers for faster service and closer communication, competition
tends to be regionally based. Management believes that few competitors offer the
scale, expertise, reputation and range of services that the Company provides.
Management also believes that there are hundreds of contract manufacturers and
packagers servicing the color cosmetic, aerosol, cream, lotion and liquid
products markets. OSG's main competitors in these market sectors include
Intercos Italia Spa, Davlyn Industries Inc., CCL, Accra-Pac Group, Bocchi
Laboratories, Inc., Cosmetic Essence Inc., Shield Packaging Co., Fluid Packaging
Co., Inc., San-Mar Laboratories, Packaging Advantage Corporation and
Alberto-Culver (Cosmetic Labs).
PROPERTIES
The following table sets forth information with respect to OSG's facilities
and the products manufactured at such facilities.
<TABLE>
<CAPTION>
APPROXIMATE
FACILITY SQ. FT. (000S) MARKET SECTORS(1) OWNERSHIP(2)
- ----------------------------------------------------- ----------------- ------------------------ ------------
<S> <C> <C> <C>
MANUFACTURING
City of Industry, CA (3)........................... 60 aerosols and liquids Leased
Gainesville, GA (4)................................ 98 aerosols and liquids Owned
Port Jervis, NY.................................... 264 cosmetics and liquids Owned
Corona, CA......................................... 112 cosmetics and liquids Leased
East Stroudsburg, PA............................... 30 cosmetics and liquids Owned
Barrie, Ontario.................................... 108 cosmetics and liquids Owned
Tlalnepantla, Mexico............................... 111 cosmetics and liquids Owned
Hornsby, Australia................................. 82 cosmetics and liquids Owned
WAREHOUSING
City of Industry, CA (4)........................... 122 Leased
Gainesville, GA (4)................................ 146 Leased
Port Jervis, NY.................................... 34 Leased
Cuautitlan, Mexico (4)............................. 58 Owned
</TABLE>
- ------------------------
(1) Liquids include cream, lotion and liquid products.
(2) Leased facilities have terms expiring from 1998-2013.
(3) Includes current corporate offices for OSG. Management intends to relocate
its headquarters during 1998.
(4) Consists of multiple facilities.
In addition to the above, the Company owns property in Sommersby, Australia
and Jalisco, Mexico, and leases corporate office space in New York, NY, none of
which management believes is material to the Company's business.
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EMPLOYEES
As of March 28, 1998, after giving effect to the Kolmar Acquisition, OSG
employed approximately 2,060 persons, of which approximately 440 are salaried
and approximately 1,520 are compensated on an hourly basis. In addition, the
Company utilizes local labor contract suppliers to provide a significant portion
of its production labor force. None of OSG's employees in the United States
belong to a union. Approximately 200 of OSG's employees in Mexico belong to a
union and approximately 80 of OSG's employees in Australia belong to one of two
unions. The Australia and Mexico union contracts expire in 1999 and 1998,
respectively. The Company has not experienced a significant work stoppage with
its employees. Management believes that its employee and union relationships are
good. The Company has employment agreements with certain key personnel. See
"Management-Employment Agreements."
TRADE NAMES, TRADEMARKS, FORMULAS AND PATENTS
OSG owns certain trade names, trademarks, formulas and patents which are
used in its business. Management believes that its development and formulation
expertise, manufacturing experience and know-how are more critical in
maintaining and growing its business than patents or trademarks. Consistent with
industry practice, management does not patent its proprietary formulas.
LEGAL PROCEEDINGS
From time to time, OSG and its subsidiaries may become party to various
legal proceedings involving routine claims which are incidental to their
businesses. The legal and financial liability of OSG and its subsidiaries with
respect to such matters cannot be estimated at the present time, but OSG and its
subsidiaries do not expect that such matters would have a material adverse
effect on the business, results of operations or financial condition of OSG
taken as a whole.
ENVIRONMENTAL ISSUES, COMPLIANCE AND GOVERNMENT REGULATION
ENVIRONMENTAL REGULATION AND COMPLIANCE. The Company's operations and
properties are subject to Environmental Laws. Violations of Environmental Laws
can result in civil or criminal penalties or in cease and desist or other orders
against the Company. In addition, the Company may be required to spend material
amounts to comply with Environmental Laws, and may be liable with respect to
contamination of sites currently or formerly owned or operated by the Company or
with respect to the off-site disposal of hazardous substances. Based upon the
Company's experience to date, as well as certain indemnification agreements
obtained in connection with the Kolmar Acquisition, the ASC acquisition and the
Piedmont acquisition, and certain insurance coverages, the Company believes that
the future cost of compliance with existing Environmental Laws and its liability
for identified environmental claims will not have a material adverse effect on
the Company's business, results of operations or financial condition. There can
be no assurance, however, that the Company's obligations in this regard will not
have such an effect or that the existing indemnities and insurance will be
sufficient to fund such liabilities. Furthermore, future events, such as new
information, or changes in Environmental Laws (or in their interpretation or
enforcement by courts or governmental agencies) may give rise to additional
costs or claims that could have a material adverse effect on the Company's
business, results of operations or financial condition.
Certain environmental laws, such as CERCLA and analogous state laws, impose
liability for the investigation and remediation of hazardous substances released
into the environment. Courts have interpreted CERCLA to impose strict, and in
some circumstances, joint and several, liability on all PRPs at a site if the
harm is indivisible, which means that one PRP could be held liable for the
entire cost of cleanup at a site where multiple parties contributed to the
contamination. As a practical matter, however, the costs typically are
allocated, according to a volumetric or other standard, among the PRPs. Under
CERCLA and analogous state laws, the Company may incur liability for
contamination at properties presently or formerly owned or operated by the
Company or its subsidiaries or predecessors (including
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contamination caused by the Company's predecessors or prior owners or operators
of such sites), or at properties where such entities sent waste for off-site
treatment or disposal.
In that regard, ASC's operations are located within the boundaries of the
Puente Valley Operable Unit ("OU") of the San Gabriel Valley Superfund Site.
Prior to the Company's purchase of ASC, the EPA identified ASC as one of more
than five hundred PRPs for the Puente Valley OU. Subsequently, ASC and
forty-three other PRPs entered into a consent agreement to fund certain
investigatory work, which work was completed in 1997. To date, the EPA has not
finally determined the remedial work that will be required at the site. In
connection with the Company's purchase of ASC, the sellers (who currently own
the property on which ASC operates) agreed to indemnify the Company with respect
to the Puente Valley OU proceeding and certain other environmental matters.
Certain of the Company's leases with the sellers also provide for off-sets to
the Company's rental obligations in the event that the Company incurs liability
for such an indemnified matter. Based on this indemnity, the lease off-set
rights, recent EPA cost estimates of the proposed cleanup alternatives and
certain preliminary estimates of ASC's share of liability, the Company believes,
although there can be no assurance, that ASC's liability at this site will not
be material. In addition, prior to the Company's acquisition, the Los Angeles
Regional Water Quality Control Board ("RWQCB") requested that ASC conduct
certain soil and groundwater investigation and remediation on its property. ASC
has conducted the requested investigations and the RWQCB has approved ASC's
remediation plan. Although there can be no assurance, the Company does not
believe that the costs of remediation will be material. This remediation is also
the subject of the above-referenced indemnity.
Also, in regard to CERCLA, Kolmar and a former affiliate, Wickhen Products
("Wickhen"), have been identified as the two principal PRPs at the Carroll &
Dubies Superfund Site in Port Jervis, New York. The EPA has estimated that it
will cost $8.8 million to clean up the site. Under current allocation estimates,
Kolmar and Wickhen will be responsible for most of these costs. Kolmar and
Wickhen's insurer has accepted coverage of this claim, and presently is
controlling the defense and paying related costs. It is anticipated that the
insurance coverage will be sufficient to pay for the estimated remedial costs.
In addition, the Company has received an indemnity for liability at this site
from CCL. Based on the foregoing, the Company does not believe that the
Company's liability at this site will be material. Kolmar also has been
identified as a PRP at several other sites where it sent waste for off-site
disposal. In addition, another site where a Kolmar affiliate formerly operated
currently is undergoing remediation under the direction of a state agency. Based
on currently available information concerning the estimated remediation costs
and the responsibility of other parties for contamination at these sites, as
well as the insurance coverage and the indemnity for these matters from CCL, the
Company does not believe that Kolmar's related liability will have a material
adverse effect on the Company's business, results of operations or financial
condition. There can be no assurance, however, that these matters will not have
such an effect, or that the Company will not incur liability at additional sites
in the future.
Piedmont's owned facility in Gainesville, Georgia is listed on the State of
Georgia's Hazardous Site Inventory ("HSI") of environmentally impacted sites due
to the detection of chlorinated solvents in the groundwater beneath the
facility. Piedmont has requested that the state agency remove the facility from
the HSI based upon Piedmont's understanding that no persons are exposed to
groundwater that may have been impacted by the facility. There can be no
assurance, however, that the Company's proposal will be approved by the state as
submitted or that the state will delist the site without requiring further
remedial action. The former owners of Piedmont have provided a partial indemnity
for remediation costs incurred at the facility. The Company believes that its
share of remediation costs, if any, will not have a material adverse effect on
the Company.
The Company also faces risks relating to federal and state environmental
regulation of VOCs. Recently enacted or future legislation requiring reductions
in the use of these propellants could materially adversely affect the Company's
business if the industry does not develop propellant technology and product
formulations to meet such future standards. California and New York recently
have mandated reductions in VOCs in aerosol products, and it is possible that
Georgia and other states may in the future
59
<PAGE>
pass similar legislation or enact regulations. All of the Company's products
meet the current regulatory standards, and management believes, although there
can be no assurance, that propellant technology and product formulations will be
developed that meet the future standards. See "--Environmental Issues,
Compliance and Government Regulation."
ERISA. Management believes that OSG is in material compliance with all laws
and regulations governing its employee benefit plans. Management believes OSG
has sufficient cash flow to meet its obligations to make pension contributions
and to pay related premiums. However, there can be no assurance that future
changes in such laws or regulations, or interpretations thereof, changes in
OSG's business or in market conditions affecting the value of plan assets will
not require OSG to expend amounts that exceed those that are now anticipated.
EMPLOYEE HEALTH AND SAFETY REGULATION. The Company's operations are subject
to a variety of worker safety laws. OSHA and analogous laws mandate general
requirements for safe workplaces for all employees. The Company believes that
its operations are in material compliance with applicable employee health and
safety laws.
STATE AND FEDERAL REGULATION. The Company's manufacturing and packaging of
over-the-counter pharmaceuticals, which accounts for a small percentage of
revenues, and cosmetics is subject to regulation by the FDA and by various state
agencies, especially the California Department of Health Services. Any failure
by the Company to remain in compliance with the regulations promulgated by these
agencies could have a material adverse effect on the Company's business.
The Company must also adhere to state and federal regulations governing
"good manufacturing practices," including testing, quality control,
manufacturing, inspection, and documentation requirements for certain products.
Although the Company has had no difficulty in complying with these regulations
to date, if violations of such regulations are noted during inspections of the
Company's manufacturing facilities, the Company may be required or may elect to
cease manufacturing and packaging at the facility in violation, pending
resolution of the violation. In these circumstances, the Company may also be
required or may elect to recall products that were manufactured under improper
conditions. Although the Company has had no difficulty in complying with these
regulations to date, there can be no assurance that any future federal or state
regulation of the Company's business will not have a material adverse impact on
the Company's business, results of operations or financial condition.
MINIMUM WAGES. The Company utilizes local labor contractors at its various
facilities to provide a significant portion of its production labor force. The
Company is subject to the Fair Labor Standards Act as well as various federal,
state and local regulations that govern such matters as minimum wage
requirements, overtime and working conditions. A large number of the Company's
employees, including those provided by local labor contractors, are paid at or
just above the federal minimum wage level and, accordingly, changes in laws,
regulations or ordinances could have a material adverse effect on the Company by
increasing the Company's costs.
60
<PAGE>
MANAGEMENT
Set forth below is certain biographical information relating to the
directors and executive officers of the Company, as of the date of this
Prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---------------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Christopher Denney.................................. 53 Director, Chief Executive Officer, President
Dennis M. Nolan..................................... 53 Chief Operating Officer
John G. Hewson, Jr.................................. 47 Senior Vice President of Sales and Marketing
Joseph W. Sortais................................... 55 Chief Financial Officer, Treasurer, Secretary
Walter K. Lim....................................... 71 Director, Chairman
Samuel D. Garretson................................. 62 Director
Howard C. Lim....................................... 62 Director
John H. Morris...................................... 54 Director
Drew H. Adams....................................... 37 Director, Assistant Secretary
Frank Edelstein..................................... 72 Director
Robert M. Wadsworth................................. 38 Director
Joseph A. Marino.................................... 65 Director
</TABLE>
CHRISTOPHER DENNEY. Mr. Denney was appointed Chief Executive Officer and
director of OSG upon consummation of the Kolmar Acquisition. From January 1994
to December 1997, Mr. Denney was the President of Kolmar. From 1987 to 1994, Mr.
Denney worked at CCL in a variety of senior management positions, including
Managing Director and Chief Executive Officer of CCL's United Kingdom
subsidiary. Prior to joining CCL, Mr. Denney was Director of Marketing with
Consumer Packaging Industries, Inc. from 1982 to 1987. Mr. Denney is an active
member of the Cosmetics Toiletries and Fragrances Association ("CFTA") board of
directors. Mr. Denney holds a B.S. degree in Mechanical Engineering from
Lancaster and Morecambe Tech.
DENNIS M. NOLAN. Mr. Nolan joined the Company as its Chief Operating
Officer in January 1998. From 1990 to 1997, Mr. Nolan worked at CCL in a variety
of senior management positions, including Senior Vice President of Operations
where he was responsible for the management and direction of six North American
plants. Prior to joining CCL, Mr. Nolan held positions with Peterson/Puritan
Inc. (a contract manufacturer) and Gillette where, during his last eight years
he worked as Division Manager of Operations and Materials. Mr. Nolan holds a
B.A. degree in Economics from Boston College.
JOHN G. HEWSON, JR. Mr. Hewson was appointed Senior Vice President of Sales
and Marketing upon consummation of the Kolmar Acquisition. From December 1996 to
December 1997, Mr. Hewson served as the Chief Operating Officer of ASC. From
1986 to 1996, Mr. Hewson was with DowBrands L.P. (which was acquired by The
Lamaur Corporation in 1996) in a variety of senior management positions,
including Vice President--Manufacturing Services. Prior to that, Mr. Hewson
served as Corporate Director of Purchasing for Carter Hawley Hale, Inc. and was
the Assistant Director of Materials Management and International Purchasing
Manager for Richardson-Vicks Inc. Mr. Hewson holds a B.A. degree from Colgate
University and an M.B.A. from Rutgers University.
JOSEPH W. SORTAIS. Mr. Sortais was appointed Chief Financial Officer,
Treasurer and Secretary of OSG in June 1997. Mr. Sortais has been with the
Company since 1994, was appointed Chief Financial Officer of Piedmont on its
acquisition in September 1996, and was appointed Chief Financial Officer of
Kolmar upon consummation of the Kolmar Acquisition as of January 9, 1998. From
1984 to 1994, Mr. Sortais held senior management positions, most recently as
Chief Financial Officer, for the management buyout of Republic Supply from Fluor
Corporation and the subsequent successful management and resale of Republic
Supply. Mr. Sortais holds a B.S. degree in Accounting and an M.B.A. in Finance
from the University of California at Berkeley. He is also a Certified Management
Accountant (CMA) and a Certified Financial Planner (CFP).
61
<PAGE>
WALTER K. LIM. Mr. Lim has been Chairman of the Board of Directors of the
Company since February 1994 and was the President of ASC from its founding in
1966 until December 1997. Prior to founding ASC, Mr. Lim was a partner in
Pacific Aerosols, Inc., a plant manager and chemist at National Aerosol Co.,
Inc., and chief chemist with Purepac Corporation. Mr. Lim serves on the Board of
Directors of the CSMA and is a member of the Society of Cosmetic Chemists, the
Beauty and Barber Supply Institute and the National Cosmetology Association,
Inc. Mr. Lim holds a B.S. degree in Chemistry from the University of California,
Los Angeles.
SAMUEL D. GARRETSON. Mr. Garretson has been a director of the Company since
June 1997 and was the President of Piedmont since its founding in 1985 until
December 1997. Prior to joining the Company, Mr. Garretson held a variety of
engineering and management positions with Kartridg--Pak, Puritan Aerosol
Company, and Western Filling Corporation. Mr. Garretson holds an E.E. degree
from Virginia Polytechnic Institute.
HOWARD C. LIM. Mr. Lim has been a director of the Company since February
1994 and was the Executive Vice President, Chief Financial Officer and Treasurer
of ASC from 1968 to 1997. Prior to joining the Company, Mr. Lim was Chief of
Laboratory Services for the Crenshaw Medical Center Hospital in Los Angeles. Mr.
Lim holds a B.S. degree in Medical Technology from the University of Southern
California and an M.B.A. in Management and Finance from Pepperdine University,
School of Business and Management.
JOHN H. MORRIS. Mr. Morris has been a director of the Company since
February 1994. He has been the President of G+MG since its founding in 1992,
where he was primarily responsible for the acquisition of ASC by the Company.
From 1981 to 1992, Mr. Morris worked with Kelso & Co. Prior thereto, he held
various positions with Booz, Allen & Hamilton and Touche Ross & Company. Mr.
Morris is currently a director of Arkansas Best Corp. and Treadco, Inc. He is a
Certified Public Accountant, a Certified Management Consultant, and is a member
of the American Institute of Certified Public Accountants (AICPA). He holds a
B.S. degree in Industrial Engineering from the Georgia Institute of Technology
and an M.B.A. (Finance) from Georgia State University.
DREW H. ADAMS. Mr. Adams has been a director of the Company since January
1998 and Assistant Secretary of the Company since consummation of the Kolmar
Acquisition. He has been employed with G+MG since 1993 where he is currently a
Partner. Mr. Adams was primarily responsible for the acquisitions of Piedmont
and Kolmar by the Company. From 1987 to 1993, Mr. Adams worked in Wells Fargo
Bank's Corporate Banking Group. Mr. Adams was a Vice President with Wells Fargo
when he joined G+MG in 1993. Mr. Adams holds a B.A. degree in Marketing and an
M.B.A. in finance from Texas Christian University.
FRANK EDELSTEIN. Mr. Edelstein has been a director of the Company since
February 1994. He has been employed as a Vice President of G+MG since March
1992. From 1987 to 1992, Mr. Edelstein was a Vice President with Kelso &
Company, Inc. Prior thereto, he held various positions with Continental
Corporation, Automatic Data Processing, Inc., Leisure Technology, Inc., Olivetti
Corp. of America, B. Manischewitz Corp. and Devegh & Co. Mr. Edelstein holds a
B.A. degree in Mathematics and Economics from New York University in 1948 and
completed Masters Studies in Mathematic Statistics & Business at Columbia
University in 1949. Mr. Edelstein is a director of Arkansas Best Corp.,
International House of Pancakes Corp. and Ceradyne.
ROBERT M. WADSWORTH. Mr. Wadsworth has been a director of the Company since
February 1994. He has been a Managing Director of HarbourVest and its
predecessor, HVP, since 1986. Prior thereto, he held various positions with
Booz, Allen & Hamilton. Mr. Wadsworth currently serves on the advisory boards of
several U.S. venture capital firms and on the board of directors of Coil S.A.
(Belgium), Concord Communications, Gulf States Steel, as well as numerous
private corporations. Mr. Wadsworth holds a B.S. degree in Systems Engineering
and Computer Science from the University of Virginia and an M.B.A. from Harvard
Business School.
62
<PAGE>
JOSEPH A. MARINO. Mr. Marino has been a director of the Company since
February 1994. He was President and Chief Executive Officer of Western
Publishing Company from 1982 until his retirement in 1989. Prior thereto, Mr.
Marino was President of Liquid Paper Corporation, a subsidiary of Gillette, Vice
President-Marketing with Gillette's Safety Razor Division, and President of
Braun North America, a division of Gillette. Mr. Marino currently serves on the
Boards of Directors of Wickes Furniture, Inc. and Heritage Bank and Trust (which
changed its name to Johnson Bank), as well as several private companies. Mr.
Marino holds a B.S. in Business Administration from Tri-State University in
Indiana and an M.B.A. in Accounting from the Graduate School of Business at
Michigan State University.
Each of the directors listed above serves for a term of one year until the
next annual meeting of stockholders or until their respective successors are
duly elected and qualified. The Stockholders Agreement sets forth specific
procedures for the election of directors. See "Certain Relationships and Related
Transactions--Stockholder Agreement and Registration Rights Agreement."
Executive officers are elected annually and serve at the pleasure of the Board
of Directors. Walker K. Lim and Howard C. Lim are brothers.
DIRECTOR COMPENSATION
Directors are reimbursed for their out-of-pocket expenses incurred in
attending meetings of the Board of Directors of the Company and its
subsidiaries. Frank Edelstein and Joseph A. Marino receive an annual fee of
$35,000 for serving as directors on the Board of Directors of the Company.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and the four other most highly compensated executive
officers (the "Named Executive Officers") for the fiscal year ended December 31,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(2)
- ------------------------------------------------------------- --------- ---------- ----------- -------------------
<S> <C> <C> <C> <C>
Walter K. Lim................................................ 1997 $ 369,763 $ -- $ 3,557
President
Howard C. Lim................................................ 1997 369,763 -- 2,008
Executive Vice President
Samuel D. Garretson.......................................... 1997 203,845 -- 6,684
President, Piedmont Laboratories
John G. Hewson............................................... 1997 155,790 51,802(1) --
Chief Operating Officer
Joseph W. Sortais............................................ 1997 111,068 22,734 --
Chief Financial Officer
</TABLE>
- ------------------------
(1) $11,802 represents a relocation bonus paid to Mr. Hewson.
(2) All Other Compensation consists of contributions made by ASC to its profit
sharing plan on behalf of Mr. Walter K. Lim in the amount of $1,301, Mr.
Howard C. Lim in the amount of $1,301, Mr. Sortais in the amount of $991 and
contributions by Piedmont to its 401(k) plan on behalf of Mr. Garretson in
the amount of $3,810. In addition All Other Compensation consists of
insurance premiums paid by ASC with respect to term life insurance in the
amount of $2,256 for Mr. Walter K. Lim and $702 for Mr. Howard C. Lim, and
by Piedmont in the amount of $6,684 for Mr. Garretson.
63
<PAGE>
EMPLOYMENT AGREEMENTS
Howard C. Lim entered into an Amendment and Termination of Employment
Contract (the "Lim Termination Contract"), effective December 31, 1997 with ASC.
Mr. Lim's employment terminated with ASC upon the closing of the Kolmar
Acquisition, however, Mr. Lim will continue to serve as a member of the Board of
Directors and will receive payments after February 14, 1999 in the amount of
$35,000 per year for such service or such other amount as OSG pays outside
directors for as long as he continues to hold at least 33% of the shares of
Common Stock held by him on December 31, 1997. As severance, Mr. Lim will
receive a lump sum payment of $403,722 plus accrued but unused vacation and will
continue to receive medical, automobile and health insurance until February 14,
1999. Mr. Lim is restricted from competing with the Company or ASC for a period
of five years following termination of employment and will not solicit customers
or employees.
Samuel D. Garretson entered into an Amendment and Termination of Employment
Contract (the "Garretson Termination Contract"), effective December 31, 1997
with Piedmont. Mr. Garretson's employment terminated with Piedmont upon the
closing of the Kolmar Acquisition. Mr. Garretson will no longer serve as Vice
Chairman of the Board of Directors; however, he will continue to serve as a
member of the Board of Directors and will receive payments after September 30,
1998, in the amount of $35,000 per year or such other amount as OSG pays outside
directors for as long as he continues to hold at least 33% of the shares of
Common Stock held by him on December 31, 1997. As severance, Mr. Garretson will
receive a lump sum payment of $150,000 and will continue to receive automobile,
life and health insurance until September 30, 1998. In addition, Piedmont agreed
not to exercise its call rights with respect to Mr. Garretson's shares under the
Stockholder Agreement (as defined). Mr. Garretson is restricted from competing
with the Company or Piedmont for a period of five years following termination of
employment and will not solicit customers or employees.
Christopher Denney entered into an employment agreement (the "Employment
Agreement") with the Company, effective January 1, 1998, which has an initial
term of three years and may be extended by mutual agreement for additional years
on the same or mutually agreeable terms. Mr. Denney will serve as President and
Chief Executive Officer of the Company and of Kolmar. The Company will pay to
Mr. Denney a base salary of $250,000 per year and a performance bonus to be
determined by the Company's Board of Directors. Upon the effective time of the
Employment Agreement, Mr. Denney received options to purchase 85,000 shares of
Common Stock at the price of $10 per share pursuant to a stock option agreement.
The options are exercisable on the earlier of (i) December 31, 2000, (ii) the
date on which the Common Stock becomes publicly traded, (iii) the date on which
the Company completes an initial public offering of its Common Stock with
proceeds in excess of $15 million, and (iv) the date on which the Company (or
its assets) is sold substantially as an entirety. For each of December 31, 1998,
1999, 2000, 2001, and 2002, Mr. Denney, along with other executives, will be
eligible to participate in a stock option program providing for an annual award,
to all such participants in the aggregate, of options to purchase up to 60,000
shares of Company stock. If Mr. Denney resigns for good reason (as such term is
defined in the Employment Agreement) or dies or becomes disabled, the Company
will pay Mr. Denney or his representative his base salary through the balance of
the term of the Employment Agreement. During the employment term and continuing
for a period of two years after the date of the expiration of Mr. Denney's
employment (unless Mr. Denney is terminated by the Company without cause), Mr.
Denney will not solicit customers or employees of the Company.
The Company is currently negotiating employment agreements with Dennis M.
Nolan, John A. Hewson, Jr. and Joseph W. Sortais, who serve as Chief Operating
Officer, Senior Vice President of Sales and Marketing and Chief Financial
Officer, Treasurer and Secretary, respectively, of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Joseph A. Marino, Howard C. Lim and Robert M. Wadsworth served on the
Compensation Committee during 1997. Mr. Lim also served as Executive Vice
President of the Company during 1997.
64
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 28, 1998 (i) by each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) by each director and Named Executive Officer and (iii) by all
directors and executive officers of the Company as a group (except as otherwise
listed below, the address of each person listed is c/o Outsourcing Services
Group, Inc., 425 South Ninth Avenue, City of Industry, CA 91746).
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
---------------------
NAME NUMBER PERCENT
- -------------------------------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Gordon+Morris Investment Partnership, L.P.(1) .............................................. 1,279,970 37.2%
840 Newport Center Drive, Suite 600
Newport Beach, CA 92660
HarbourVest Partners IV-Direct Fund L.P. (2) ............................................... 343,916 10.0%
One Financial Center, 44th Floor
Boston, MA 02111
HarbourVest Partners V-Direct Fund L.P.(3) ................................................. 1,100,000 32.0%
One Financial Center, 44th Floor
Boston, MA
Christopher Denney(4) ...................................................................... -- --
John G. Hewson.............................................................................. -- --
Joseph W. Sortais(5)........................................................................ * *
Walter K. Lim(6)............................................................................ 222,974 6.5%
Samuel D. Garretson......................................................................... 101,187 2.9%
Howard C. Lim............................................................................... 185,609 5.4%
Frank Edelstein(7).......................................................................... -- --
Drew H. Adams(8)............................................................................ -- --
Joseph A. Marino(9)......................................................................... -- --
John H. Morris(1)(10)....................................................................... 1,355,618 39.4%
Robert M. Wadsworth(11)..................................................................... 1,443,916 41.9%
Michael S. Gordon(1)(12).................................................................... 1,355,618 39.4%
Bruce N. Lipian(1)(13)...................................................................... 1,355,618 39.4%
All directors and Named Executive Officers as a group (11 persons).......................... 3,314,599 96.3%
</TABLE>
* Less than 1%
- ------------------------
(1) Gordon+Morris Partners, L.P. ("GMP") is the general partner and a limited
partner of GMIP. Michael S. Gordon, John H. Morris and Bruce N. Lipian are
the general partners of GMP.
(2) Investment and dispositive power of shares of Common Stock held by HVP-IV
is held by HarbourVest. HVP-IV is a limited partner of GMIP but does not
exercise voting or investment power over the shares of Common Stock held by
GMIP.
(3) Investment and dispositive power of HVP-V is held by HarbourVest.
65
<PAGE>
(4) Does not include 85,000 shares subject to options granted to Mr. Denney,
which options will be fully vested on December 31, 2000 or the occurence of
certain other events. See "Management-- Employment Agreements."
(5) Joseph W. Sortais is the trustee of the Sortais Trust dated May 27, 1994,
which is a limited partner of GMIP. Mr. Sortais does not exercise voting or
investment power over the shares of Common Stock held by GMIP.
(6) Walter K. Lim is a co-trustee of the Walter K. Lim and Sylvia Lim Revocable
Trust dated November 30, 1989, which is a limited partner of GMIP. Mr. Lim
does not exercise voting or investment power over the shares of Common
Stock held by GMIP.
(7) Frank Edelstein is the trustee of the Edelstein Living Trust which is a
limited partner of ASC Investment Partners, L.P. ("ASCIP"), which owns
75,648 shares of Common Stock. See "Certain Relationships and Related
Transactions--ASC Investment Partners, L.P." Mr. Edelstein does not
exercise voting or investment power over the shares of Common Stock held by
ASCIP.
(8) Drew H. Adams is a limited partner of ASCIP, which owns 75,648 shares of
Common Stock. See "Certain Relationships and Related Transactions--ASC
Investment Partners, L.P." Mr. Adams does not exercise voting or investment
power over the shares of Common Stock held by ASCIP.
(9) Joseph A. Marino is a limited partner of both GMIP and ASCIP, which owns
75,648 shares of Common Stock. See "Certain Relationships and Related
Transactions--ASC Investment Partners, L.P." Mr. Marino does not exercise
voting or investment power over the shares of Common Stock held by either
GMIP or ASCIP.
(10) John H. Morris is a shareholder, officer and director of the general
partner of ASCIP and a general partner of GMP, the general partner of GMIP.
As such, Mr. Morris exercises voting and investment power over the shares
of Common Stock owned by ASCIP and GMIP. Mr. Morris is a trustee of the
John H. Morris and Sharon L. Morris Family Trust, which is a limited
partner in ASCIP, which owns 75,648 shares of Common Stock. See "Certain
Relationships and Related Transactions--ASC Investment Partners, L.P."
(11) Robert M. Wadsworth is a managing director of HVP and HarbourVest which
control the general partners of HVP-IV and HVP-V, respectively. As such,
Mr. Wadworth exercises voting and investment power over the shares of
Common Stock held by HVP-IV and HVP-V.
(12) Michael S. Gordon is a shareholder, officer and director of the general
partner of ASCIP and a general partner of GMP, the general partner of GMIP.
As such, Mr. Gordon exercises voting and investment power over the shares
of Common Stock owned by ASCIP and GMIP. Mr. Gordon is a trustee of the
Mikel Gordon Trust dated January 29, 1988 which is a limited partner in
ASCIP, which owns 75,648 shares of Common Stock. See "Certain Relationships
and Related Transactions--ASC Investment Partners, L.P."
(13) Bruce N. Lipian is a shareholder, officer and director of the general
partner of ASCIP and a general partner of GMP, the general partner of GMIP.
As such, Mr. Lipian exercises voting and investment power over the shares
of Common Stock owned by ASCIP and GMIP. ASCIP owns 75,648 shares of Common
Stock. See "Certain Relationships and Related Transactions--ASC Investment
Partners, L.P."
66
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDER AGREEMENT AND REGISTRATION RIGHTS AGREEMENT
In connection with the Merger, each stockholder of the Company at that time
executed an amended and restated stockholder agreement, dated June 30, 1997 (the
"Original Stockholder Agreement") setting forth the rights, obligations and
restrictions by and among the Company and its stockholders. In contemplation of
the Kolmar Acquisition, on December 31, 1997, the Original Stockholder Agreement
was amended by an amendment to stockholder agreement (the "Amendment"). The
Original Stockholder Agreement and the Amendment are referred to herein as the
"Stockholder Agreement." The rights, obligations and restrictions set forth in
the Stockholder Agreement include, but are not limited to, the following: (a)
restrictions on sales, pledges and other transfers of Common Stock by the
Company's stockholders (the "Stockholders") except in certain circumstances; (b)
the right of certain individuals who are part of management of the Company to
sell their shares of Common Stock to the Company upon termination of employment
by the Company without cause or upon the death or disability, retirement or
resignation for "good reason" (as defined therein) of such person; (c) the right
of the Company to purchase shares of Common Stock of certain Stockholders in
certain circumstances; (d) restrictions on the purchase of shares of Common
Stock by the Company in certain circumstances; (e) a right of first refusal in
favor of the Company and the Stockholders in certain circumstances; and (f) the
right to compel a sale or merger of the Company. The obligation of the Company
to purchase shares of Common Stock of certain management employees pursuant to
clause (b) above may be deferred in certain circumstances, including to the
extent that the Company is prohibited by any debt instruments entered into by
the Company or any of its affiliates or by law. In the event such payment is
deferred, it shall accrue interest at a rate of 9% per annum until paid in full.
The Stockholder Agreement requires that, unless certain events have
occurred, each Stockholder will nominate, elect and vote all of such
Stockholder's shares of Common Stock to continue in office a Board of Directors
consisting of nine members, three of whom will be designated by the Founders
(Samuel D. Garretson, Walter K. Lim and Howard C. Lim) and must be reasonably
acceptable to GMIP; two of whom will be designated by HarbourVest; three of whom
will be designated by GMIP; and one of whom will be Christopher Denney, so long
as he is Chief Executive Officer of the Company and is willing to serve. The
persons designated by the Founders, HarbourVest and GMIP may be changed from
time to time by the Founders, HarbourVest and GMIP, respectively, provided,
however, that Walter K. Lim, Howard C. Lim and Samuel D. Garretson will each be
one of the directors named by the Founders so as long as he holds at least
thirty-three percent (33%) of the Common Stock he held on December 31, 1997 and
is willing to serve. If both Michael S. Gordon and John H. Morris are no longer
principals of the manager of GMIP, then HarbourVest will have the right to name
one of the directors GMIP would otherwise have the right to name, provided that
HarbourVest is, at such time, the beneficial owner of at least ten percent (10%)
of the Common Stock. If either GMIP and its affiliates or HarbourVest and its
affiliates no longer hold at least 33% of the highest number of shares of Common
Stock held by them at any time, the rights of GMIP or HarbourVest, as
appropriate, to name a director will terminate. On each date that any one of
Walter K. Lim, Howard C. Lim and Samuel D. Garretson ceases to own at least 33%
of the Common Stock he held on December 31, 1997, the number of directors to be
named by the Founders will decrease by one, and when all three of such Founders
cease to own at least 33% of the Common Stock that each held on December 31,
1997, the Founders shall no longer have the right to name any directors. If
Christopher Denney ceases to be a director because he is no longer Chief
Executive Officer, Mr. Denney's directorship will be filled by the incoming
Chief Executive Officer.
Certain parties to the Original Stockholder Agreement previously entered
into a registration rights agreement with the Company on February 14, 1994
providing certain piggyback registration rights relating to their shares of
Common Stock.
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<PAGE>
PRIVATE PLACEMENTS OF COMMON STOCK
In connection with financing the Kolmar Acquisition, the Company sold
2,093,000 shares of Common Stock for an aggregate purchase price of $20.9
million to GMIP, Walter K. Lim and HVP-V. On September 30, 1996, ACHC, the sole
stockholder of Piedmont, issued 700,000 shares of Common Stock to certain
existing stockholders of the Company, including Walter K. Lim, Howard C. Lim,
GMIP and HarbourVest, as well as certain other new investors, at a purchase
price of $10.00 per share in connection with the Piedmont acquisition. On June
30, 1997, all issued and outstanding ACHC and ASHC shares were exchanged for
1,267,174 shares of Common Stock in the Company as a result of the Merger.
Pursuant to the Merger, 3,750 shares of the Company's unclassified preferred
stock owned by Nancy Lim were exchanged for the Company's Series A Preferred
Stock (as defined) and 26,250 shares of the Company's unclassified preferred
stock owned by Walter K. Lim and Howard C. Lim were exchanged for the Company's
Series B Preferred Stock (as defined). In each case, such transactions,
including the conversion ratios, were approved by a majority of the independent
directors of the Company. See "Description of Acquisition Agreements."
MANAGEMENT SERVICE AGREEMENTS
The Company, ASC, Piedmont, Kolmar and G+MG are parties to an Amended and
Restated Management Services Agreement, dated January 8, 1998 (the "Management
Services Agreement"), which supersedes all prior management agreements with
G+MG. Pursuant to this agreement, G+MG agreed to provide financial advisory,
consulting and other management services to the Company. The Company paid G+MG a
fee of $800,000 upon the closing of the Kolmar Acquisition and will pay G+MG (i)
provided certain conditions are met, an annual fee of $350,000 which is subject
to adjustment in the event of further acquisitions and/or dispositions, (ii)
provided certain ownership conditions are met at the closing of each acquisition
of an additional business an amount equal to 1% (or a different amount agreed to
by the parties up to 2%) of the total consideration paid to third parties,
including assumption of debt, (iii) provided certain ownership conditions are
met, upon the sale of the Company or any of its subsidiaries, an amount equal to
1% (or a different amount agreed to by the parties up to 2%) of the
consideration received, including the assumption of debt, (iv) at the closing of
a debt refinancing transaction an amount equal to 0.5% (or a different amount
agreed to by the parties up to 1%) of the amount refinanced and (v) reasonable
out-of-pocket expenses. This agreement contains broad indemnification provisions
benefitting G+MG. Since January 1, 1994, the Company has paid G+MG a total of
approximately $1.7 million (up to but not including the fee for the Kolmar
Acquisition) under the Management Services Agreement and predecessor agreements.
The Management Services Agreement was approved by a majority of the independent
directors of the Company.
The Company is also party to a letter agreement with HarbourVest, dated
January 8, 1998 (the "HarbourVest Agreement"), whereby HarbourVest has agreed to
provide a representative to serve on the Company's Board of Directors and to
render financial and business advice to OSG. In return, the Company will (i)
reimburse the HarbourVest designated OSG director for all reasonable expenses
related to attending meetings, (ii) provided certain ownership conditions are
met, pay HarbourVest a $115,000 annual financial advisory fee, $50,000 of which
shall be paid in cash and the remainder of which shall accrue, all subject to
increase if the management fees paid to G+MG are increased and (iii) pay
HarbourVest a fee of 1/3 of the fee received by G+MG or any of its affiliates
under the Management Services Agreement upon the sale of OSG or any of its
subsidiaries or, if approved by OSG's Board of Directors, upon the acquisition
of additional businesses. The HarbourVest Agreement was approved by a majority
of the independent directors of the Company.
ASC INVESTMENT PARTNERS, L.P.
ASCIP was formed on February 3, 1994 as a Delaware limited partnership
pursuant to an Agreement of Limited Partnership which was amended on March 27,
1996. ASCIP acquired 100,000 shares of ASHC's
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common stock in ASHC's acquisition of ASC, which shares were exchanged for
75,648 shares of Common Stock in the Merger; both transactions were on the same
terms as those terms for other stockholders. John H. Morris and Michael S.
Gordon, directors of the Company, and Bruce N. Lipian, are shareholders,
officers and directors of ASCIP's general partner and indirectly exercise voting
and investment power over the shares held by ASCIP. Each of Joseph A. Marino,
Drew H. Adams and Frank Edelstein, directors of the Company, or their
affiliates, are limited partners of ASCIP and do not exercise voting and
investment power over the shares held by ASCIP.
PURCHASES FROM THE LIMS
The Company leases its manufacturing and warehouse facilities located in the
City of Industry, as well as certain equipment located therein, from Walter K.
Lim, Sylvia Lim, Howard C. Lim, Nancy Lim, and their affiliates. The Company
believes these leases were entered into in the ordinary course of business on
terms no less favorable than could be obtained from a third party in an
arms-length transaction and were approved by the Board of Directors of the
Company. Between January 1, 1995, and March 28, 1998, the Company paid
approximately $3.3 million to Walter K. Lim, Sylvia Lim, Howard C. Lim, Nancy
Lim, and their affiliates, under all such leases.
The Company has sold products to companies controlled by Walter K. Lim,
Howard C. Lim, and their affiliates, in the amount of $100,000 and $119,000 and
$227,000 for the years ended December 31, 1995, 1996 and 1997, respectively. The
Company believes that these sales were made in the ordinary course of business
on terms no less favorable than could have been obtained from a third party in
an arms-length transaction.
AMENDMENT TO CERTIFICATE OF INCORPORATION
In accordance with the Kolmar Acquisition, the Company's Certificate of
Incorporation was amended with respect to the Preferred Stock (as defined) in
order to extend the redemption date of the Preferred Stock until after the
maturity of the Notes.
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DESCRIPTION OF CERTAIN TERMS OF THE PREFERRED STOCK
AND THE WARRANT AGREEMENT
PREFERRED STOCK
The following is a description of the general terms of the Preferred Stock
of the Company. This information relating to the Preferred Stock is qualified in
its entirety by reference to the Certificate of Amendment of Certificate of
Incorporation of OSG, dated January 8, 1998. This document is available upon
request from the Company.
The Company has issued and outstanding 30,000 shares of Preferred Stock
("Preferred Stock"), 3,750 shares of which are designated as "Series A Preferred
Stock," par value of $.001 per share and 26,250 shares of which are designated
as "Series B Preferred Stock," par value $.001 per share. Neither class of
Preferred Stock has voting rights, except as provided by law. Holders of Series
A Preferred Stock are entitled to a noncumulative dividend ("Series A Current
Dividend") in cash equal to $2.50 per share per quarter. If the Series A Current
Dividend is not declared and paid, then the Series A Preferred Stock holders are
entitled to a cumulative dividend ("Series A Deferred Dividends") in cash equal
to $3.25 per share for the quarter preceding the dividend payment date, subject
to quarterly increases of 2.5% of such dividend or, if Series A Current
Dividends and all Series A Deferred Dividends are not timely paid, 3.25% of such
dividend. Holders of Series B Preferred Stock are entitled to receive cumulative
dividends ("Series B Dividends") in cash equal to $2.00 per share per quarter.
Series B Dividends accrue whether or not they have been declared. At any time
after the completion of an offering by the Company of its shares of Common Stock
pursuant to an effective registration statement filed with the Securities and
Exchange Commission or at any time after June 30, 2000, the Company may, at the
option of its Board of Directors, redeem all or part of the outstanding shares
of Preferred Stock or a series thereof at a redemption price of $100.00 per
share of Series A Preferred Stock, plus all accrued and unpaid dividends thereon
through the date of redemption (the "Series A Redemption Price"), and $145.97
per share of Series B Preferred Stock, plus all accrued and unpaid dividends
thereon through the date of redemption (the "Series B Redemption Price"). The
Company must redeem all outstanding Preferred Stock upon the earlier of (i) a
liquidation, dissolution or winding up of the Company, (ii) an initial public
offering of Common Stock which results in net proceeds of not less than $20.0
million to the Company and (iii) June 30, 2010. Upon a change of control (as
defined therein) at the option of the holders of a majority of the Preferred
Stock, the Company shall redeem all outstanding shares of Series A Preferred
Stock at the Series A Redemption Price and all outstanding shares of Series B
Preferred Stock at the Series B Redemption Price. As of March 28, 1998,
dividends on the Series A Preferred Stock had accrued in the amount of $9,400,
but remain unpaid, and dividends on the Series B Preferred Stock had accrued in
the amount of $52,500, but remain unpaid.
WARRANT AGREEMENT
The following is a description of the general terms of the Warrant Agreement
(as defined). This information relating to the Warrant Agreement is qualified in
its entirety by reference to the Warrant Agreement. This document is available
upon request from the Company.
In connection with the issuance of $6 million of the Company's 12% senior
subordinated notes to Chase Manhattan Capital, L.P. or its transferee ("Chase
Manhattan") on June 30, 1997 (which notes were refinanced as part of the Kolmar
Acquisition), the Company entered into a warrant agreement with Chase Manhattan.
Pursuant to this warrant agreement, Chase Manhattan received a warrant to
purchase 80,833 shares of Common Stock at an exercise price of $.01 per share
(the "Warrant"). In contemplation of the Offering, the Company and Chase
Manhattan entered into an Amended and Restated Warrant Agreement (the "Warrant
Agreement"), dated as of January 8, 1998, which supersedes the prior warrant
agreement.
Under the Warrant Agreement, Chase Manhattan retained the Warrant, which is
exercisable immediately and expires on June 30, 2007. The Warrant Agreement
provides for certain anti-dilution rights and restrictions on transferability in
addition to certain registration, tag along, drag along and preemptive
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rights. Pursuant to the Warrant Agreement, if the Company purchases or redeems
any shares of its Common Stock from affiliates of the Company, Chase Manhattan
shall have the right to cause the Company to purchase the Warrant or shares of
Common Stock owned by Chase Manhattan that were acquired pursuant to exercise of
the Warrant ("Warrant Stock") on the same terms, subject to certain quantity and
other restrictions. In addition, at any time or from time to time after June 30,
2002, but prior to the earlier of (i) an initial public offering of the Common
Stock pursuant to an effective registration statement under the Securities Act
with proceeds of at least $10.0 million before the payment of underwriting
discounts and commissions (an "IPO") and (ii) June 30, 2007, Chase Manhattan
shall have the right to require the Company to purchase all or any portion of
the Warrant and Warrant Stock at the fair market value of the Common Stock on
the date the right is exercised ("Purchase Price"). If the Company is prohibited
from purchasing all Warrant and Warrant Stock pursuant to Chase Manhattan's
request because of insufficient funds or contractual restrictions, the Purchase
Price with respect to such unpurchased Warrant or Warrant Stock will become an
accruing liability of the Company with interest accruing thereon at 12.5% per
annum, compounded quarterly (the "Accruing Liability"). The Accruing Liability
shall be subordinated in right of payment to the prior payment in full of all
Senior Debt of the Company (as defined in the Warrant Agreement). At any time or
from time to time after June 30, 2003, but prior to the earlier of (i) an IPO
and (ii) June 30, 2007, the Company shall have the right to purchase all (but
not less than all) of the Warrant and Warrant Stock at the fair market value of
the Common Stock on that date.
Without the prior consent of Chase Manhattan, the Warrant Agreement
prohibits (i) the Company and its subsidiaries from repurchasing or redeeming
shares of Common Stock, except for shares repurchased or redeemed from
management, other than on a PRO RATA basis from all of the Company's
shareholders and Chase Manhattan; (ii) the Company and its subsidiaries from
selling, leasing or otherwise transferring any property or assets to, or
purchasing, leasing or otherwise acquiring any property or assets from, or
otherwise engaging in any other transactions with, any of the Company's
affiliates, except (a) in the ordinary course, (b) transactions between or among
the Company and its wholly-owned subsidiaries, (c) any transactions existing as
of January 8, 1998 or (d) other transactions permitted by the Warrant Agreement;
(iii) the Company from entering into any agreement or instrument limiting in any
manner its ability to perform its obligations under the Warrant Agreement or the
Warrants, other than the Subordinated Bridge Facility and the Senior Secured
Credit Facility and any refinancing thereof (including the Notes); and (iv) the
Company from amending any provisions of the Company's employee stock option
plan, Stockholder Agreement and organizational documents in any manner that
would have an adverse effect on Chase Manhattan's rights under the Warrant,
without the prior consent of Chase Manhattan.
DESCRIPTION OF ACQUISITION AGREEMENTS
ASC ACQUISITION AGREEMENT
ASHC (subsequently renamed OSG), a holding corporation formed for such
purpose, acquired on February 14, 1994, through a merger, Aerosol Services
Company, Inc. (predecessor to ASC) from Walker K. Lim and Howard C. Lim (the
"Lims") for $32.0 million in cash and $3.0 million of preferred stock in ASHC
pursuant to that certain purchase and merger agreement (the "ASC Acquisition
Agreement"), dated as of February 14, 1994. Pursuant to the ASC Acquisition
Agreement, Aerosol Services Company, Inc. (predecessor to ASC) was merged into a
newly-formed subsidiary of ASHC. The newly-formed subsidiary of ASHC survived
the merger and was renamed ASC. Pursuant to the ASC Acquisition Agreement, the
Lims are required, subject to a $0.4 million minimum threshold, to indemnify ASC
and OSG for losses resulting from inaccuracies or breaches of representations
and warranties, including losses resulting from undisclosed hazardous materials
and other environmental liabilities, and for breaches of post-closing covenants.
The Lims' liability to the Company for indemnification is limited to $3.0
million except for indemnifiable losses incurred with respect to the
representations and warranties relating to title, employee benefits, employment
laws, environmental laws and taxes, for which liability is unlimited and
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there is no $0.4 million minimum threshold. In connection with the ASC
Acquisition Agreement, the Lims executed amendments to their leases with ASC to
provide an offset against lease payments as a means of satisfying environmental
indemnities under the ASC Acquisition Agreement.
PIEDMONT ACQUISITION AGREEMENT
ACHC, a holding company formed for such purpose, acquired on September 30,
1996, all of the shares of Piedmont from Samuel D. Garretson and certain other
sellers (collectively, the "Sellers") for a combination of cash and the
refinancing of debt totaling $14.1 million pursuant to that certain stock
purchase agreement, dated as of June 27, 1996 (the "Piedmont Acquisition
Agreement"). Pursuant to the Piedmont Acquisition Agreement, the Sellers agreed
to indemnify ACHC, subject to a $325,000 minimum threshold in most cases, for
losses resulting from inaccuracies or breaches of representations and
warranties, including losses resulting from undisclosed hazardous materials and
other environmental liabilities, and for breaches of post-closing covenants. The
Sellers' liability for indemnification under the Piedmont Acquisition Agreement
is limited to $1.0 million.
KOLMAR ACQUISITION AGREEMENT
As of January 1, 1998, OSG acquired all of the shares of Kolmar from CCL
Industries and certain assets relating to Kolmar's Canadian operations from CCL
for an aggregate purchase price of $78.0 million, subject to certain
post-closing adjustments, pursuant to a share and asset purchase agreement dated
October 28, 1997, as it was amended by that certain letter agreement dated
January 1, 1998 and by that certain modification agreement dated January 8, 1998
(collectively the "Kolmar Acquisition Agreement"). Upon consummation of the
Kolmar Acquisition, Kolmar became a wholly-owned subsidiary of OSG and those
other assets purchased from CCL were transferred to Kolmar Canada Inc., an
Ontario corporation formed for such purpose, which became a wholly-owned
subsidiary of Kolmar. Pursuant to the Kolmar Acquisition Agreement and subject
to a $134,000 minimum threshold in one lawsuit, CCL retained liability for all
disclosed litigation. The Kolmar Acquisition Agreement contains typical
representations and warranties, which for the most part shall survive until the
earlier of (i) July 8, 1999 or (ii) delivery of Kolmar's audited financial
statements for the year ending December 31, 1998. Certain representations and
warranties made with respect to compliance with environmental laws survive until
January 8, 2003. CCL and CCL Industries agreed to indemnify the Company for
losses resulting from inaccuracies or breaches of representations and warranties
and breaches of certain covenants contained in the agreement. Subject to a
$750,000 minimum threshold and for certain environmental liabilities subject to
a $250,000 minimum threshold, CCL and CCL Industries' liability for
indemnification is limited to $6.5 million (this limit is $12.0 million with
respect to losses resulting from environmental matters related to certain
facilities and there is no limit with respect to losses from environmental
matters related to certain other facilities). Pursuant to the terms of the
Kolmar Acquisition Agreement, OSG is required to indemnify CCL and CCL
Industries for losses resulting from breaches or inaccuracies of its
representations and warranties and for losses arising from the Company's conduct
of Kolmar's business, its real property and environmental matters, to the extent
that the losses relate to actions or occurrences after the closing date.
DESCRIPTION OF THE SENIOR SECURED CREDIT FACILITY
The Company is a party to a credit agreement (the "Senior Secured Credit
Facility"), dated as of January 8, 1998, among ASC, Piedmont and Kolmar, as the
initial borrowers, and any other subsidiary of the Company which becomes a
borrower thereunder (collectively, the "Borrowers"), the Company, as guarantor,
the financial institutions from time to time a party thereto (the "Lenders"), BT
Commercial Corporation ("BTCC"), as agent, and Heller Financial, Inc., as
co-agent, pursuant to which the Lenders have agreed to make revolving loans and
letters of credit available to the Borrowers to finance working capital, other
permitted corporate purposes and permitted acquisitions (the "Revolving Credit
Facility"). The amount available to individual Borrowers is limited by a formula
as set forth in the Senior Secured
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Credit Facility based on that Borrower's accounts receivable, inventory,
equipment and real property with the maximum aggregate amount available to all
Borrowers capped at $70.0 million. This information relating to the Senior
Secured Credit Facility is qualified in its entirety by reference to the
complete text of the Senior Secured Credit Facility and the other documents
entered into in connection therewith. The following is a description of the
general terms of the Senior Secured Credit Facility which is available upon
request from the Company.
Indebtedness of the Borrowers under the Senior Secured Credit Facility is
guaranteed by the Company and, with respect solely to Kolmar Laboratories, Inc.
by Kolmar Canada Inc. ("Kolmar Canada"), and will be guaranteed by future
domestic subsidiaries of the Company and future subsidiaries of the Company
designated as "Subsidiary Guarantors" pursuant to the Senior Secured Credit
Facility. Such indebtedness is secured by, or will be secured by, (i) the
assets, including accounts receivable, inventory, equipment, certain real
property, intellectual property and intercompany indebtedness of each Borrower,
the Company and Kolmar Canada, (ii) a pledge of all of the stock of each
domestic subsidiary of the Company, (iii) a pledge of 66% of the stock of each
foreign subsidiary of the Company and (iv) a pledge by each foreign subsidiary
of the Company of intercompany notes.
At the option of the Borrowers, indebtedness under the Senior Secured Credit
Facility bears interest at a floating rate based on (i) the Prime Lending Rate
(defined as the rate which BTCo announces as its prime lending rate from time to
time), plus 0.75% (the "Base Rate Margin") or (ii) the Eurodollar Rate (defined
as the rate of the offered quotation, if any, to first class banks in the
Eurodollar market by BTCo for U.S. dollar deposits) for one, two, three or six
months, in each case plus 2.25% (the "Eurodollar Rate Margin"). The Base Rate
Margin and Eurodollar Rate Margin are subject to adjustment pursuant to the
terms of the Senior Secured Credit Facility. The Borrowers shall pay to the
Lenders an unused line fee equal to 0.375% per annum of the average daily
unutilized portion of the Revolving Credit Facility, payable monthly, in
accordance with the provisions of the Senior Secured Credit Facility. The
Borrowers shall also pay to the Lenders letter of credit fees as set forth in
the Senior Secured Credit Facility.
Loans made under the Revolving Credit Facility may be repaid and reborrowed.
The Revolving Credit Facility matures on December 31, 2002, subject to earlier
termination pursuant to the terms of the Senior Secured Credit Facility.
Mandatory prepayments of the Revolving Credit Facility shall be made from all
net proceeds from the Offering in excess of amounts used to repay the
Subordinated Bridge Facility and from all insurance proceeds received upon the
loss or destruction of the Company's assets or properties.
The Senior Secured Credit Facility provides that the Company and its
subsidiaries must meet certain financial tests, including minimum EBITDA,
minimum fixed charge coverage ratios and maximum funded debt ratios. The Senior
Secured Credit Facility also contains covenants which, among other things, limit
the incurrence of additional indebtedness and contingent obligations,
investments, dividends, transactions with affiliates, asset sales, acquisitions,
mergers and consolidations, prepayments of other indebtedness, the creation of
liens and encumbrances, capital expenditures and other matters customarily
restricted in such agreements.
The Senior Secured Credit Facility contains customary events of default,
including payment defaults, breach of representations and warranties, covenant
defaults, cross-defaults to certain other indebtedness, certain events of
bankruptcy and insolvency, judgment defaults, certain changes of control of the
Company, its subsidiaries and certain affiliates and the cessation of the
enforceability of the Senior Secured Credit Facility or any other document
executed in connection therewith or the security interests granted thereby.
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DESCRIPTION OF NOTES
The New Notes will be issued under the indenture (the "Indenture"), dated as
of March 3, 1998, by and among the Company, the Guarantors and U.S. Bank Trust
National Association (formerly First Trust National Association), as Trustee,
(the "Trustee"), a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus constitutes a part. The New
Notes are identical in all material respects to the terms of the Old Notes
except (i) that the New Notes have been registered under the Securities Act,
(ii) for certain transfer restrictions and registration rights relating to the
Old Notes and (iii) that the New Notes will not contain certain provisions
relating to Liquidated Damages to be paid to the Holders of Old Notes under
certain circumstances relating to the timing of the Exchange Offer and to other
registration requirements described below under "--Exchange Offer; Registration
Rights." The Trustee will authenticate and deliver New Notes for original issue
only in exchange for a like principal amount of Old Notes. Any Old Notes that
remain outstanding after the consummation of the Exchange Offer, together with
the New Notes, will be treated as a single class of securities under the
Indenture.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to
all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
TIA as in effect on the date of the Indenture. A copy of the Indenture may be
obtained from the Company or BT. The definitions of certain capitalized terms
used in the following summary are set forth below under "--Certain Definitions."
For purposes of this section, references to the "Company" include only the
Company and not its Subsidiaries.
The Notes will be unsecured obligations of the Company, ranking subordinate
in right of payment to all Senior Debt of the Company.
The New Notes will be, and the Old Notes are, issued in fully registered
form only, without coupons, in denominations of $1,000 and integral multiples
thereof. Initially, the Trustee will act as paying agent and registrar for the
Notes. The Notes may be presented for registration or transfer and exchange at
the offices of the Registrar, which initially will be the Trustee's corporate
trust office. The Company may change any paying agent and registrar without
notice to holders of the Notes (the "Holders"). The Company will pay principal
(and premium, if any) on the Notes at the Trustee's corporate office in New
York, New York. At the Company's option, interest may be paid at the Trustee's
corporate trust office or by check mailed to the registered address of Holders.
For purposes of this section, references to the "Notes" include the Old Notes
and the New Notes, unless the context otherwise requires.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $130,000,000, of
which $105,000,000 will be issued in the Offering, and will mature on March 1,
2006. Additional amounts may be issued in one or more series from time to time
subject to the limitations set forth under "--Certain Covenants--Limitation on
Incurrence of Additional Indebtedness" and restrictions contained in the Credit
Agreement. Interest on the Notes will accrue at the rate of 10 7/8% per annum
and will be payable semiannually in arrears and in cash on each March 1 and
September 1, commencing on September 1, 1998, to the persons who are registered
Holders at the close of business on the February 15 and August 15, respectively,
immediately preceding the applicable interest payment date. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from and including the date of issuance. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Registered holders of New Notes on the relevant record date for the first
interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid or, if no interest has been paid, from March 3, 1998. Old Notes accepted
for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders whose Old Notes are accepted for
exchange will not receive any payment in respect of interest on
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such Old Notes otherwise payable on any interest payment date the record date
for which occurs on or after the consummation of the Exchange Offer.
The Notes will not be entitled to the benefit of any mandatory sinking fund.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after March 1, 2003,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on March 1 of the year set forth
below, plus, in each case, accrued and unpaid interest thereon, if any, to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2003............................................................................. 105.438%
2004............................................................................. 103.625%
2005 and thereafter.............................................................. 101.813%
</TABLE>
OPTIONAL REDEMPTION UPON EQUITY OFFERINGS. At any time, or from time to
time, on or prior to March 1, 2001, the Company may, at its option, use the net
cash proceeds of one or more Equity Offerings to redeem up to 35% of the
aggregate principal amount of Notes originally issued at a redemption price
equal to 110.875% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of redemption; PROVIDED that at least 65%
of the principal amount of New Notes issued hereunder together with the Old
Notes originally issued and not exchanged in the Exchange Offer remains
outstanding immediately after any such redemption. In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Company shall
make such redemption not more than 120 days after the consummation of any such
Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which such Notes are listed or, if such Notes are not then listed on a national
securities exchange, on a PRO RATA basis, by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED, HOWEVER, that no Notes of a
principal amount of $1,000 or less shall be redeemed in part; PROVIDED, FURTHER,
that if a partial redemption is made with the proceeds of an Equity Offering,
selection of the Notes or portions thereof for redemption shall be made by the
Trustee only on a PRO RATA basis or on as nearly a PRO RATA basis as is
practicable (subject to The Depository Trust Company's procedures, if
applicable), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption as long
as the Company has deposited with the paying agent funds in satisfaction of the
applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon
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any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due or to become due upon all Senior Debt shall first be paid in full in cash or
Cash Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any principal of, interest
on, unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Senior Debt (a "Payment Default"), no payment
of any kind or character shall be made by or on behalf of the Company or any
other Person on its behalf with respect to any Obligations on the Notes or to
acquire any of the Notes for cash or property or otherwise unless and until such
default has been cured, waived or has ceased to exist or such Senior Debt shall
have been discharged or paid in full in cash, or in any other manner acceptable
to the holders of such Senior Debt.
In addition, if any event of default other than a Payment Default (a
"Non-payment Default") occurs and is continuing with respect to any Designated
Senior Debt, as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt, permitting the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof and
if the Representative for the respective issue of Designated Senior Debt gives
written notice of the Non-payment Default to the Trustee (a "Default Notice"),
then, unless and until all Non-payment Defaults have been cured or waived or
have ceased to exist or the Trustee receives notice from the Representative for
the respective issue of Designated Senior Debt terminating the Blockage Period
(as defined below), during the 180 days after the delivery of such Default
Notice (the "Blockage Period"), neither the Company nor any other Person on its
behalf shall (x) make any payment of any kind or character with respect to any
Obligations on the Notes or (y) acquire any of the Notes for cash or property or
otherwise. Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 180 days from the date the payment on the Notes
was due and only one such Blockage Period may be commenced within any 360
consecutive days. No Non-payment Default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Debt whether or
not within a period of 360 consecutive days, unless such Non-payment Default
shall have been cured or waived for a period of not less than 90 consecutive
days (it being acknowledged that any subsequent action or any breach of any
financial covenants for a period commencing after the date of commencement of
such Blockage Period that, in either case, would give rise to a Non-payment
Default pursuant to any provisions under which a Non-payment Default previously
existed or was continuing shall constitute a new Non-payment Default for this
purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less, ratably, than holders of Senior
Debt.
As of March 28, 1998, the Company had no Senior Debt Outstanding.
HOLDING COMPANY
The Company is a holding company for its Subsidiaries, with no material
operations of its own and only limited assets. Accordingly, the Company is
dependent upon the distribution of the earnings of its Restricted Subsidiaries,
whether in the form of dividends, advances or payments on account of
intercompany obligations, to service its debt obligations. There can be no
assurance that, after providing for all prior claims, there would be sufficient
assets available from the Company and the Guarantors to satisfy the claims of
the Holders of Notes. See "Risk Factors--Holding Company Structure; Effects of
Asset Encumbrance."
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GUARANTEES
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on the Notes. The Guarantees
will be subordinated to Guarantor Senior Debt on the same basis as the Notes are
subordinated to Senior Debt. As of March 28, 1998, the Guarantors had no
Guarantor Senior Debt and the Guarantors had approximately $51.4 million of
availability under the Senior Secured Credit Facility. Each Guarantor and each
Holder irrevocably agrees pursuant to the Indenture that the obligations of each
Guarantor under its Guarantee will not exceed the maximum that such Guarantor
could incur without such obligations constituting an avoidable fraudulent
transfer or conveyance under such laws, taking into account (if necessary),
among other things, all other debts of such Guarantor (including, without
limitation, any contingent or unliquidated debts and such Guarantor's Guarantor
Senior Debt) at the time that such Guarantor entered into its Guarantee or
became obligated to make any payment thereunder, as appropriate. Each Guarantor
that makes a payment under a Guarantee shall be entitled to receive from each
other Guarantor a reimbursement amount as set forth in the Indenture.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Restricted Subsidiary of the Company
without limitation, or with other Persons upon the terms and conditions set
forth in the Indenture. See "--Certain Covenants--Merger, Consolidation and Sale
of Assets." In the event all of the Capital Stock of a Guarantor is sold by the
Company and the sale complies with the provisions set forth in "--Certain
Covenants--Limitation on Asset Sales," the Guarantor's Guarantee will be
released. Each Guarantor that is designated as an Unrestricted Subsidiary in
accordance with the Indenture shall be released from its Guarantee and related
obligations set forth in the Indenture for so long as it remains an Unrestricted
Subsidiary.
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date for the
Notes, which must be no earlier than 30 days nor later than 45 days from the
date such notice is mailed, other than as may be required by law (the "Change of
Control Payment Date"). Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the paying agent at the address specified in the notice prior to
the close of business on the third business day prior to the Change of Control
Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
the Notes that might be delivered by Holders seeking to accept the Change of
Control Offer. In the event the Company is required to purchase outstanding
Notes pursuant to a Change of Control Offer, the Company expects that it would
seek third party financing to the extent it does not have available funds to
meet its purchase obligations. However, there can be no assurance that the
Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control
without the consent of the Holders of a majority in principal amount of the then
outstanding Notes. Restrictions in the Indenture described herein on the ability
of the Company and its Restricted Subsidiaries to incur additional Indebtedness,
to grant liens on its
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property, to make Restricted Payments and to make Asset Sales may also make more
difficult or discourage a takeover of the Company, whether favored or opposed by
the management of the Company. Consummation of any such transaction in certain
circumstances may require redemption or repurchase of the Notes, and there can
be no assurance that the Company or the acquiring party will have sufficient
financial resources to effect such redemption or repurchase. Such restrictions
and the restrictions on transactions with Affiliates may, in certain
circumstances, make more difficult or discourage any leveraged buyout of the
Company or any of its Subsidiaries by the management of the Company. While such
restrictions cover a wide variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the Indenture may not afford the
Holders of Notes protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
The Credit Agreement prohibits the Company from purchasing any Notes and
also provides that certain change of control events (including a Change of
Control) with respect to the Company would constitute a default thereunder. Any
future credit agreements or other agreements relating to Senior Debt to which
the Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from purchasing Notes, the Company could seek the consent of its lenders to
purchase the Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture, which would, in turn, constitute a default under
the Credit Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); PROVIDED, HOWEVER, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.0 to 1.0 if the Indebtedness is incurred
prior to March 1, 2000 and greater than 2.25 to 1.0 if the Indebtedness is
incurred thereafter.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock, (c) make any principal payment on,
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purchase, defease, redeem, prepay or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), (c)
and (d) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum of: (w) 50%
of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to the Issue Date and through the last day of the fiscal quarter
ending prior to the date the Restricted Payment occurs (the "Reference Date")
(treating such period as a single accounting period); plus (x) 100% of the
aggregate net cash proceeds received by the Company from any Person (other than
a Subsidiary of the Company) from the issuance and sale subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital Stock of the
Company, including the net cash proceeds received by the Company upon the
exercise, exchange or conversion of Indebtedness or Disqualified Capital Stock
into Qualified Capital Stock; plus (y) to the extent not otherwise included in
Consolidated Net Income of the Company, an amount equal to the net reduction in
Investments (other than reductions in Permitted Indebtedness) in Unrestricted
Subsidiaries resulting from dividends, interest payments, repayments of loans or
advances, or other transfers of cash, in each case, to the Company or to any
Wholly-Owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (in each case valued as provided in the definition of
"Investment"), not to exceed, in the case of an Unrestricted Subsidiary, the
amount of Investments previously made by the Company or any Restricted
Subsidiary of the Company in such Unrestricted Subsidiary and which were treated
as a Restricted Payment under the Indenture; plus (z) without duplication of any
amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(x) and (z), any
net cash proceeds from an Equity Offering to the extent used to redeem the
Notes).
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of Default
shall have occurred and be continuing, the acquisition, redemption, repurchase
or retirement of any shares of Capital Stock of the Company, either (i) solely
in exchange for shares of Qualified Capital Stock of the Company or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital Stock
of the Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) so long as no Default
or Event of Default shall have occurred and be continuing, repurchases by the
Company of Common Stock of the Company from employees, officers or directors of
the Company or any of its Subsidiaries or their authorized representatives upon
the death, disability or termination of employment of such officers, directors
and employees, in an aggregate amount not to exceed $1,000,000 in any calendar
year and $5,000,000 in the aggregate, in each case plus the aggregate cash
proceeds from any reissuance during such calendar year of Common Stock by the
Company to employees, officers or directors of the Company and its Subsidiaries
plus the aggregate cash proceeds from any payments on life insurance policies in
which the
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Company or its Subsidiaries is the beneficiary with respect to any employees,
officers or directors of the Company and its Subsidiaries which proceeds are
used to purchase the Common Stock of the Company held by any such employees,
officers or directors; (5) if no Default or Event of Default shall have occurred
and be continuing, the redemption at stated maturity of the existing Class A
Preferred Stock of Nancy Lim and the payment of scheduled dividend payments
thereon in accordance with the terms of such Class A Preferred Stock; (6) if no
Default or Event of Default shall have occurred and be continuing, the
repurchase by the Company of the warrants issued in connection with the Warrant
Agreement upon the exercise of the put rights contained in such Warrant
Agreement by the holders of such warrants; and (7) repurchases of Capital Stock
deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof. In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in accordance
with clause (iii) of the immediately preceding paragraph, amounts expended
pursuant to clauses (1), (2)(ii), (3)(ii)(A), (4), (5), (6) and, to the extent
included in clause (iii)(x) or (z) of the preceding paragraph, (7) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is received
at the time of such disposition (the fair market value of Replacement Assets (as
defined below) received by the Company or any Restricted Subsidiary, as the case
may be, from such Asset Sale shall be considered cash or Cash Equivalents for
purposes of this covenant); and (iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Restricted Subsidiary to apply, the Net
Cash Proceeds relating to such Asset Sale within 270 days of receipt thereof
either (A) to prepay any Senior Debt and, in the case of any Senior Debt under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Issue Date or in any businesses
which are similar or related to the contract packaging and manufacturing
businesses ("Replacement Assets"), or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the
271st day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each, a "Net
Proceeds Offer Trigger Date"), an amount equal to such aggregate amount of Net
Cash Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") within 45
days following the applicable Net Proceeds Offer Trigger Date, from all Holders
on a PRO RATA basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
PROVIDED, HOWEVER, that if at any time any consideration other than Cash or Cash
Equivalents received by the Company or any Restricted Subsidiary of the Company,
as the case may be, in connection with any Asset Sale is converted into or sold
or otherwise disposed of for cash (other than interest received with respect to
any such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. A transfer of assets by the
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Company to a Wholly-Owned Restricted Subsidiary or by a Restricted Subsidiary to
the Company or to another Wholly-Owned Restricted Subsidiary will not be deemed
to be an Asset Sale. The Company may defer the Net Proceeds Offer until there is
an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of
$5,000,000 resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of
$5,000,000, shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold pursuant to this paragraph less
the fair market value of all liabilities of such Person related to such property
and assets not transferred shall be deemed to be Net Cash Proceeds for purposes
of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as determined
on a date shown on the register of Holders within 25 days following the Net
Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with
the procedures set forth in the Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their Notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the extent Holders
properly tender Notes in an amount exceeding the Net Proceeds Offer Amount,
Notes of tendering Holders will be purchased on a PRO RATA basis (based on
amounts tendered), unless otherwise required by law or any applicable exchange
rules. A Net Proceeds Offer shall remain open for a period of 20 business days
or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations or any applicable exchange
regulations conflict with the "Asset Sale" provisions of the Indenture, the
Company shall comply with the applicable securities laws and regulations and
exchange regulations and shall not be deemed to have breached its obligations
under the "Asset Sale" provisions of the Indenture by virtue thereof. The
agreements governing certain outstanding Senior Debt of the Company may require
that the Company and its Subsidiaries apply all proceeds from asset sales to
repay in full outstanding obligations under such Senior Debt prior to the
application of such proceeds to repurchase outstanding Notes.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or permit to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture, the Notes and the Guarantees;
(3) customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary of the Company; (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (5)
agreements existing
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on the Issue Date (including the Credit Agreement) to the extent and in the
manner such agreements are in effect on the Issue Date; (6) any restriction or
encumbrance contained in contracts for sale of assets permitted by the Indenture
in respect of the assets being sold pursuant to such contracts pending the close
of such sale, which encumbrance or restriction is not applicable to any asset
other than the asset being sold pursuant to such contract; (7) Purchase Money
Obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (c) above on the property so
acquired; (8) restrictions of the nature described in (c) above on the transfer
of assets subject to any Lien permitted under the Indenture imposed by the
holder of such Lien; or (9) an agreement governing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (2), (4) or (5) above; PROVIDED, HOWEVER, that the
provisions relating to such encumbrance or restriction contained in any such
Indebtedness are no less favorable to the Company in any material respect as
determined by the Board of Directors of the Company in their reasonable and good
faith judgment than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4) or (5).
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly-Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly-Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company unless at the time of such issuance such
Restricted Subsidiary would be entitled to create, incur or assume Indebtedness
pursuant to the covenant described under "--Limitation on Incurrence of
Additional Indebtedness" in the aggregate amount equal to the aggregate
liquidation value, plus any accrued and unpaid dividends, of the Preferred Stock
to be issued. Notwithstanding the foregoing, nothing contained in such covenant
will prohibit the ownership of Preferred Stock issued by a Person prior to the
time (a) such Person becomes a Restricted Subsidiary of the Company, (b) such
Person merges with or into a Restricted Subsidiary of the Company or (c) a
Subsidiary of the Company merges with or into such Person; PROVIDED that such
Preferred Stock was not issued by such Person in anticipation of a transaction
contemplated by any of clauses (a), (b) or (c) above.
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of its Restricted Subsidiaries whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes or any Guarantee, the
Notes and such Guarantee, as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes and the Guarantees are equally and ratably
secured, except for (A) Liens existing as of the Issue Date to the extent and in
the manner such Liens are in effect on the Issue Date; (B) Liens securing Senior
Debt and Liens securing Guarantor Senior Debt; (C) Liens securing the Notes and
the Guarantees; (D) Liens of the Company or a Wholly-Owned Restricted Subsidiary
of the Company on assets of any Subsidiary of the Company; (E) Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness which
has been secured by a Lien permitted under the Indenture and which has been
incurred in accordance with the provisions of the Indenture; PROVIDED, HOWEVER,
that such Liens (A) are no less favorable to the Holders and are not more
favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (B) do not extend to or cover
any property or assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so Refinanced; and (F) Permitted Liens.
PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT. The Company will
not, and will not permit any Guarantor to, incur or suffer to exist Indebtedness
that is senior in right of payment to the Notes or any Guarantee, as the case
may be, and subordinate in right of payment to any other Indebtedness of the
Company or such Guarantor, as the case may be.
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MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Company's Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company shall be the surviving
or continuing corporation or (2) the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, the Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, (1) shall have a Consolidated Net Worth
equal to or greater than 90% of the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the "Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred and any Lien granted in connection with or in
respect of the transaction), no Default or Event of Default shall have occurred
and be continuing; and (iv) the Company or the Surviving Entity shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition, and if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply with the
applicable provisions of the Indenture and that all conditions precedent in the
Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, in which the Company is not the continuing
corporation, the Surviving Entity formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of "--Limitation on Asset
Sales") will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any State thereof
or the District
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of Columbia; (ii) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Guarantee; and (iii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing. Any merger or consolidation of a Guarantor with and
into the Company (with the Company being the Surviving Entity) or another
Guarantor that is a Wholly-Owned Restricted Subsidiary of the Company need only
comply with clause (iv) of the first paragraph of this covenant.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are not less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $500,000 shall be approved
by the Board of Directors of the Company or such Restricted Subsidiary, as the
case may be, such approval to be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary of the Company
enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair market
value of more than $5,000,000, the Company or such Restricted Subsidiary, as the
case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
(b) The restrictions set forth in paragraph (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors or employees, agents or consultants of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii) transactions exclusively
between or among the Company and any of its Wholly-Owned Restricted Subsidiaries
or exclusively between or among such Wholly-Owned Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by the Indenture; (iii)
any agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto)
in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Company or its
Restricted Subsidiaries, as the case may be, in any material respect than the
original agreement as in effect on the Issue Date; (iv) Restricted Payments
permitted by the Indenture; (v) any issuance of securities or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans of the
Company entered into in the ordinary course of business and approved by the
Board of Directors; (vi) fees and related expenses paid pursuant to the
Management Agreement; (vii) loans and advances, or guarantees of loans of
third-parties, to employees and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business for BONA FIDE business purposes
not in excess of $2,000,000 at any time outstanding; (viii) indemnification
agreements provided for the benefit of the Company or any Restricted Subsidiary
of the Company from officers, directors or employees of the Company or any
Restricted Subsidiary; (ix) all leases for equipment and real property used by
the Company which are between the Company or any Restricted Subsidiary of the
Company and either of Nancy Lim, Walter Lim or Howard Lim, and any Affiliate
thereof, (A) entered into in the ordinary course of business, on terms no less
favorable to the Company than could be obtained from a third party in an
arm's-length transaction and approved by the Board of Directors or (B) contained
in agreements in existence as of the Issue Date; and (x) the sale of inventory
in the ordinary course of
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business on customary terms no less favorable to the Company and its
Subsidiaries than could be obtained from a third party in an arm's-length
transaction.
ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted Subsidiary (other
than a Foreign Subsidiary) that is not a Guarantor, or if the Company or any of
its Restricted Subsidiaries shall organize, acquire or otherwise invest in
another Restricted Subsidiary (other than a Foreign Subsidiary) in each case
having total assets with a book value in excess of $500,000, then such
transferee or acquired or other Restricted Subsidiary (other than a Foreign
Subsidiary) and, in the case of a transferee or acquired or other Restricted
Subsidiary (other than a Foreign Subsidiary) that does not have total assets
with a book value in excess of $500,000, when such transferee or acquired or
other Restricted Subsidiary (other than a Foreign Subsidiary) obtains assets
with a book value in excess of $500,000 shall (i) execute and deliver to the
Trustee a supplemental indenture in form reasonably satisfactory to the Trustee
pursuant to which such Restricted Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Notes and the Indenture on the terms set
forth in the Indenture and (ii) deliver to the Trustee an opinion of counsel
that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary (with customary
exceptions). Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of the Indenture.
CONDUCT OF BUSINESS. The Company and its Restricted Subsidiaries will not
engage, to any material extent, in any businesses which are not the same,
similar or related to the contract packaging and manufacturing businesses.
REPORTS TO HOLDERS. The Indenture will provide that the Company will
deliver to the Trustee within 15 days after the filing of the same with the
Commission, copies of the quarterly and annual reports and of the information,
documents and other reports, if any, which the Company is required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The
Indenture further provides that, notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will, beginning on the earlier of the date the Registration
Statement of which this Prospectus is a part becomes effective and 180 days
after the Issue Date, file with the Commission, to the extent permitted, and
provide the Trustee and the Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act within 15 days after the same would be required to be filed
with the Commission if the Company were subject to such reporting requirements.
The Company will also comply with the other provisions of TIA Section 314(a). So
long as any of the Notes remain outstanding, the Company has agreed to make
available to any prospective purchaser of the Notes or the beneficial owner of
the Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer) (whether or not such
payment shall be prohibited by the subordination provisions of the
Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a period
of 30 days after the Company receives written
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notice specifying the default (and demanding that such default be remedied)
from the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to the
"Merger, Consolidation and Sale of Assets" covenant, which will constitute
an Event of Default with such notice requirement but without such passage of
time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount of
any Indebtedness of the Company or any Restricted Subsidiary of the Company
and such failure continues for a period of 20 days or more, or the
acceleration of the final stated maturity of any such Indebtedness (which
acceleration is not rescinded, annulled or otherwise cured within 20 days of
receipt by the Company or such Restricted Subsidiary of notice of any such
acceleration) if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in default
for failure to pay principal at final maturity or which has been
accelerated, in each case with respect to which the 20-day period described
above has passed, aggregates $5,000,000 or more at any time;
(v) one or more judgments in an aggregate amount in excess of $5,000,000
(excluding judgments to the extent covered by insurance by a reputable
insurer as to which the insurer has acknowledged coverage) shall have been
rendered against the Company or any of its Restricted Subsidiaries and such
judgments remain undischarged, unpaid or unstayed for a period of 60 days
after such judgment or judgments become final and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees of a Significant Subsidiary ceases to be in
full force and effect or any of the Guarantees of a Significant Subsidiary
is declared to be null and void and unenforceable or any of the Guarantees
is found to be invalid or any of the Guarantors which is a Significant
Subsidiary denies its liability under its Guarantee (other than by reason of
release of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Notes may declare the principal of
and accrued interest on all the Notes to be due and payable by notice in writing
to the Company and the Trustee specifying the respective Event of Default and
that it is a "notice of acceleration" (the "Acceleration Notice"), and the same
(i) shall become immediately due and payable or (ii) if there are any amounts
outstanding under the Credit Agreement, shall become immediately due and payable
upon the first to occur of an acceleration under the Credit Agreement or 5
business days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice. If an Event of Default specified
in clause (vi) above occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest on all of the outstanding Notes
shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
The Indenture will provide that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
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The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes or
except as otherwise prohibited by the TIA.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payments, (iii) the rights, powers, trust, duties and immunities of
the Trustee and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, reorganization and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders cash in U.S. dollars, non-callable U.S. government obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to
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federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred; (iv)
no Default or Event of Default shall have occurred and be continuing on the date
of such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under the Indenture
or any other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent (other than, in the case of such legal opinion, paragraph
(vi) as to which such counsel need express no opinion) provided for or relating
to the Legal Defeasance or the Covenant Defeasance have been complied with;
(viii) the Company shall have delivered to the Trustee an opinion of counsel to
the effect that (A) the trust funds will not be subject to any rights of holders
of Senior Debt, including, without limitation, those arising under the Indenture
and (B) after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; and (ix) certain other
customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not, in the opinion of the Trustee, adversely affect the rights of any of
the Holders in any material respect. In formulating its opinion on such matters,
the Trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel. Other
modifications and amendments of the Indenture may be made with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may: (i) reduce the amount of Notes whose Holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of interest, including defaulted
interest, on any Notes; (iii) reduce the principal of or change or have the
effect of changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption or repurchase, or reduce the redemption
or repurchase price therefor; (iv) make any Notes payable in money other than
that stated in
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the Notes; (v) make any change in provisions of the Indenture protecting the
right of each Holder to receive payment of principal of and interest on such
Note on or after the due date thereof or to bring suit to enforce such payment,
or permitting Holders of a majority in principal amount of Notes to waive
Defaults or Events of Default; (vi) amend, change or modify in any material
respect the obligation of the Company to make and consummate a Change of Control
Offer after the occurrence of an event which constitutes a Change of Control or
make and consummate a Net Proceeds Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with respect
thereto; (vii) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the Notes or any Guarantee
in a manner which adversely affects the Holders; or (viii) release any Guarantor
from any of its obligations under its Guarantee or the Indenture otherwise than
in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture will provide that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it by the Indenture, and use the
same degree of care and skill in its exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; PROVIDED that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
"AFFILIATE" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
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"ASSET ACQUISITION" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company, or shall be merged with or
into the Company or any Restricted Subsidiary of the Company, or (b) the
acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any Person (other than a Restricted Subsidiary of the Company) which
constitute all or substantially all of the assets of such Person or comprise any
division or line of business of such Person or any other properties or assets of
such Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly-Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; PROVIDED, HOWEVER,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $500,000, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under "Merger, Consolidation and Sale of Assets" and (iii)
a disposition consisting of a Permitted Investment or Restricted Payment
permitted under "Limitation on Restricted Payments."
"BOARD OF DIRECTORS" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have been
duly adopted by the Board of Directors of such Person and to be in full force
and effect on the date of such certification, and delivered to the Trustee.
"BORROWING BASE" means the sum of (i) 85% of the net book value (after
allowance for doubtful accounts) of accounts receivable (other than intercompany
receivables) of the Company and the Restricted Subsidiaries arising in the
ordinary course of business from the sale of products sold by the Company and
the Restricted Subsidiaries or the provision of services by the Company and the
Restricted Subsidiaries and (ii) 60% of the net book value (after appropriate
write-downs of obsolescence, quality problems and the like) of inventories of
the Company and the Restricted Subsidiaries held in the ordinary course of
business, in each case on a consolidated basis with Restricted Subsidiaries in
accordance with generally accepted accounting principles.
"CAPITAL STOCK" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and including any warrants,
options or rights to acquire any of the foregoing and instruments convertible
into any of the foregoing, and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATIONS" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from
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either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's"); (iii) commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $250,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group") or to any Affiliates thereof (whether or not
otherwise in compliance with the provisions of the Indenture); (ii) the approval
by the holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) any Person or Group
(other than the Permitted Holders(s)) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the replacement of a majority of the
directors on the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"COMMON STOCK" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of, such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent
Consolidated Net Income has been reduced thereby, (A) all income taxes of such
Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP
for such period (other than income taxes attributable to extraordinary or
nonrecurring gains or losses or taxes attributable to sales or dispositions
outside the ordinary course of business), (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges LESS any non-cash items increasing Consolidated
Net Income for such period, (D) an amount equal to any extraordinary loss plus
any net loss realized in connection with an Asset Sale and (E) fees and expenses
of the Kolmar Acquisition, including, but not limited to, capitalization of
costs and expenses related thereto, all as determined on a consolidated basis
for such Person and its Restricted Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for such Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the
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application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (provided
that such Consolidated EBITDA shall be included only to the extent includable
pursuant to the definition of "Consolidated Net Income" or to the extent it is
excluded pursuant to clause (h) of the definition of "Consolidated Net Income")
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Restricted
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness; PROVIDED, HOWEVER, that where such Person and one or
more of its Restricted Subsidiaries is, or two or more of such Person's
Restricted Subsidiaries are, liable for the same Indebtedness, whether as
principal or guarantor, the above sentence shall be calculated to avoid
duplication. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) to the extent not included in Consolidated Interest Expense, the product of
(x) the amount of all dividend payments on any series of Preferred Stock of such
Person (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation, less interest expense which is historically allocated to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued) but only in the case of which such Person maintained separate
books and records with respect to such discontinued operations or such disposed
operations; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such
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Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, except to the extent of cash
dividends or distributions paid to the referent Person or to a Restricted
Subsidiary of the referent Person by such Person, (e) the net income of any
Person, other than a Restricted Subsidiary of the referent Person, except to the
extent of cash dividends or distributions paid to the referent Person or to a
Restricted Subsidiary of the referent Person by such Person, (f) any restoration
to income of any contingency reserve, except to the extent that provision for
such reserve was made out of Consolidated Net Income accrued at any time
following the Issue Date, (g) income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued), and (h)
in the case of a successor to the referent Person by consolidation or merger or
as a transferee of the referent Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"CREDIT AGREEMENT" means the Credit Agreement dated as of January 8, 1998,
among the Company, as guarantor, Piedmont Laboratories, Inc., Aerosol Services
Company, Inc. and Kolmar Laboratories, Inc., as initial borrowers, the lenders
party thereto in their capacities as lenders thereunder and BT Commercial
Corporation, as agent, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (PROVIDED that such increase in borrowings is permitted by the
"Limitation on Incurrence of Additional Indebtedness" covenant above) or adding
or deleting Restricted Subsidiaries of the Company as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"DEFAULT" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
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"DESIGNATED SENIOR DEBT" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25,000,000 and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Notes other than the Class A Preferred Stock and Class B
Preferred Stock of the Company outstanding on the Issue Date and any Class A
Preferred Stock or Class B Preferred Stock of the Company issued as dividends on
such Class A Preferred Stock or Class B Preferred Stock and the Common Stock of
the Company which certain management stockholders have the right to put such
Common Stock to the Company pursuant to the terms of the Stockholders Agreement.
"EQUITY OFFERING" of any Person means any underwritten public offering or
any private placement of any Capital Stock of such Person other than
Indebtedness or Disqualified Capital Stock convertible or exchangeable into
Capital Stock of such Person.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company which (i) is not
organized under the laws of the United States, any state thereof or the District
of Columbia and (ii) conducts substantially all of its business operations in a
country other than the United States of America.
"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 are in effect from time to time.
"GUARANTOR" means (i) the domestic Restricted Subsidiaries of the Company on
the Issue Date, including, without limitation, Aerosol Services Company, Inc.,
Kolmar Laboratories, Inc., and Piedmont Laboratories, Inc., and (ii) each of the
Company's Restricted Subsidiaries that in the future executes a supplemental
indenture in which such Restricted Subsidiary agrees to be bound by the terms of
the Indenture as a Guarantor; PROVIDED that any Person constituting a Guarantor
as described above shall cease to constitute a Guarantor when its respective
Guarantee is released in accordance with the terms of the Indenture.
Notwithstanding the above, no direct or indirect Foreign Subsidiary of the
Company, including Kolmar (Aust) Pty. Ltd., Kolmar de Mexico, S.A. de C.V. and
Kolmar Canada Inc. will be considered Guarantors.
"GUARANTOR SENIOR DEBT" means, with respect to any Guarantor, the principal
of, premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law), fees and expenses on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
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provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on, and all other amounts owing in respect of, (x) all monetary obligations of
every nature under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations and (z) all obligations under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Guarantor Senior Debt" shall not include (i) any Indebtedness of
such Guarantor to a Restricted Subsidiary of such Guarantor, (ii) Indebtedness
to, or guaranteed on behalf of, any director, officer or employee of either of
such Guarantor or any Restricted Subsidiary of such Guarantor (including,
without limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by such Guarantor, (vi) Indebtedness to the extent incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of such
Guarantor.
"INDEBTEDNESS" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic
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payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person. "Investment" shall exclude extensions of trade credit by
the Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, (i) "Investment" shall include and be valued at
the fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment (other than as
specified in clause (i) above) shall be the original cost of such Investment
plus the cost of all additional Investments by the Company or any of its
Restricted Subsidiaries, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment,
reduced by the payment of dividends, distributions, interest payments or
repayments of loans or advances in connection with such Investment or any other
amounts received in respect of such Investment; PROVIDED that no such payment of
dividends, distributions, interest payments, repayments of loans or advances or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends, distributions, interest payments, repayments of loans
or advances or receipt of any such amounts would be included in Consolidated Net
Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, it ceases to be a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Notes.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; PROVIDED,
HOWEVER, that, as to any such arrangement in corporate form, such corporation
shall not, as to any Person of which such corporation is a Subsidiary, be
considered to be a Joint Venture to which such person is a party.
"KOLMAR ACQUISITION" means the acquisition by the Company of all the
outstanding stock of Kolmar Laboratories, Inc. and the net assets of Kolmar
Canada from CCL Industries, Inc. and its subsidiary CCL Industries Corporation
for a total purchase price of $78 million.
"LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"MANAGEMENT AGREEMENT" means the Amended and Restated Management Services
Letter agreement, dated January 8, 1998, among the Company, Aerosol Services
Company, Inc., Piedmont Laboratories, Inc., The Gordon + Morris Group, Kolmar
Laboratories, Inc. and each of its subsidiaries as such letter agreement exists
on the Issue Date.
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"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, matured indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"PERMITTED HOLDER(S)" means HarbourVest Venture Partners--IV Direct Fund
L.P., The
Gordon+Morris Group, Gordon+Morris Investment Partnership, L.P. and their
respective Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the following:
(i) Indebtedness under the Notes offered hereby and the Guarantees
thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the greater
of (a) $70,000,000 in the aggregate with respect to Indebtedness under the
Revolving Credit Facility, less the amount of all permanent prepayment of
Indebtedness under the Credit Agreement actually made with the proceeds of
an Asset Sale, or (b) the Borrowing Base;
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iv) Interest Swap Obligations of the Company or any of its Restricted
Subsidiaries covering Indebtedness of the Company or any of its Restricted
Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary of
the Company covering Indebtedness of such Restricted Subsidiary; PROVIDED,
HOWEVER, that such Interest Swap Obligations are entered into to protect the
Company and its Restricted Subsidiaries from fluctuations in interest rates
on Indebtedness incurred in accordance with the Indenture to the extent the
notional principal amount of such Interest Swap Obligation does not exceed
the principal amount of the Indebtedness to which such Interest Swap
Obligation relates;
(v) Indebtedness under Currency Agreements; PROVIDED that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Wholly-Owned Restricted Subsidiary of the Company
to the Company or to a Wholly-Owned Restricted Subsidiary of the Company for
so long as such Indebtedness is held by the Company or a Wholly-Owned
Restricted Subsidiary of the Company, in each case subject to no Lien (other
than a Lien in connection with the Credit Agreement) held by a Person other
than the Company or a Wholly-Owned Restricted Subsidiary of the Company;
PROVIDED that if as of any date any Person other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company owns
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or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness (other than a Lien in connection with the Credit Agreement),
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly-Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly-Owned
Restricted Subsidiary of the Company, in each case subject to no Lien (other
than a Lien in connection with the Credit Agreement); PROVIDED that (a) any
Indebtedness of the Company to any Wholly-Owned Restricted Subsidiary of the
Company is unsecured and subordinated in right of payment, pursuant to a
written agreement, to the Company's obligations under the Indenture and the
Notes and (b) if as of any date any Person other than a Wholly-Owned
Restricted Subsidiary of the Company owns or holds any such Indebtedness or
any Person holds a Lien in respect of such Indebtedness (other than a Lien
in connection with the Credit Agreement), such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;
(viii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn
against insufficient funds in the ordinary course of business; PROVIDED,
HOWEVER, that such Indebtedness is extinguished within two business days of
incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
in order to finance insurance premiums and other Indebtedness represented by
letters of credit for the account of the Company or such Restricted
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance
or similar requirements, all in the ordinary course of business;
(x) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business, in accordance with
customary industry practice, in amounts and for purposes customary in the
Company's industry;
(xi) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for adjustment of purchase price, earn
out or other similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Restricted
Subsidiary of the Company or any of its Restricted Subsidiaries, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition; PROVIDED that the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross proceeds
actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(xii) Capitalized Lease Obligations and Purchase Money Obligations of the
Company and its Restricted Subsidiaries incurred in the ordinary course of
business not to exceed $5.0 million at any one time outstanding;
(xiii) Guarantees of Indebtedness permitted to be incurred under the
Indenture and guarantees of third-party loans to employees or officers of
the Company or its Restricted Subsidiaries permitted by clause (iv) of the
definition of "Permitted Investments;"
(xiv) Refinancing Indebtedness; and
(xv) additional Indebtedness of the Company or its Restricted
Subsidiaries in an aggregate principal amount not to exceed $5,000,000 in
the aggregate at any one time outstanding.
"PERMITTED INVESTMENTS" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
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Company, (ii) Investments in the Company by any Restricted Subsidiary of the
Company; PROVIDED that any Indebtedness evidencing such Investment is unsecured
and subordinated in right of payment, pursuant to a written agreement, to the
Company's obligations under the Notes and the Indenture; (iii) Investments in
cash and Cash Equivalents; (iv) loans and advances to, or guarantees of
third-party loans to, employees and officers of the Company and its Restricted
Subsidiaries for relocation expenses and purchasing Common Stock of the Company
not in excess of $2,000,000 at any one time outstanding; (v) Currency Agreements
and Interest Swap Obligations entered into in the ordinary course of the
Company's or its Restricted Subsidiaries' businesses and otherwise in compliance
with the Indenture; (vi) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers; (vii)
Investments made by the Company or its Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
the "Limitation on Asset Sales" covenant; (viii) Investments in Joint Ventures
in businesses reasonably related or complimentary to the Company and its
Restricted Subsidiaries made in the ordinary course of business and Investments
in minority interests created by the sale or disposition of Common Stock of any
Restricted Subsidiary of the Company, having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (viii)
that are at that time outstanding, not to exceed 4% of Total Assets at the time
of such Investment (with the fair market value of each such Investment being
measured at the time made and without giving effect to subsequent changes in
value); (ix) Investments the payment for which consists exclusively of Qualified
Capital Stock of the Company; (x) guarantees of Indebtedness permitted to be
incurred under the Indenture; and (xi) additional Investments not to exceed
$1,500,000 at any time outstanding.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(ii) statutory Liens of landlords or of mortgagees of landlords and
Liens of carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen and other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith, if
such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or assets
which is not leased property subject to such Capitalized Lease Obligation or
other property subject to a Permitted Lien held by the lien holder of such
Capitalized Lease Obligation;
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(vii) purchase money Liens to finance property or assets (including the
cost of construction) of the Company or any Restricted Subsidiary of the
Company acquired in the ordinary course of business; PROVIDED, HOWEVER, that
(A) the related purchase money Indebtedness shall not exceed the cost of
such property or assets (including the cost of construction) and shall not
be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired and
(B) the Lien securing such Indebtedness shall be created within 90 days of
such acquisition or construction;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods or
construction;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant; PROVIDED
that (A) such Liens secured such Acquired Indebtedness at the time of and
prior to the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company and were not granted in connection
with, or in anticipation of, the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company and (B) such Liens do
not extend to or cover any property or assets of the Company or of any of
its Restricted Subsidiaries other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary of the
Company and are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness
by the Company or a Restricted Subsidiary of the Company;
(xiv) Liens arising out of consignment or similar arrangements for the
sale of goods in the ordinary course of business;
(xv) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries;
(xvi) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xvii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods; and
(xviii) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations that
do not exceed $2,500,000 at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary.
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"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of such
Person or any of its subsidiaries to any seller or any other person incurred or
assumed in connection with the purchase of real or personal property to be used
in the business of such person or any of its subsidiaries within 180 days of
such purchase.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock or Indebtedness that is convertible or exchangeable into Capital
Stock.
"REFINANCE" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii),
(xiii) or (xv) of the definition of Permitted Indebtedness) and Indebtedness
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments actually paid or permanent
reductions thereon, in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such Refinancing)
or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is
less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; PROVIDED that (x) if such Indebtedness being
Refinanced is Indebtedness solely of the Company, then such Refinancing
Indebtedness shall be Indebtedness solely of the Company and (y) if such
Indebtedness being Refinanced is subordinate or junior to the Notes, then such
Refinancing Indebtedness shall be subordinate to the Notes at least to the same
extent and in the same manner as the Indebtedness being Refinanced.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Guarantors and BT.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; PROVIDED that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means one or more revolving credit facilities
under the Credit Agreement.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
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"SENIOR DEBT" means the principal of, premium, if any, interest (including
any interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law), fees and expenses on
any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred, assumed or guaranteed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations of every nature under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Subsidiary of the Company, (ii)
Indebtedness to, or guaranteed on behalf of, any director, officer or employee
of either of the Company or any of its Subsidiaries (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) Indebtedness to the extent incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"STOCKHOLDERS AGREEMENT" means that Amended and Restated Stockholders
Agreement, dated as of June 30, 1997, among the Company and certain stockholders
of the Company, as amended as of December 31, 1997 and as in effect on the Issue
Date.
"SUBSIDIARY" with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"TOTAL ASSETS" means total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent consolidated
balance sheet.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED that (x) the Company certifies to the
Trustee that such designation complies with the "Limitation on Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its
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Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board of Directors resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
"WARRANT AGREEMENT" means the Amended and Restated Warrant Agreement, dated
as of January 8, 1998, between the Company and Chase Manhattan Capital, L.P. and
as in effect on the Issue Date.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly-Owned
Restricted Subsidiary of such Person.
EXCHANGE OFFER; REGISTRATION RIGHTS
The following summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
to which this Prospectus forms a part.
Pursuant to the Registration Rights Agreement, each of the Company and the
Guarantors agreed that they, at their cost, for the benefit of the Holders, to
the extent not prohibited by any applicable law or applicable interpretation of
the staff of the Commission (i) prepare and, on or prior to July 1, 1998 (the
"Filing Date"), file with the Commission this Registration Statement with
respect to the Exchange Offer, (ii) use their best efforts to cause this
Registration Statement to be declared effective by the Commission under the
Securities Act on or prior to August 31, 1998, and (iii) commence the Exchange
Offer and use their best efforts to issue, on or prior to the date (the
"Consummation Date") that is 35 days immediately following the date that this
Registration Statement shall have been declared effective, the New Notes. The
offer and sale of the New Notes pursuant to the Exchange Offer is being
registered pursuant to this Registration Statement and will be duly registered
or qualified under all applicable state securities or Blue Sky laws and will
comply with all applicable tender offer rules and regulations under the Exchange
Act and state securities or Blue Sky laws. The Exchange Offer is not subject to
any condition, other than that the Exchange Offer does not violate any
applicable law or interpretation of the staff of the Commission.
If, prior to consummation of the Exchange Offer, BT holds any Notes acquired
by it and having, or which are reasonably likely to be determined to have, the
status of an unsold allotment in the initial distribution, or any other holder
of Old Notes is not entitled to participate in the Exchange Offer, the Company
and the Guarantors, upon the request of such Initial Purchaser or any such
holder, shall, simultaneously with the delivery of the New Notes in the Exchange
Offer, issue and deliver to such Initial Purchaser and any such holder, in
exchange (the "Private Exchange") for such Old Notes held by such Initial
Purchaser and any such holder, a like principal amount of debt securities of the
Company, guaranteed by each of the Guarantors on a senior subordinated basis,
that are identical in all material respects to the New Notes other than transfer
restrictions (the "Private Exchange Notes").
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Interest on each New Note or Private Exchange Note will accrue (A) from the
later of (i) the last interest payment date on which interest was paid on the
Old Note surrendered in exchange therefor, or (ii) if the Old Note is
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date of such interest payment date or (B)
if no interest has been paid on the Old Notes, from March 3, 1998.
Under existing interpretations of the Commission contained in several
no-action letters to third parties, the New Notes (and the related Guarantees)
will be freely transferable by holders thereof (other than affiliates of any of
the Company or the Guarantors) after the Exchange Offer without further
registration under the Act; provided, however, that the Company and the
Guarantors may require each holder of Old Notes, as a condition to its
participation in the Exchange Offer, to represent to the Company and the
Guarantors and their counsel in writing (which may be contained in the
applicable letter of transmittal) that at the time of the consummation of the
Exchange Offer (i) any New Notes received by such holder will be acquired in the
ordinary course of its business, (ii) such holder will have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes and (iii) such holder is not an
affiliate (as defined in Rule 405 promulgated under the Securities Act) of the
Company, or if it is an affiliate of the Company, it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
New Notes. If the holder is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer"), it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. Each of the Company
and the Guarantors has agreed to make available, during the period required by
the Securities Act, a prospectus meeting the requirements of the Securities Act
for use by Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements for use in connection with any resale of the
New Notes.
If (i) the Company and the Guarantors are not permitted to file this
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by any applicable law or applicable interpretation of the
staff of the Commission or (ii) any holder of an Old Note notifies the Company
that (A) due to a change in law or policy it is not entitled to participate in
the Exchange Offer, (B) due to a change in law or policy it may not resell New
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and this Prospectus is not appropriate or available for such resales
by such holder or (C) it owns Old Notes (including if BT holds Old Notes as part
of an unsold allotment from the original offering of the Old Notes) acquired
directly from the Company or a Guarantor or an affiliate of the Company or a
Guarantor or (iii) any holder of Private Exchange Notes so requests after the
consummation of the Private Exchange or (iv) the Company and the Guarantors have
not consummated the Exchange Offer within 215 days after March 3, 1998 (each
such event referred to in clauses (i) through (iv), a "Shelf Filing Event"), the
Company and the Guarantors shall (a) promptly deliver to the holders and the
Trustee notice thereof and (b) at their own expense cause to be filed with the
Commission pursuant to Rule 415 a shelf registration statement (the "Shelf
Registration Statement") as promptly as practicable and in any event prior to 60
days after the Company and the Guarantors become aware that such filing
obligation arises relating to all Transfer Restricted Notes (as defined) (the
"Shelf Registration") the holders of which have provided certain information
requested by the Company (provided that if the Shelf Filing Event arises
pursuant to clause (iv) above, the Company and the Guarantors shall file the
Shelf Registration Statement on or prior to the 216th day after March 3, 1998),
and shall use their best efforts to have the Shelf Registration Statement
declared effective by the Commission on or prior to 60 days after the filing
thereof (the "Shelf Effective Date"). In such
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circumstances, the Company and the Guarantors shall use their best efforts to
keep the Shelf Registration Statement continuously effective under the
Securities Act, until (A) two years (or such shorter period as may be
established by any amendment to the two year period set forth in Rule 144(k)
under the Securities Act) following the Shelf Effective Date or (B) if sooner,
the date immediately following the date that all Transfer Restricted Notes
covered by the Shelf Registration Statement have been sold pursuant thereto or
otherwise cease to be Transfer Restricted Notes (the "Effectiveness Period").
For purposes of the foregoing, a "Transfer Restricted Note" means each Old
Note, each New Note as to which clause (ii) of the preceding paragraph is
applicable, and each Private Exchange Note, in each case upon original issuance
thereof and at all time subsequent thereto until the earliest to occur of (A)
the date on which any such note has been exchanged by a person other than a
Participating Broker-Dealer for a New Note (other than with respect to a New
Note as to which clause (ii) of the preceding paragraph applies) pursuant to the
Exchange Offer, (B) with respect to New Notes received by Participating Broker-
Dealers in the Exchange Offer, the earlier of (x) the date on which such New
Note has been sold by such Participating Broker-Dealer by means of this
Prospectus and (y) the date on which this Registration Statement has been
effective under the Securities Act for a period of six months after the date
that is 35 days immediately following the date that this Registration Statement
shall have been declared effective, (C) a Shelf Registration Statement covering
such Old Note, New Note or Private Exchange Note has been declared effective by
the Commission and such Old Note, New Note or Private Exchange Note, as the case
may be, has been disposed of in accordance with such effective Shelf
Registration Statement, (D) the date on which such Old Note, New Note or Private
Exchange Note, as the case may be, is eligible for distribution to the public
without volume or manner of sale restrictions pursuant to Rule 144(k) or (E) the
date on which such Old Note, New Note or Private Exchange Note, as the case may
be, ceases to be outstanding for purposes of the Indenture or any other
indenture under which such Old Note, New Note or Private Exchange Note was
issued.
If the Company and the Guarantors fail to comply with the above provisions
or if this Registration Statement or the Shelf Registration Statement fails to
become effective, then, liquidated damages (the "Liquidated Damages") shall
become payable in respect of the Old Notes as follows:
(i) if (A) neither this Registration Statement nor the Shelf
Registration Statement is filed with the Commission on or prior to the
Filing Date or (B) notwithstanding that the Company and the Guarantors have
consummated or will consummate an Exchange Offer, the Company and the
Guarantors are required to file a Shelf Registration Statement and such
Shelf Registration Statement is not filed on or prior to the date required
by the Registration Rights Agreement, then commencing on the day after
either such required filing date, Liquidated Damages shall accrue on the
principal amount of the Old Notes at a rate of 0.5% per annum for the first
90 days immediately following each such filing date, such Liquidated Damages
rate increasing by an additional 0.5% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) this Registration Statement or a Shelf Registration
Statement has been filed with the Commission but neither this Registration
Statement nor a Shelf Registration Statement is declared effective by the
Commission on or prior to 60 days after the applicable required filing date
or (B) notwithstanding that the Company and the Guarantors have consummated
or will consummate an Exchange Offer, the Company and the Guarantors are
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the
60th day following the date such Shelf Registration Statement was required
to be filed, then, commencing on the day after the 60th day following the
applicable required filing date, Liquidated Damages shall accrue on the
principal amount of the Old Notes at a rate of 0.5% per annum for the first
90 days immediately following such date, such Liquidated Damages rate
increasing by an additional 0.5% per annum at the beginning of each
subsequent 90-day period; or
105
<PAGE>
(iii) if (A) the Company and the Guarantors have not exchanged New Notes
for all Old Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 36th day after the date on which this
Registration Statement was declared effective or (B) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
expiration of the Effectiveness Period, then Liquidated Damages shall accrue
on the principal amount of the Old Notes at a rate of 0.5% per annum for the
first 90 days commencing on (x) the 36th day after such effective date, in
the case of (A) above, or (y) the day such Shelf Registration Statement
ceases to be effective in the case of (B) above, such Liquidated Damages
rate increasing by an additional 0.5% per annum at the beginning of each
subsequent 90-day period; provided, however, that the Liquidated Damages
rate on the Old Notes may not exceed in the aggregate 2.00% per annum;
provided, further, however, that (1) upon the filing of this
Registration Statement or a Shelf Registration Statement (in the case of
clause (i) above), (2) upon the effectiveness of this Registration Statement
or a Shelf Registration Statement (in the case of clause (ii) above), or (3)
upon the exchange of New Notes for all Old Notes validly tendered in
accordance with the terms of the Exchange Offer (in the case of clause (iii)
(A) above), or upon the effectiveness of the Shelf Registration Statement
which had ceased to remain effective (in the case of clause (iii) (B)
above), Liquidated Damages on the Old Notes as a result of such clause (or
the relevant subclause thereof), as the case may be, shall cease to accrue.
Liquidated Damages will not accrue because of the suspension of a Shelf
Registration Statement during the pendency of certain blackout periods.
Any Liquidated Damages will be payable in cash to record holders in the same
manner as interest will be payable on the Old Notes. Holders of Old Notes, who
tender such Notes in the Exchange Offer agree to waive any accrued but upaid
Liquidated Damages on such Old Notes. An amount equal to the amount of accrued
and unpaid Liquidated Damages on Old Notes tendered in the Exchange Offer shall
be payable to registered holders of New Notes on the record date for the first
interest payment following the consummation of the Exchange Offer.
No holder of Transfer Restricted Notes shall be entitled to Liquidated
Damages payable in connection with any Shelf Registration Statement unless and
until such holder shall have provided certain information reasonably requested
by the Company for use in connection with such Shelf Registration Statement.
BOOK ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the New Notes initially will be
represented by a single, permanent global Note, in definitive, fully registered
form without interest coupons (the "Global Note"). The Global Note will be
deposited on the date on which the Exchange Offer is consumated with, or on
behalf of, DTC and registered in the name of a nominee of DTC.
New Notes held by Holders who elect to take physical delivery of their
certificates instead of holding their interests through a Global Note (and which
are thus ineligible to trade through DTC) (collectively referred to herein as
the "Non-Global Purchasers") will be issued in registered form (the
"Certificated Security"). Upon the transfer of any Certificated Security
initially issued to a Non-Global Purchaser, such Certificated Security will,
unless the transferee requests otherwise or the Global Note has previously been
exchanged in whole for Certificated Securities, be exchanged for an interest in
a Global Note.
THE GLOBAL NOTE. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Note, DTC or its
custodian will credit, on its internal system, the principal amount of New Notes
of the individual beneficial interests represented by such Global Note to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Note will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Ownership of
106
<PAGE>
beneficial interests in the Global Note will be limited to persons who have
accounts with DTC ("participants") or persons who hold interests through
participants. Holders may hold their interests in the Global Note directly
through DTC if they are participants in such system, or indirectly through
organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the New Notes represented by the Global Note for all
purposes under the Indenture. No beneficial owner of an interest in the Global
Note will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture with respect
to the New Notes.
Payments of the principal of, premium (if any), and interest on, the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell New Notes to persons in
states which require physical delivery of the New Notes, or to pledge such
securities, such holder must transfer its interest in the Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Notes only at the direction of one or more participants
to whose account the DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of New Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC will exchange
the Global Note for Certificated Securities, which it will distribute to its
participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and to facilitate the clearance and settlement
of securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
107
<PAGE>
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Note.
CERTAIN FEDERAL TAX CONSEQUENCES
The following is a summary of certain Federal income tax consequences
associated with the exchange of Old Notes for New Notes and the disposition of
the New Notes. This summary is based upon existing Federal income tax law, which
is subject to change, possibly retroactively. This summary does not discuss all
aspects of Federal income taxation which may be important to particular holders
in light of their individual investment circumstances, such as Notes held by
investors subject to special tax rules (E.G., financial institutions, insurance
companies, broker-dealers, tax-exempt organizations, or foreign investors) or to
persons that hold the Old Notes or will hold the New Notes as a part of a
straddle, hedge, or synthetic security transaction for Federal income tax
purposes, all of whom may be subject to tax rules that differ significantly from
those summarized below. In addition, this summary does not discuss any foreign,
state, or local tax considerations. This summary assumes that investors hold
their Old Notes and will hold their New Notes as "capital assets" (E.G.,
generally, property held for investment). Prospective investors are urged to
consult their tax advisors regarding the Federal, state, local and foreign
income and other tax considerations associated with the exchange of Old Notes
for New Notes and the disposition of the New Notes.
EXCHANGE OF NOTES
There will be no Federal income tax consequences to a holder exchanging an
Old Note for a New Note pursuant to the Exchange Offer and such holder will have
the same adjusted basis and holding period in the New Note as it had in the Old
Note immediately before the exchange.
DISPOSTION OF NEW NOTES
In general, subject to the market discount rules discussed below, a holder
of a New Note will recognize capital gain or loss upon the sale, redemption, or
other disposition of the New Note in an amount equal to the difference between
the amount realized (except to the extent attributable to accrued but unpaid
interest) in such disposition and the holder's adjusted tax basis in the New
Note. Net capital gain (I.E., generally, capital gain in excess of capital loss)
recognized by an individual holder upon the disposition of a New Note that has
been held for (i) more than 18 months will generally be subject to tax at a rate
not to exceed 20%, (ii) more than 12 months but not more than 18 months will be
subject to tax at a rate not to exceed 28%, and (iii) 12 months or less will be
subject to tax at ordinary income tax rates. In addition, capital gain
recognized by a corporate holder will be subject to tax at the ordinary income
tax rates applicable to corporations.
MARKET DISCOUNT
Holders, other than original purchasers of the Old Notes in the original
offering, should be aware that the sale of the New Notes may be affected by the
market discount provisions of the Internal Revenue Code. These rules generally
provide that if a holder of a Note purchased such note, subsequent to the
original offering, at a market discount in excess of a statutorily defined DE
MINIMIS amount, and thereafter recognizes gain upon a disposition (including a
partial redemption) of the New Note received in exchange for such Old Note, the
lesser of such gain or the portion of the market discount that accrued while the
Old Note and New Note were held by such holder will be treated as ordinary
interest income at the time of disposition. The rules also provide that a holder
who acquires a Note at a market discount may be required
108
<PAGE>
to defer a portion of any interest expense that may otherwise be deductible on
any indebtedness incurred or maintained to purchase or carry such note until the
holder disposes of such note in a taxable transaction. If a holder of such a
note elects to include market discount in income currently, both of the
foregoing rules would not apply.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver this Prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Until [ ], 1998, all dealers effecting
transactions in the New Notes may be required to deliver this Prospectus. The
Company has agreed that, for a period of 90 days after the Expiration Date, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchaser of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any commission
or concessions received by any such person may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering this Prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses in connection with
the Exchange Offer and to reimburse BT for the reasonable fees and expenses of
counsel for the Holders of the Notes. Each Holder will pay all expenses of its
counsel other than as described in the preceding sentence, transfer taxes, if
any, and any commissions or concessions of any brokers or dealers. The Company
has agreed in the Registration Rights Agreement to indemnify the Holders of the
Notes (including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act.
In addition, to comply with the securities laws of certain jurisdictions,
the New Notes may not be offered or sold unless they have been registered or
qualified for offer and sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Notes for offer or
sale under all applicable state securities or Blue Sky laws by the time the
Registration Statement (of which this Prospectus forms a part) is declared
effective by the Commission.
LEGAL MATTERS
Certain legal matters with respect to the New Notes offered hereby will be
passed upon for the Company by its special counsel, Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California, and Paul, Hastings, Janofsky &
Walker LLP, Los Angeles, California.
109
<PAGE>
CHANGE IN INDEPENDENT ACCOUNTANTS
PREVIOUS INDEPENDENT ACCOUNTANTS
On October 25, 1996, the Company dismissed Coopers & Lybrand L.L.P. as its
independent accountants. The report of Coopers & Lybrand L.L.P. on the Company's
financial statements for the fiscal year ended December 31, 1995 contained no
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principle. The Company's Board of
Directors participated in and approved the decision to change independent
accountants. In connection with its audit for the fiscal year ended December 31,
1995, and through October 25, 1996, there were no disagreements with Coopers &
Lybrand L.L.P. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Coopers & Lybrand L.L.P. would have caused them
to make reference thereto in their report on the financial statements for such
year.
During the fiscal year ended December 31, 1995, and through October 25,
1996, there were no reportable events (as defined in Regulations S-K Item
304(a)(1)(v)).
NEW INDEPENDENT ACCOUNTANTS
The Company engaged Deloitte & Touche LLP as its new independent accountants
as of October 25, 1996. During the fiscal year ended December 31, 1995 and
through October 25, 1996, the Company did not consult with Deloitte & Touche LLP
regarding either (i) the application of accounting principles to a specific
transaction either completed or proposed or the type of audit opinion that might
be rendered on the Company's financial statements, and neither a written report
was provided to the Company nor oral advice was provided that Deloitte & Touche
LLP concluded was an important factor considered by the Company in reaching a
decision as to the accounting, auditing or financial reporting issue; or (ii)
any matter that was either the subject of a disagreement, as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to
Item 304 of Regulation S-K, or a reportable event, as that term is defined in
Item 304(a)(1)(v) of Regulation S-K.
EXPERTS
The consolidated financial statements of Outsourcing Services Group, Inc. as
of December 31, 1997 and 1996 and for the years then ended, included in this
Prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
on the report of such firm given upon their authority as experts in accounting
and auditing.
The consolidated financial statements of operations, stockholders' deficit
and cash flows of Outsourcing Services Group, Inc. and subsidiary for the year
ended December 31, 1995 included in this Prospectus, have been included herein
in reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The combined financial statements of Kolmar Group included in this
Prospectus, have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, to the extent and for the periods indicated in their report
thereon. Such combined financial statements have been included in reliance upon
the report of KPMG Peat Marwick LLP.
The financial statements of Piedmont Laboratories, Inc. as of September 29,
1996, and for the year then ended, included in this Prospectus, have been
audited by Moore, Colson & Company, P.C., independent auditors, as stated in
their report appearing herein.
110
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
OUTSOURCING SERVICES GROUP, INC. PAGE
----
<S> <C>
Condensed consolidated balance sheets as of December 31, 1997 and March
28, 1998 (unaudited).................................................... F-2
Condensed consolidated statements of operations and comprehensive income
(unaudited) for the three month periods ended March 30, 1997 and March
28, 1998................................................................ F-3
Condensed consolidated statements of cash flows (unaudited) for the three
month periods ended March 30, 1997 and March 28, 1998................... F-4
Notes to condensed consolidated financial statements (unaudited).......... F-6
Independent auditors' report of Deloitte & Touche LLP..................... F-7
Report of independent accountants of Coopers & Lybrand L.L.P. ............ F-8
Consolidated balance sheets as of December 31, 1996 and 1997.............. F-9
Consolidated statements of operations for the years ended December 31,
1995, 1996 and 1997..................................................... F-10
Consolidated statements of stockholders' deficit for the years ended
December 31, 1995, 1996 and 1997........................................ F-11
Consolidated statements of cash flows for the years ended December 31,
1995, 1996 and 1997..................................................... F-12
Notes to consolidated financial statements................................ F-14
KOLMAR GROUP
Independent auditors' report of KPMG Peat Marwick LLP..................... F-27
Combined balance sheets as of December 31, 1996 and 1997.................. F-28
Combined statements of operations for the years ended December 30, 1995,
1996 and 1997........................................................... F-29
Combined statements of stockholders' deficit for the years ended December
30, 1995,
1996 and 1997........................................................... F-30
Combined statements of cash flows for the years ended December 30, 1995,
1996 and 1997........................................................... F-31
Notes to combined financial statements.................................... F-32
PIEDMONT LABORATORIES, INC.
Independent auditors' report of Moore, Colson & Company, P.C. ............ F-42
Balance sheet as of September 29, 1996.................................... F-43
Statement of income and retained earnings for the year ended September 29,
1996.................................................................... F-44
Statement of cash flows for the year ended September 29, 1996............. F-45
Notes to financial statements............................................. F-46
</TABLE>
F-1
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND MARCH 28, 1998
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 28,
1997 1998
------------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash................................................................................ $ 338 $ 3,628
Short-term investments.............................................................. 250 257
Trade accounts receivable, net...................................................... 17,319 35,829
Other receivables................................................................... 330 2,590
Inventories, net.................................................................... 12,125 26,309
Prepaid expenses.................................................................... 174 643
Deferred income taxes............................................................... 376 376
------------- -----------
Total current assets.............................................................. 30,912 69,632
PROPERTY AND EQUIPMENT, net........................................................... 10,188 29,155
DEPOSITS AND OTHER ASSETS............................................................. 98 351
DEFERRED INCOME TAXES................................................................. 1,014 6,080
GOODWILL, net......................................................................... 7,857 58,348
DEFERRED FINANCING COSTS.............................................................. 1,111 7,802
ENVIRONMENTAL INSURANCE RECEIVABLE.................................................... -- 8,250
DUE FROM CCL, net..................................................................... -- 3,376
OTHER INTANGIBLE ASSETS, net.......................................................... 661 1,597
------------- -----------
$ 51,841 $ 184,591
------------- -----------
------------- -----------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Trade accounts payable.............................................................. $ 13,349 $ 24,723
Current maturities of long-term debt................................................ 1,600 31
Accrued payroll and other compensation.............................................. 1,269 4,447
Accrued interest.................................................................... 235 857
Accrued property taxes.............................................................. 305 27
Refundable trade discount........................................................... 649 14
Other liabilities................................................................... 910 10,960
------------- -----------
Total current liabilities......................................................... 18,317 41,059
DEFERRED TAXES........................................................................ -- 506
ENVIRONMENTAL RESERVE AND OTHER LIABILITIES........................................... -- 19,132
LONG-TERM DEBT........................................................................ 34,591 105,000
------------- -----------
Total liabilities................................................................... 52,908 165,697
REDEEMABLE SERIES A PREFERRED STOCK, $.001 par value; 3,750 shares authorized, issued
and outstanding..................................................................... 375 384
REDEEMABLE SERIES B PREFERRED STOCK, $.001 par value; 26,250 shares authorized, issued
and outstanding..................................................................... 3,884 3,937
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value; 6,000,000 shares authorized; 1,267,174 and 3,360,174
shares issued and outstanding as of December 31, 1997 and March 28, 1998
respectively...................................................................... 1 3
Common stock warrants............................................................... 828 828
Additional paid-in capital.......................................................... 12,662 33,590
Accumulated deficit................................................................. (9,102) (11,741)
Accumulated other comprehensive income:............................................. -- --
Foreign currency translation, adjustment.......................................... -- 1,608
------------- -----------
4,389 24,288
Less predecessor carryover basis adjustment......................................... (9,715) (9,715)
------------- -----------
Total stockholders' equity (deficit).............................................. (5,326) 14,573
------------- -----------
$ 51,841 $ 184,591
------------- -----------
------------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 30, 1997 AND MARCH 28, 1998
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
MARCH 30, MARCH 28,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
NET REVENUES.......................................................................... $ 26,538 $ 53,875
COST OF GOODS SOLD.................................................................... 22,923 45,874
------------ ------------
GROSS PROFIT.......................................................................... 3,615 8,001
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......................................... 2,379 4,973
------------ ------------
INCOME FROM OPERATIONS................................................................ 1,236 3,028
INTEREST EXPENSE, net................................................................. 1,341 2,829
OTHER INCOME, net..................................................................... -- (2)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAX PROVISION AND
EXTRAORDINARY ITEM.................................................................. (105) 201
PROVISION FOR INCOME TAXES............................................................ 76 633
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM........................................................ (181) (432)
EXTRAORDINARY ITEM--LOSS FROM EARLY EXTINGUISHMENT OF DEBT, net of income tax benefit
of $1,429........................................................................... -- 2,145
------------ ------------
NET LOSS.............................................................................. (181) (2,577)
OTHER COMPREHENSIVE INCOME:
Foreign currency translation, adjustment, net of tax of $1,072...................... -- 1,608
------------ ------------
COMPREHENSIVE LOSS.................................................................... $ (181) $ (969)
------------ ------------
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM PER SHARE.............................................. $ (0.14) $ (0.14)
LOSS FROM EXTRAORDINARY ITEM PER SHARE................................................ $ -- $ (0.68)
------------ ------------
NET LOSS PER SHARE--Basic and diluted................................................. $ (0.14) $ (0.82)
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON SHARES--Basic and diluted..................................... 1,329,842 3,150,874
------------ ------------
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 30, 1997 AND MARCH 28, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 30, MARCH 28,
1997 1998
----------- ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................................. $ (181) $ (2,577)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization............................................................. 1,039 1,934
Amortization of deferred financing costs.................................................. 400 --
Provision for doubtful accounts........................................................... 30 64
Extraordinary item--write-off of deferred financing costs................................. -- 2,145
Deferred income taxes..................................................................... (147) 1,404
Change in operating assets and liabilities, net of effect of Kolmar acquisition:
Trade accounts receivable................................................................. 1,225 (1,681)
Income taxes receivable/payable........................................................... 143 --
Inventories............................................................................... (1,542) (3,470)
Trade accounts payable.................................................................... 3,773 2,475
Other Assets.............................................................................. (568) (9,695)
Accrued liabilities....................................................................... 684 3,483
----------- ----------
Net cash provided by operating activities................................................. 4,856 (5,918)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................................................... (254) (369)
Sale of property, plant or equipment...................................................... -- 28
Acquisition of Kolmar Laboratories, net of cash acquired.................................. -- (77,951)
Sale (Purchase) of short-term investment, net............................................. 100 (7)
----------- ----------
Net cash used in investing activities..................................................... (154) (78,299)
</TABLE>
See notes to condensed consolidated financial statements.
F-4
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 30, 1997 AND MARCH 28, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 30, MARCH 28,
1997 1998
----------- ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments on revolving loans......................................................... $ (1,498) $ (10,441)
Borrowing on senior subordinated debt..................................................... -- 105,000
Borrowing on senior bridge loans.......................................................... -- 70,000
Borrowing on senior term loans............................................................ (2,938) --
Repayments of senior bridge loans......................................................... -- (70,000)
Repayment of senior subordinated debt..................................................... -- (6,000)
Repayment of term loans................................................................... -- (19,750)
Repayment of debt due to affiliate........................................................ -- (2,232)
Proceeds from the issuance of common stock................................................ -- 20,930
----------- ----------
Net cash (used in) provided by financing activities..................................... (4,436) 87,507
----------- ----------
NET INCREASE IN CASH...................................................................... 266 3,290
CASH, beginning of period................................................................. 260 338
----------- ----------
CASH, end of period....................................................................... $ 526 $ 3,628
----------- ----------
----------- ----------
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS--
Accretion attributable to preferred stock............................................... $ 35 $ 62
----------- ----------
----------- ----------
The Company acquired all the capital stock of Kolmar Laboratories, Inc. In conjunction
with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired......................................................... $ 63,358
Intangible assets acquired............................................................ 51,277
Cash paid for capital stock........................................................... (77,951)
----------
Liabilities assumed..................................................................... $ 45,914
----------
----------
</TABLE>
See notes to condensed consolidated financial statements.
F-5
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 30, 1997 AND MARCH 28, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein have
been prepared by Outsourcing Services Group, Inc. ("OSG" or the "Company")
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosures,
normally included in financial statements prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant to such
SEC rules and regulations; nevertheless, the management of the Company believes
that the disclosures herein are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto for
the year ended December 31, 1997. In the opinion of management, the condensed
consolidated financial statements included herein reflect all adjustments
necessary to present fairly the consolidated financial position of the Company
as of March 28, 1998, the results of its operations for the three month period
ended March 28, 1998, and its cash flows for the three month period ended March
28, 1998. The results of operations for the interim periods are not necessarily
indicative of the results of operations for the full year.
As of January 1, 1998, the Company acquired from CCL Industries, all of the
outstanding shares of Kolmar Laboratories, Inc. and the net assets of Kolmar
Canada Inc., (collectively referred to as the Kolmar Group) for $78.0 million,
subject to certain post-closing adjustments. The acquisition has been treated as
a purchase for accounting purposes. Accordingly, the assets acquired and
liabilities assumed have been recorded at their estimated fair values at the
date of acquisition.
2. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE
Net Income (Loss) Per Share. The Company has adopted SFAS No. 128, Earnings
per Share, which replaces the presentation of "primary" earnings per share with
"basic" earnings per share and the presentation of "fully diluted" earnings per
share with "diluted" earnings per share. All previously reported earnings per
share amounts have been restated based on the provisions of the new standard.
Basic earnings per share are based upon the weighted average number of common
shares outstanding. Diluted earnings per share amounts are based upon the
weighted average number of common and common equivalent shares for each period
presented. Common equivalent shares include stock options assuming conversion
under the treasury stock method.
3. NEW ACCOUNTING PRONOUNCEMENTS
In the first quarter ended March 28, 1998, the Company adopted SFAS No. 130,
REPORTING COMPREHENSIVE INCOME. This statement establishes standards for the
reporting and display of comprehensive income and its components. March 30, 1997
statements have been restated based on the provisions of the new standard. For
the fiscal year ending December 31, 1998, the Company will adopt SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION and SFAS No.
132, DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Outsourcing Services Group, Inc.
City of Industry, California
We have audited the accompanying consolidated balance sheets of Outsourcing
Services Group, Inc. (the Company or OSG) as of December 31, 1996 and 1997, and
the related consolidated statements of operations, stockholders' deficit and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Outsourcing Services Group, Inc. as
of December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
During the year ended December 31, 1996, the Company changed its method of
evaluating the recoverability of intangible assets.
Deloitte & Touche LLP
Costa Mesa, California
March 3, 1998
F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Outsourcing Services Group, Inc. and subsidiary
City of Industry, California
We have audited the accompanying consolidated statements of operations,
stockholders' deficit, and cash flows of Outsourcing Services Group Inc. and
subsidiary (the "Company") for the year ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our 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
misstatements. 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 operations
and cash flows of the Company for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Newport Beach, California
February 23, 1996
F-8
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................................................ $ 260 $ 338
Short-term investment....................................................................... 350 250
Trade accounts receivable, net (Note 3)..................................................... 16,415 17,319
Other receivables........................................................................... 45 330
Income taxes receivable..................................................................... 143
Inventories, net (Note 4)................................................................... 10,143 12,125
Prepaid expenses............................................................................ 241 174
Deferred income taxes (Note 7).............................................................. 883 376
--------- ---------
Total current assets...................................................................... 28,480 30,912
PROPERTY AND EQUIPMENT, net (Note 5).......................................................... 10,091 10,188
DEPOSITS AND OTHER ASSETS..................................................................... 145 98
DEFERRED INCOME TAXES (Note 7)................................................................ 493 1,014
GOODWILL, net................................................................................. 9,921 7,857
OTHER INTANGIBLE ASSETS, net (Note 6)......................................................... 3,221 1,772
--------- ---------
$ 52,351 $ 51,841
--------- ---------
--------- ---------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Trade accounts payable...................................................................... $ 10,387 $ 13,349
Current maturities of long-term debt (Note 8)............................................... 2,688 1,600
Accrued payroll and other compensation...................................................... 825 1,269
Accrued interest............................................................................ 141 235
Accrued property taxes...................................................................... 333 305
Refundable trade discount................................................................... 29 649
Other liabilities........................................................................... 651 910
--------- ---------
Total current liabilities................................................................. 15,054 18,317
DEFERRED TAXES (Note 7)....................................................................... 503
LONG-TERM DEBT (Note 8)....................................................................... 36,016 34,591
--------- ---------
Total liabilities......................................................................... 51,573 52,908
REDEEMABLE PREFERRED STOCK, $.001 par value; 30,000 shares authorized, issued and outstanding
as of December 31, 1996 (Note 9)............................................................ 4,118
REDEEMABLE SERIES A PREFERRED STOCK, $.001 par value; 3,750 shares authorized, issued and
outstanding (Note 9)........................................................................ 375
REDEEMABLE SERIES B PREFERRED STOCK, $.001 par value; 26,250 shares authorized, issued and
outstanding (Note 9)........................................................................ 3,884
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value; 2,000,000 shares authorized; 1,329,842 and 1,267,174 shares
issued and outstanding as of December 31, 1996 and 1997, respectively..................... 1 1
Common stock warrants (Notes 8 and 10)...................................................... 193 828
Additional paid-in capital.................................................................. 13,297 12,662
Accumulated deficit......................................................................... (7,116) (9,102)
--------- ---------
6,375 4,389
Less predecessor carryover basis adjustment................................................. (9,715) (9,715)
--------- ---------
Total stockholders' deficit............................................................... (3,340) (5,326)
--------- ---------
$ 52,351 $ 51,841
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ------------
<S> <C> <C> <C>
NET REVENUES............................................................... $ 60,633 $ 79,832 $ 110,328
COST OF GOODS SOLD......................................................... 52,375 68,748 95,211
---------- ---------- ------------
GROSS PROFIT............................................................... 8,258 11,084 15,117
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................................................. 4,608 5,995 10,784
---------- ---------- ------------
INCOME FROM OPERATIONS..................................................... 3,650 5,089 4,333
INTEREST EXPENSE, net...................................................... (3,689) (3,646) (4,221)
OTHER INCOME, net.......................................................... 131
---------- ---------- ------------
INCOME BEFORE INCOME TAX PROVISION, EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE............................... 92 1,443 112
PROVISION FOR INCOME TAXES (Note 7)........................................ 40 690 568
---------- ---------- ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE.................................................. 52 753 (456)
EXTRAORDINARY ITEM, LOSS FROM EARLY EXTINGUISHMENT OF DEBT, net of income
tax benefit of $633 (Note 8)............................................. (1,060)
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (Note 2)............. (7,000)
---------- ---------- ------------
NET INCOME (LOSS).......................................................... $ 52 $ (6,247) $ (1,516)
---------- ---------- ------------
---------- ---------- ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE PER SHARE........................................ $ 0.11 $ 1.09 $ (0.35)
LOSS AFTER EXTRAORDINARY ITEM PER SHARE.................................... $ -- $ -- $ (0.82)
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE PER SHARE............ -- (10.15) --
---------- ---------- ------------
NET INCOME (LOSS) PER SHARE--Basic and diluted............................. $ 0.11 $ (9.06) $ (1.17)
---------- ---------- ------------
---------- ---------- ------------
WEIGHTED AVERAGE COMMON SHARES--Basic and diluted.......................... 471,616 689,806 1,298,508
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR
COMMON STOCK COMMON ADDITIONAL CARRYOVER TOTAL
---------------------- STOCK PAID-IN ACCUMULATED BASIS STOCKHOLDERS'
SHARES AMOUNT WARRANTS CAPITAL DEFICIT ADJUSTMENT DEFICIT
--------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995......... 471,166 $ -- $ 193 $ 6,228 $ (7) $ (9,715) $ (3,301)
Sale of stock for cash........... 5,295 70 70
Accretion of redeemable preferred
stock.......................... (429) (429)
Net income....................... 52 52
--------- ----- ----- ----------- ------------- ----------- -------------
BALANCE, December 31, 1995....... 476,461 193 6,298 (384) (9,715) (3,608)
Accretion of redeemable preferred
stock.......................... (485) (485)
Issuance of common stock in
conjunction with the
acquisition of Piedmont........ 853,381 1 6,999 7,000
Net loss......................... (6,247) (6,247)
--------- ----- ----- ----------- ------------- ----------- -------------
BALANCE, December 31, 1996....... 1,329,842 1 193 13,297 (7,116) (9,715) (3,340)
Cancelation of common stock
warrants....................... (193) 193
Accretion of redeemable preferred
stock.......................... (141) (141)
Exchange of common stock for
warrants....................... (62,668) 828 (828)
Payment of dividends............. (329) (329)
Net loss......................... (1,516) (1,516)
--------- ----- ----- ----------- ------------- ----------- -------------
BALANCE, December 31, 1997....... 1,267,174 $ 1 $ 828 $ 12,662 $ (9,102) $ (9,715) $ (5,326)
--------- ----- ----- ----------- ------------- ----------- -------------
--------- ----- ----- ----------- ------------- ----------- -------------
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................ $ 52 $ (6,247) $ (1,516)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization.................................................. 1,880 2,495 4,218
Amortization of deferred financing costs....................................... 367 395 339
Provision for doubtful accounts................................................ 58 (43)
Cumulative effect of a change in accounting principle (Note 2)................. 7,000
Extraordinary item--write-off of deferred financing costs (Note 8)............. 1,693
Deferred income taxes.......................................................... 172 228 (517)
Benefit applied to reduce goodwill (Note 7).................................... 394 394
Change in operating assets and liabilities, net of effects of Piedmont
acquisition:
Notes receivable............................................................. 2,125
Trade accounts receivable.................................................... (2,523) (2,945) (861)
Inventories.................................................................. (883) (973) (1,982)
Prepaid expenses and other current assets.................................... 204 (233) (75)
Deposits and other assets.................................................... 13 87 47
Trade accounts payable....................................................... 2,252 (1,889) 2,962
Accrued expenses and other liabilities....................................... (153) (41) 1,389
--------- ---------- ---------
Net cash provided by operating activities.................................. 1,381 454 6,048
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................. (429) (638) (1,486)
Acquisition of Piedmont, net of cash acquired.................................... (14,060)
Purchase of short-term investment................................................ (350)
Sale of short-term investment.................................................... 100
Intangible assets acquired....................................................... (19) -- --
--------- ---------- ---------
Net cash used in investing activities...................................... (448) (15,048) (1,386)
</TABLE>
See notes to consolidated financial statments.
F-12
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing acquisition................................................... -- -- (1,742)
Net (repayments) borrowings on revolving loans................................... (215) 6,315 (2,075)
Net payments on line of credit................................................... (290)
Borrowings on senior term loans.................................................. 5,000 20,500
Repayments of long-term debt..................................................... (1,125) (3,203) (20,938)
Payment of dividends on preferred stock.......................................... (329)
Proceeds from the issuance of common stock....................................... 70 7,000
Increase in bond overdraft....................................................... 365
--------- ---------- ---------
Net cash (used in) provided by financing activities........................ (905) 14,822 (4,584)
--------- ---------- ---------
NET INCREASE IN CASH............................................................. 28 228 78
CASH, beginning of year.......................................................... 4 32 260
--------- ---------- ---------
CASH, end of year................................................................ $ 32 $ 260 $ 338
--------- ---------- ---------
--------- ---------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--Cash paid during the year for:
Interest..................................................................... $ 3,836 $ 3,312 $ 3,609
--------- ---------- ---------
--------- ---------- ---------
Income taxes................................................................. $ 2 $ 172 $ 126
--------- ---------- ---------
--------- ---------- ---------
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS--
Accretion attributable to preferred stock (Note 9)............................. $ 429 $ 485 $ 141
--------- ---------- ---------
--------- ---------- ---------
The Company acquired all the capital stock of Piedmont Laboratories, Inc. In
conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired.................................................. $ 13,919
Intangible assets acquired..................................................... 6,753
Cash paid for capital stock.................................................... (14,060)
----------
Liabilities assumed............................................................ $ 6,612
----------
----------
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
1. ORGANIZATION AND BACKGROUND
BUSINESS--Outsourcing Services Group, Inc. (the Company or OSG) is a leading
provider of outsourced manufacturing and packaging services to the health and
beauty aid, household and automotive consumer product markets in North America.
OSG primarily manufactures and/or packages health and beauty aid products,
including skin care creams and lotions, hair spray and gel, hair mousse,
shampoo, and shaving cream and gel. Other products manufactured and packaged by
the Company include household and automotive products, such as lubricants, tire
sealers, cleaners and lighter fluid. OSG offers its customers a complete range
of services, including product development, formulation, blending,
manufacturing, filling and packaging. It also provides ancillary services such
as materials procurement, warehousing and distribution of finished goods.
FORMATION--The Company was established as a result of the merger of Aerosol
Services Holding Corporation (ASHC) and Aerosol Companies Holding Corporation
(ACHC) in a transaction accounted for similar to a pooling of interest. ASHC was
formed by an investor group to acquire Aerosol Services Company, Inc. (ASC)
effective February 14, 1994. ACHC was formed by essentially the same investor
group plus management of Piedmont Laboratories, Inc. (Piedmont) to acquire
Piedmont on October 1, 1996 for approximately $14,060,000. The purchase price
was financed primarily through the issuance of debt and equity securities. The
acquisition has been accounted for as a purchase for accounting purposes and,
accordingly, the assets acquired and liabilities assumed have been recorded at
their estimated fair values at the date of acquisition. The excess of the
purchase price over the fair value of the net assets acquired was $5,754,000 and
has been recorded as goodwill. Other intangible assets arising from this
transaction amounted to $999,000. Assuming the Piedmont acquisition had occurred
on January 1, 1996, pro forma net revenues and net loss for OSG for the year
ended December 31, 1996 would have been approximately $107,708,000 and
$(5,296,000), respectively.
MERGER--Under the terms of the merger, effective June 30, 1997, ACHC was
merged into ASHC at which time, ASHC was renamed Outsourcing Services Group,
Inc. As a result of this merger, the Company became the sole common stockholder
of ASC and Piedmont. The merger agreement also amended the capital structure
such that the existing stockholders of ACHC received approximately 1.22 new
shares of the Company's common stock for each old share of ACHC common stock
that they owned prior to the merger and the existing stockholders of ASHC
received approximately .76 new shares of the Company's common stock for each old
share of ASHC common stock that they owned prior to the merger. In addition, the
outstanding preferred stock was canceled and new shares of preferred stock were
issued in the form of a Series A preferred stock and Series B preferred stock
(Note 9).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries, Aerosol Services
Company, Inc. and Piedmont Laboratories, Inc. subsequent to its acquisition on
October 1, 1996. All significant intercompany transactions have been eliminated.
BASIS OF PRESENTATION--OSG's financial statements give retroactive effect to
the formation of OSG and to the acquisition of Piedmont as if it was acquired by
OSG on October 1, 1996.
F-14
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SHORT-TERM INVESTMENT--Short-term investment consists of a certificate of
deposit with an original maturity of greater than three months and a remaining
maturity of less than one year. Short-term investment is stated at cost which
approximates market value.
INVENTORIES--Inventories are valued at the lower of cost or market using the
first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation and amortization are
provided principally using the straight-line method over the estimated useful
lives of the related assets ranging from 3 to 20 years. Expenditures for major
renewals and betterments are capitalized, while minor replacements, maintenance
and repairs which do not extend the asset lives are charged to operations as
incurred.
OTHER INTANGIBLE ASSETS--Other intangible assets which include organization
and other costs are being amortized on a straight-line basis over a 60-month
period.
DEFERRED FINANCING COSTS--Deferred financing costs are capitalized costs
associated with obtaining long-term debt financing including legal expenses,
bank fees and seller's costs. These costs are being amortized over the repayment
term of the related debt using the effective interest method.
GOODWILL--Goodwill represents the excess of the purchase price over the fair
value of the net assets of ASC and Piedmont and is amortized on a straight-line
basis over twenty years. The Company subjects the carrying value of the goodwill
to an annual review for impairment. Effective January 1, 1996, the Company
changed its accounting policy for evaluating the recoverability of intangible
assets. Previously, the Company determined the recoverability of intangible
assets by considering estimated future operating income of the Company on an
undiscounted cash flow basis. Under its new policy, the Company evaluates the
recoverability of intangible assets based on the estimated fair market value of
the Company. The cumulative effect of the change in accounting policy has
resulted in a write-down of goodwill associated with the acquisition of ASC of
$7,000,000. Goodwill is presented net of accumulated amortization of $2,421,000
in 1996 and $5,845,000 in 1997.
PREDECESSOR CARRYOVER BASIS ADJUSTMENT--The assets and liabilities
attributed to the former stockholders of ASC, who retained a 33.63% interest in
ASHC, subsequent to the acquisition, were recorded at the predecessor basis in
accordance with generally accepted accounting principles. The new basis of
reporting for the Company's net assets using fair market values at the date of
the acquisition was reduced by $9,715,000 to reflect the carryover basis of the
former stockholder of ASC. This predecessor carryover basis adjustment is
reflected as a separate component of stockholders' deficit.
LONG-LIVED ASSETS--The Company accounts for the impairment and disposition
of long-lived assets in accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
FOR LONG-LIVED ASSETS TO BE DISPOSED OF. In accordance with SFAS No. 121,
long-lived assets to be held are reviewed for events or changes in circumstances
which indicate that their carrying value may not be recoverable. The Company
periodically reviews the carrying value of long-lived assets to determine
whether or not an impairment to such value has occurred.
F-15
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OVERDRAFT--As a result of cash management policies, the Company maintains
overdraft positions in certain cash accounts. Overdrafts at December 31, 1996
and 1997, which are included in accounts payable, were $1,162,000 and
$1,627,000, respectively.
REVENUE RECOGNITION--Revenue is generally recognized as products are shipped
to customers. When customers, under the terms of specific orders, request that
the Company manufacture and invoice goods on a bill and hold basis, the Company
recognizes revenue based on the completion of the manufacturing process. The
Company estimates and records provisions for sales returns and allowances based
on its experience. Total sales returns and allowances were $1,688,000,
$1,094,000 and $1,537,000 in 1995, 1996 and 1997, respectively.
INCOME TAXES--The Company accounts for income taxes under the provisions of
SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under this method, deferred income
taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting
amounts at each year-end based on enacted tax laws and statutory rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
CONCENTRATION OF CREDIT RISK--Financial instruments which potentially expose
the Company to concentration of credit risk consist primarily of cash and trade
accounts receivable. The Company maintains cash balances with financial
institutions that are in excess of federally insured limits. The Company's
products are primarily sold to product marketers which, in turn, sell or
distribute to retail stores and salons. These customers can be affected by
changes in economic, competitive or other factors. The Company makes substantial
sales to relatively few, large customers. Credit limits, ongoing credit
evaluations, and account monitoring procedures are utilized to minimize the risk
of loss. Collateral is generally not required.
USE OF ESTIMATES AND ASSUMPTIONS--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, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company's consolidated balance
sheets include the following financial instruments: short-term investment, trade
accounts receivable, trade accounts payable and long-term debt. The Company
considers the carrying amounts in the financial statements to approximate fair
value of these financial instruments due to the relatively short period of time
between the origination of the instruments and their expected realization or the
interest rates which approximate current market rates.
MAJOR CUSTOMERS--During fiscal years 1995, 1996 and 1997, two customers
accounted for approximately 49%, 38% and 35%, respectively, of revenues. A
decision by a significant customer to decrease the amount purchased from the
Company or to cease carrying the Company's products could have a material effect
on the Company's financial condition and results of operations.
RESEARCH AND DEVELOPMENT COSTS--Research and development costs are expensed
when incurred. Included in general and administrative expenses for the fiscal
years 1995, 1996 and 1997 is approximately
F-16
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$159,000, $191,000 and $298,000, respectively, of research and development costs
for the development and improvement of the Company's products.
RECLASSIFICATIONS--Certain reclassifications have been made to the 1996
financial statements to conform with the 1997 presentation.
NET INCOME (LOSS) PER SHARE--The Company has adopted SFAS No. 128, EARNINGS
PER SHARE, which replaces the presentation of "primary" earnings per share with
"basic" earnings per share and the presentation of "fully diluted" earnings per
share with "diluted" earnings per share. All previously reported earnings per
share amounts have been restated based on the provisions of the new standard.
Basic earnings per share are based upon the weighted average number of common
shares outstanding. Diluted earnings per share amounts are based upon the
weighted average number of common and common equivalent shares for each period
presented. Common equivalent shares include stock options assuming conversion
under the treasury stock method. Diluted earnings per share have not been
presented in the accompanying financial statements because the effect was either
antidilutive or the same as basic earnings per share.
RECENTLY ISSUED ACCOUNTING STANDARDS--For fiscal year beginning after
December 15, 1997, the Company will adopt SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION. The Company is reviewing the impact of such accounting
pronouncements on its financial statements.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Trade accounts receivable............................................... $ 16,753 $ 17,528
Less allowance for doubtful accounts.................................... (338) (209)
--------- ---------
$ 16,415 $ 17,319
--------- ---------
--------- ---------
</TABLE>
4. INVENTORIES
Inventories consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Raw materials........................................................... $ 8,430 $ 9,621
Finished goods.......................................................... 3,276 3,511
--------- ---------
11,706 13,132
Less reserve for excess and obsolete inventories........................ (1,563) (1,007)
--------- ---------
$ 10,143 $ 12,125
--------- ---------
--------- ---------
</TABLE>
F-17
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Land.................................................................... $ 158 $ 158
Building................................................................ 2,227 2,230
Equipment............................................................... 9,062 9,716
Leasehold improvements.................................................. 131 345
Furniture and fixtures.................................................. 250 298
Construction in progress................................................ 332 819
Computer equipment...................................................... 396 476
--------- ---------
12,556 14,042
Less accumulated depreciation and amortization.......................... (2,465) (3,854)
--------- ---------
$ 10,091 $ 10,188
--------- ---------
--------- ---------
</TABLE>
6. OTHER INTANGIBLE ASSETS
Other intangible assets consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred financing costs................................................. $ 3,313 $ 1,111
Organizational costs..................................................... 1,520 1,537
Consolidation costs...................................................... 26
Other intangible assets.................................................. 236 259
Lease acquisition costs.................................................. 125 125
--------- ---------
5,194 3,058
Less accumulated amortization............................................ (1,973) (1,286)
--------- ---------
$ 3,221 $ 1,772
--------- ---------
--------- ---------
</TABLE>
F-18
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
7. INCOME TAXES
The provision for income taxes consists of the following for the years ended
December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal............................................................. $ -- $ 60 $ 188
State............................................................... 1 8 43
--------- --------- ---------
1 68 231
Deferred:
Federal............................................................. (74) 211 (74)
State............................................................... (281) 17 17
--------- --------- ---------
(355) 228 (57)
Benefit applied to reduce goodwill.................................... 394 394 394
--------- --------- ---------
Provision for income taxes............................................ $ 40 $ 690 $ 568
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation between the provision for income taxes, as required by
applying the federal statutory rate of 35% to that included in the financial
statements, is as follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
------ --------- ----------
<S> <C> <C> <C>
Provision for income taxes at
federal statutory rate........... 35.0% 35.0% 35.0%
State income taxes, net of federal
benefit.......................... (160.4)% (2.7)% 56.8%
Change in valuation allowance...... 41.8% 4.9%
Goodwill........................... 125.1% 10.4% 362.2%
Meals and entertainment............ 16.2%
Officer's life insurance........... 12.8%
Other permanent differences........ 2.0% 0.2% 23.9%
------ --------- ----------
43.5% 47.8% 506.9%
------ --------- ----------
------ --------- ----------
</TABLE>
F-19
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
7. INCOME TAXES (CONTINUED)
Deferred taxes are recorded based upon the differences between the financial
statement and tax bases of assets and liabilities. Temporary differences which
give rise to deferred income tax assets and liabilities are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryover........................................... $ 951 $ 2,037
Allowance for doubtful accounts........................................ 144 90
Accrued liabilities.................................................... 164 250
Inventory capitalization............................................... 98 98
Inventory reserve...................................................... 476 226
Contamination reserve.................................................. 50 50
Goodwill............................................................... 3,193 3,066
Deferred acquisition costs............................................. 53 53
California manufacturer credits........................................ 79 92
Charitable contributions............................................... 28
AMT tax credits........................................................ 12
--------- ---------
Total gross deferred tax assets...................................... 5,220 5,990
Deferred tax liabilities:
Property and equipment................................................. (1,096) (1,321)
Franchise taxes........................................................ (102) (130)
AMT tax credits........................................................
--------- ---------
Total deferred tax liabilities....................................... (1,198) (1,451)
Valuation allowance...................................................... (3,149) (3,149)
--------- ---------
Net deferred tax assets.............................................. $ 873 $ 1,390
--------- ---------
--------- ---------
</TABLE>
At December 31, 1997, the Company had a federal net operating loss
carryforward of $5,625,000 that expires from 2010 through 2012 and a California
net operating loss carryforward of $1,341,000 that expires in 2002, except for
federal and California losses of approximately $900,000 and $414,000,
respectively. The federal and California loss carryforwards can only be utilized
by the subsidiary generating the losses. In addition, the Company has a
California manufacturer credit carryover of $92,000 that expires in 2004.
As a result of the purchase of ASC's assets, the purchase price assigned to
goodwill for tax purposes exceeded the goodwill recorded for financial reporting
by approximately $6,015,173 at December 31, 1997. The tax benefit of this excess
is being recognized when realized on the tax return by a corresponding reduction
to financial reporting goodwill as required by SFAS No. 109.
F-20
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
8. LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Senior term loan to a financial institution, principal due quarterly
plus interest through June 30, 2004................................... $ -- $ 19,750
Senior term loan to a financial institution, principal due quarterly
plus interest through February 14, 2001............................... 14,188 --
Senior revolving loans to financial institution with various
maturities............................................................ 12,516 10,441
Senior subordinated debt................................................ 12,000 6,000
--------- ---------
Total long-term debt................................................ 38,704 36,191
Current maturities...................................................... (2,688) (1,600)
--------- ---------
Long-term debt, net of current maturities............................... $ 36,016 $ 34,591
--------- ---------
--------- ---------
</TABLE>
SENIOR TERM LOAN--On June 30, 1997, the Company entered into a credit
agreement with a financial institution, in which it borrowed $11,000,000 under
Term Loan A and $9,500,000 under Term Loan B. As of December 31, 1997, the
Company had $19,750,000 outstanding under these term loans. The new financing
was used to pay down the existing senior term and senior revolving loans.
Deferred financing costs of $1,693,000 associated with such existing debt was
written off in 1997 and reflected as an extraordinary item in the accompanying
financial statements, net of tax. The term loans will be repaid with scheduled
quarterly installments of varying amounts through June 30, 2004. Amounts
borrowed under the term loans bear interest as follows: (a) if a base rate loan,
then at the sum of the base rate plus .75% per annum for Term Loan A and 1.25%
per annum for Term Loan B, and (b) if a LIBOR rate loan, then at the sum of the
LIBOR rate plus 3.0% per annum for Term Loan A and 3.5% per annum for Term Loan
B. The index rate is selected by the Company initially and may be changed from
time to time. As part of this credit agreement, this Company also obtained a
revolving loan described below.
All borrowings under the credit agreement are collateralized by
substantially all assets and capital stock of OSG. The agreement contains
covenants which, among other things, require OSG to achieve a specified level of
earnings and maintain a minimum interest coverage ratio. In addition, the
Company is restricted from paying dividends and selling certain assets. The
Company was in compliance with all covenants as of December 31, 1997.
As of December 31, 1996, the Company had a term loan of $9,187,500 payable
to a financial institution. Such loan was collateralized by substantially all
assets of Aerosol Services Company (ASC). The Company was required to make
scheduled quarterly installment payments of varying amounts through February 14,
2001. This loan bore interest at the prime rate plus 1.75% per annum (10% at
December 31, 1996).
On September 30, 1996, the Company entered into a loan agreement with a
financial institution. Such loan was collateralized by substantially all assets
of Piedmont. As of December 31, 1996, the balance on this loan was $5,000,000.
This loan bore interest as follows: (a) if a base rate loan, then at the sum of
the
F-21
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
8. LONG-TERM DEBT (CONTINUED)
base rate plus 1.0% per annum (9.25% at December 31, 1996); and (b) if a LIBOR
rate loan, then at the sum of the LIBOR rate plus 3.0% per annum (8.5% at
December 31, 1996). The index rate was selected by the Company initially at the
date of borrowing.
SENIOR REVOLVING LOANS--As of December 31, 1997, the Company had a senior
revolving loan for maximum borrowings of up to $18,000,000 based on 65% of
eligible inventory plus 85% of eligible accounts receivable. The balance on this
loan was $10,441,000 as of December 31, 1997. Amounts due under the revolving
loan bear interest as follows: (a) if a base rate loan, then at the sum of the
base rate plus .75% per annum; and (b) if a LIBOR rate loan, then at the sum of
the LIBOR rate plus 3.05 per annum.
As of December 31, 1996, the Company had a $12,000,000 revolving credit
facility available until February 14, 2001. Amounts borrowed under the credit
facility bore interest as follows: (a) if a base rate loan, then at the sum of
the base rate plus 1.75% per annum (10% at December 31, 1996); and (b) if a
LIBOR rate loan, then at the sum of the LIBOR rate plus 3.5% per annum (9% at
December 31, 1996). The index rate was selected by the Company initially at the
date of borrowing.
The Company also had a $5,000,000 revolving credit facility available until
October 1, 2001, which was collateralized by substantially all assets of
Piedmont. Amounts borrowed under the credit facility bore interest as follows:
(a) if a base rate loan, then at the sum of the base rate plus 0.5% per annum
(8.75% at December 31, 1996); and (b) if a LIBOR rate loan, then at the sum of
the LIBOR rate plus 2.5% per annum (8.0% at December 31, 1996). The index rate
was selected by the Company initially at the date of borrowing.
SENIOR SUBORDINATED DEBT--On January 30, 1997, amounts owed to London
Pacific Life were repaid in full. In addition, the warrants to purchase 19,263
shares of common stock issued with the debentures were canceled.
Effective June 30, 1997, the Company renegotiated its senior subordinated
debt of $6,000,000 owed to Chase Manhattan Bank. Under the terms of the new
agreement, the principal will be repaid in one lump sum on June 30, 2005. The
interest rate will remain at 12% per annum. The Company was in compliance with
all senior subordinated debt covenants as of December 31, 1997.
In conjunction with the June 30, 1997 financing, OSG issued warrants to a
lender in exchange for 62,668 shares it held of the Company's common stock. The
value assigned to the warrants was the amount previously invested by the lender
for the common stock. The warrants allow the holder to purchase 80,883 shares of
its common stock at a price of $0.01 per share, exercisable any time after June
30, 2002. The warrants expire on June 30, 2007. The Company may not call the
warrants prior to June 30, 2003. Thereafter, the Company may from time to time
call all of the outstanding warrants at a call price equal to the fair market
value of a share of common stock as of the call date less the exercise price in
effect on the date which the call price is paid.
As of December 31, 1996, the Company had senior subordinated debt which was
unsecured and consisted of term loans in the amount of $6,000,000 to London
Pacific Life and $6,000,000 to Chase Manhattan Bank, which bore interest at the
rate of 12% per annum.
F-22
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
8. LONG-TERM DEBT (CONTINUED)
REFINANCING--Subsequent to December 31, 1997, the Company refinanced all of
its existing indebtedness as part of the acquisition of Kolmar (Note 14).
9. REDEEMABLE PREFERRED STOCK
As of December 31, 1996, the Company had authorized and issued 30,000 shares
of Redeemable preferred stock with a par value of $.001 per share and a
liquidation preference of $100 per share, plus an amount equal to all accrued
and unpaid dividends. The holders of Redeemable preferred stock were entitled to
cumulative dividends at a rate of $2.50 per share, per quarter, accruing from
the date of issuance, payable quarterly. If current dividends were not declared
and paid with respect to any dividend payment date, then the holders of the
Redeemable preferred stock were entitled to receive an increased dividend in
cash equal to $3.25 per share for the first undeclared dividend. Subsequently,
the amount of the unpaid dividend shall increase by 2.5% or 3.25% of the
liquidation preference per quarter, depending on whether subsequent dividend
payments were made.
Upon the merger of ASHC and ACHC (Note 1), the Redeemable preferred stock
discussed in the preceding paragraph was canceled and 3,750 shares of Series A
and 26,250 shares of Series B Redeemable preferred stock were issued to the
holders of the canceled shares, with a par value of $.001 per share.
The holders of Series A preferred stock are entitled to noncumulative
dividends at a rate of $2.50 per share, per quarter, accruing from the date of
issuance, payable quarterly. If current dividends are not declared and paid with
respect to any dividend payment date, then the holders of the Series A preferred
stock are entitled to receive an increased cumulative dividend in cash equal to
$3.25 per share for the first dividend period for which a dividend was not
declared. Subsequently, the amount of the unpaid dividend shall increase by 2.5%
or 3.25% of the liquidation preference per quarter, depending on whether
subsequent dividend payments are made. The holders of Series B preferred stock
are entitled to cumulative dividends at a rate of $2.00 per share, per quarter,
accruing from June 30, 1997, payable quarterly. The Series B dividends shall
accrue and be cumulative whether or not they have been declared.
At any time after June 30, 2000, the Company may, at the option of the Board
of Directors, redeem all or part of the outstanding shares of the Series A and
Series B preferred stock at a redemption price of $100.00 and $145.97 per share,
respectively, plus an amount equal to all accrued and unpaid dividends. The
Company is required to redeem all outstanding shares on the earlier of June 30,
2006, an initial public offering of the Company's common stock or a liquidation,
dissolution or winding up of the Company. Holders of Series A and Series B
preferred stock have a liquidation preference of $100.00 and $145.97 per share,
respectively, plus an amount equal to all accrued and unpaid dividends. Except
as required by law, the holders of Series A and Series B preferred stock are not
entitled to vote on any matters.
As of December 31, 1996 and 1997, cumulative and undeclared dividends in
arrears amounted to $1,118,000 and $53,000, respectively. The difference between
the original value of the preferred stock and the redemption value, plus accrued
dividends, is being accreted annually as an increase to the value of the
preferred stock and a reduction in retained earnings.
10. COMMON STOCK WARRANTS
On February 14, 1994, in connection with obtaining the subordinated debt
discussed in Note 8, 1,000 common stock warrants were issued which were
initially exercisable for 19,263 shares of common stock of
F-23
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
10. COMMON STOCK WARRANTS (CONTINUED)
the Company at a price of $0.01 per share, exercisable any time after issuance
and subject to an anti-dilution adjustment. On January 30, 1997, in conjunction
with the repayment of the subordinated debenture (Note 8), these warrants were
canceled.
11. RELATED-PARTY TRANSACTIONS
The Company leases its plant facility, two adjacent warehouses and land from
stockholders of the Company and from a partnership of three of the Company's
stockholders. Lease payments for these facilities and land leases were $882,000,
$882,000 and $895,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
Various manufacturing and data processing equipment is also leased from a
partnership of two of the Company's stockholders. Lease payments for these
equipment leases for the years ended December 31, 1995, 1996 and 1997 were
$139,000, $106,000 and $106,000, respectively.
The Company recorded sales to affiliated companies, which are wholly-owned
by two of the Company's stockholders, for the years ended December 31, 1995,
1996 and 1997 in the amount of $100,000, $119,000 and $243,000, respectively. At
December 31, 1995, 1996 and 1997, the Company had $47,000, $41,000 and $163,000,
respectively, in affiliated company accounts receivable, which are included in
trade accounts receivable.
The Company has a management agreement with a stockholder for managing
operations of OSG. Such management fees were $100,000, $119,000 and $175,000 for
the years ended December 31, 1995, 1996 and 1997, respectively.
12. PROFIT-SHARING PLANS
The Company has profit-sharing plans for employees of ASC and Piedmont.
Contributions to the plan are at the discretion of the Board of Directors.
During December 31, 1995, 1996 and 1997, the Company contributed $50,000,
$59,000 and $85,000 to these plans.
13. COMMITMENTS AND CONTINGENCIES
LEASES--The Company leases warehouse and office space under operating
leases. Each lease is subject to an upward annual rental adjustment based upon
the percentage change in the Consumer Price Index. The Company is responsible
for insurance and property taxes on the facilities.
The Company has equipment under operating leases having terms from 3 to 10
years.
Total rent expense on operating leases for the years ended December 31,
1995, 1996 and 1997 was $1,027,000, $1,134,000 and $1,383,000, respectively.
F-24
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Minimum annual rentals and lease payments in the aggregate are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- -------------------------------------------------------------------------------
<S> <C>
1998......................................................................... $ 1,407,000
1999......................................................................... 1,156,000
2000......................................................................... 987,000
2001......................................................................... 936,000
2002......................................................................... 910,000
Thereafter................................................................... 7,537,000
-------------
$ 12,933,000
-------------
-------------
</TABLE>
SELF-INSURANCE PROGRAMS--The Company participates in a self-insured group
health program for employees of Piedmont, whereby the first $50,000 of claims
for each employee will be paid by the Company. The Company also participates in
a self-insured workers' compensation program for employees of Piedmont, whereby
the Company will pay the first $100,000 per claim. The Company has accrued
$100,000 and $279,000 as of December 31, 1996 and 1997, respectively, for unpaid
claims.
PRODUCT LIABILITY INSURANCE--The Company maintains product liability
insurance which provides coverage in the amount of $51 million per occurrence
(above a $25,000 per occurrence self-insured retention) and $52 million in the
aggregate (above a $250,000 annual aggregate self-insured retention). A product
liability claim that results in a judgment or settlement in excess of the
Company's insurance coverage could have a material adverse effect on the
Company's business, results of operations or financial condition.
ENVIRONMENTAL REGULATION AND COMPLIANCE--The Company's operations and
properties are subject to extensive federal, state, local and foreign
environmental laws and regulations concerning, among other things, emissions to
air, discharges to water, the remediation of contaminated soil and groundwater,
and the generation, handling, storage, transportation, treatment and disposal of
waste and other materials (collectively, the Environmental Laws). Based upon the
Company's experience to date, as well as certain indemnification agreements
obtained in connection with the Company's acquisitions, the Company believes
that the future cost of compliance with existing Environmental Laws and its
liability for identified environmental claims will not have a material adverse
effect on the Company's business, results of operations or financial condition.
EMPLOYEE AGREEMENTS--Effective December 31, 1997, the Company terminated the
employment of two shareholders upon the closing of the Kolmar Acquisition (Note
14). The shareholders will receive lump sum payments totaling $553,700, plus
benefits.
14. SUBSEQUENT EVENTS
As of January 1, 1998, the Company acquired from CCL Industries, all of the
outstanding shares of Kolmar Laboratories, Inc. and the net assets of Kolmar
Canada Inc., (collectively referred to as the Kolmar Group) for $78.0 million,
subject to certain post-closing adjustments. The acquisition has been treated as
a purchase for accounting purposes. Accordingly, the assets acquired and
liabilities assumed
F-25
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
14. SUBSEQUENT EVENTS (CONTINUED)
have been recorded at their estimated fair values at the date of acquisition.
Assuming the Kolmar Group acquisition had occurred on January 1, 1997, pro forma
net revenue and net loss for OSG for the year ended December 31, 1997 would have
been approximately $213,090,000 and $847,000, respectively.
The Kolmar Group designs, manufactures, contracts for manufacture and sells
a variety of cosmetics, creams and lotions, and fragrances to retailers and
wholesale distributors principally in the United States, Canada, Mexico and
Australia.
In conjunction with the Kolmar Group acquisition, the Company refinanced all
of its existing indebtedness. Deferred financing costs of $1,111,000 associated
with this indebtedness was written off. The purchase price and the repayment of
existing debt, plus $7.4 million of related fees and expenses were financed
through $30.0 million of borrowings under a senior secured credit facility,
$70.0 million of borrowings under a senior subordinated credit agreement, and
the issuance of 2.093 million shares of the Company's common stock to existing
shareholders of the Company. Loans under the senior secured credit facility and
the senior subordinated credit agreement bore interest at rates of approximately
9.25% and 11.6%, respectively.
On March 3, 1998, the Company repaid indebtedness incurred in conjunction
with the Kolmar Group acquisition, using the proceeds from the issuance of $105
million senior subordinated notes which are due in 2006. Interest on the notes
will accrue from their date of original issuance and will be payable semi-
annually in arrears on March 1 and September 1 of each year, commencing
September 1, 1998, at the rate of 10.875% per annum. The notes are redeemable in
whole or in part, at the option of the Company, on or after March 1, 2003 at the
redemption price of 110.875% of the aggregate principal amount to be redeemed
plus accrued and unpaid interest to the redemption date. In addition, at any
time on or prior to March 1, 2001, the Company, at its option, may redeem up to
35% of the aggregate principal amount of the notes originally issued with the
net cash proceeds of one or more equity offerings at the redemption price plus
accrued and unpaid interest to the redemption date; provided that at least 65%
of the aggregate principal amount of the notes originally issued remains
outstanding immediately after such redemption. The notes are unsecured senior
subordinated obligations of the Company and will be subordinated in right of
payment to all existing and future senior debt of the Company.
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Outsourcing Services Group Inc.:
We have audited the accompanying combined balance sheets of Kolmar Group as
of December 31, 1997 and 1996 and the related combined statements of operations,
stockholder's equity (deficit) and cash flows for the years ended December 31,
1997 and 1996 and December 30, 1995. These combined financial statements are the
responsibility of Outsourcing Services Group Inc.'s management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Kolmar Group as of
December 31, 1997 and 1996 and the results of their operations and their cash
flows for the years ended December 31, 1997 and 1996 and December 30, 1995, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
May 28, 1998
F-27
<PAGE>
KOLMAR GROUP
COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................................... $ 5,366 $ 9,555
Accounts receivable, net of allowances of $1,012 in 1997 and $1,508 in 1996........ 13,720 17,338
Inventories, net................................................................... 15,685 12,631
Prepaid expenses and other receivables............................................. 1,485 1,629
Deferred income taxes.............................................................. 209 --
------------ ------------
Total current assets............................................................. 36,465 41,153
Property, plant and equipment, net................................................... 18,992 19,253
Long-term receivables................................................................ 8,250 8,250
Other assets, net.................................................................... 4,265 3,827
Deferred income taxes................................................................ -- 372
------------ ------------
Total assets..................................................................... $ 67,972 $ 72,855
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Short-term loans, due to affiliate................................................. $ 26,622 $ 34,483
Note payable....................................................................... 2,197 --
Trade accounts payable............................................................. 11,512 9,199
Accrued payroll and other compensation............................................. 3,257 2,252
Accrued interest................................................................... 309 358
Refundable trade discount.......................................................... 14 11
Other liabilities.................................................................. 2,732 1,614
Accounts payable due to affiliate.................................................. 316 90
Taxes payable...................................................................... 1,400 1,456
------------ ------------
Total current liabilities........................................................ 48,359 49,463
------------ ------------
Long-term debt, due to affiliate..................................................... 20,305 22,637
Deferred income taxes................................................................ 209 506
Environmental reserve................................................................ 14,500 14,500
Other long-term obligations.......................................................... 3,774 3,159
------------ ------------
Total liabilities................................................................ 87,147 90,265
------------ ------------
Stockholder's deficit:
Contributed capital................................................................ 17,000 17,000
Accumulated deficit................................................................ (31,709) (28,311)
Equity adjustment from foreign currency translations............................... (4,466) (6,099)
------------ ------------
Total stockholder's deficit...................................................... (19,175) (17,410)
------------ ------------
Total liabilities and stockholder's deficit...................................... $ 67,972 $ 72,855
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to combined financial statements.
F-28
<PAGE>
KOLMAR GROUP
COMBINED STATEMENTS OF OPERATIONS
DECEMBER 30, 1995 AND DECEMBER 31, 1996 AND 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1996 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales................................................... $ 74,307 $ 103,316 $ 103,141
Cost of goods sold.......................................... 60,306 83,255 86,173
------- -------- --------
Gross profit............................................ 14,001 20,061 16,968
Operating expenses:
Selling, general and administrative....................... 9,160 10,151 8,111
------- -------- --------
Income from operations.................................... 4,841 9,910 8,857
------- -------- --------
Interest income (expense):
Interest income, net........................................ (100) (100) 77
Interest expense--Affiliate................................. (3,033) (3,597) (4,241)
------- -------- --------
(3,133) (3,697) (4,164)
------- -------- --------
Income before income taxes.............................. 1,708 6,213 4,693
Income taxes................................................ 666 1,142 1,295
------- -------- --------
Net income.............................................. $ 1,042 $ 5,071 $ 3,398
------- -------- --------
------- -------- --------
</TABLE>
See accompanying notes to combined financial statements.
F-29
<PAGE>
KOLMAR GROUP
COMBINED STATEMENTS OF STOCKHOLDER'S DEFICIT
YEARS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1996 AND 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT FROM
FOREIGN
CONTRIBUTED ACCUMULATED CURRENCY
CAPITAL DEFICIT TRANSLATIONS TOTAL
----------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Balance December 31, 1994................................ $ 17,000 $ (37,822) $ (3,341) $ (24,163)
Net income............................................... -- 1,042 -- 1,042
Equity adjustment from foreign currency translations..... -- -- (1,333) (1,333)
----------- ------------ ------- ----------
Balance December 30, 1995................................ 17,000 (36,780) (4,674) (24,454)
Net income............................................... -- 5,071 -- 5,071
Equity adjustment from foreign currency translations..... -- -- 208 208
----------- ------------ ------- ----------
Balance December 31, 1996................................ 17,000 (31,709) (4,466) (19,175)
Net income............................................... -- 3,398 -- 3,398
Equity adjustment from foreign currency translations..... -- -- (1,633) (1,633)
----------- ------------ ------- ----------
Balance December 31, 1997................................ $ 17,000 $ (28,311) $ (6,099) $ (17,410)
----------- ------------ ------- ----------
----------- ------------ ------- ----------
</TABLE>
See accompanying notes to combined financial statements.
F-30
<PAGE>
KOLMAR GROUP
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1996 AND 1997
($ IN THOUSANDS)
REPRESENTS INCREASES (DECREASES) IN CASH
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 1,042 $ 5,071 $ 3,398
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization.................................... 2,103 2,268 2,757
Gain on disposal of property and equipment....................... (159) (28) (50)
Deferred income taxes............................................ -- -- 134
Changes in assets and liabilities, net of net assets acquired:
Accounts receivable............................................ (2,707) (868) (3,618)
Inventories.................................................... (1,661) (6,076) 3,054
Prepaid expenses and other receivables......................... (1,438) 3,357 (144)
Accounts payable and accrued expenses.......................... (8,037) 5,574 (4,390)
Accounts payable due to affiliate.............................. (1,061) 126 (226)
Taxes payable.................................................. 278 451 56
Other.......................................................... 2,685 (5,360) (2,015)
------------ ------------ -------------
Net cash provided by (used in) operating activities.......... (8,955) 4,515 (1,044)
------------ ------------ -------------
Cash flows used in investing activities:
Acquisitions of business, net of cash acquired..................... -- (5,800) --
Acquisition of property and equipment.............................. (3,559) (3,836) (2,866)
Proceeds from disposal of property and equipment................... 1,482 60 103
------------ ------------ -------------
Net cash used in investing activities........................ (2,077) (9,576) (2,763)
------------ ------------ -------------
Cash flows from financing activities:
Proceeds from short-term loans, affiliate.......................... 10,724 7,031 7,861
Proceeds/repayment of notes payable................................ 880 366 (2,197)
Proceeds from long-term borrowings, affiliate...................... -- -- 2,332
------------ ------------ -------------
Net cash provided by financing activities.................... 11,604 7,397 7,996
------------ ------------ -------------
Net change in cash........................................... 572 2,336 4,189
Cash at beginning of year............................................ 2,458 3,030 5,366
------------ ------------ -------------
Cash at end of year.................................................. $ 3,030 $ 5,366 $ 9,555
------------ ------------ -------------
------------ ------------ -------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest......................................................... $ 3,092 $ 3,866 $ 4,228
------------ ------------ -------------
------------ ------------ -------------
Taxes............................................................ $ 311 $ 454 $ 357
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
See accompanying notes to combined financial statements.
F-31
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
($ IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of (1)
Kolmar Laboratories, Inc. (Kolmar), a wholly-owned subsidiary of CCL Industries
Corporation, a Delaware corporation which in turn is a wholly-owned indirect
subsidiary of CCL Industries Inc. (CCL), a corporation incorporated under the
laws of Canada (2) Kolmar's wholly-owned subsidiaries: Kolmar de Mexico, S.A. de
C.V., Kolmar (Aust.) Pty. Limited, Designed Cosmetics, Inc. and (3), Kolmar
Canada, a division of CCL, collectively referred to as "Kolmar Group" or "the
Company".
As of January 1, 1998, CCL Industries completed a transaction selling all
issued and outstanding shares of Kolmar and Kolmar's wholly-owned subsidiaries
and substantially all of the assets of Kolmar Canada to Outsourcing Services
Group, Inc. (OSG) for $78,000, subject to certain post-closing adjustments
(hereinafter referred to as the "Acquisition"). The presentation of these
combined financial statements reflect Kolmar Group's balances prior to the
acquisition on a historical basis. The Acquisition agreement contains
representations and warranties, (including those made with respect to taxes)
which for the most part shall survive until the earlier of (i) July 8, 1999 or
(ii) delivery of Kolmar's audited financial statements for the year ending
December 31, 1998. Certain representations and warranties made with respect to
compliance with environmental laws survive until January 8, 2003. CCL and CCL
Industries agreed to indemnify the Company for losses resulting from
inaccuracies or breaches of representations and warranties and breaches of
certain covenants contained in the agreement. Subject to a $750 minimum
threshold and certain environmental liabilities subject to a $250 minimum
threshold, CCL and CCL Industries' liability for indemnification is limited to
$6.5 million (this limit is $12.0 million with respect to losses resulting from
environmental matters related to certain facilities and there is no limit with
respect to losses from environmental matters related to certain other
facilities). Pursuant to the terms of the Acquisition agreement, OSG is required
to indemnify CCL and CCL Industries for losses resulting from breaches or
inaccuracies of its representations and warranties and for losses arising from
OSG's conduct of Kolmar's business, its real property and environmental matters,
to the extent that the losses relate to actions or occurrences after the closing
of the Acquisition.
The Company designs, manufactures, contracts for manufacture and sells a
variety of cosmetics, creams and lotions, and fragrances to retailers and
wholesale distributors principally in the United States, Canada, Mexico and
Australia.
Common stock of the Company has no par value and consists of 51,070 shares
authorized and four shares issued and outstanding at December 31, 1996 and 1997.
Preferred stock of the Company has a par value of $100 and consists of 500
shares authorized and no shares issued and outstanding at December 31, 1996 and
1997.
All material intercompany balances and transactions between and among Kolmar
Group have been eliminated in combination.
ACQUISITIONS
On January 4, 1996, Kolmar Laboratories, Inc. acquired the assets and
certain liabilities of Imperial Cosmetic Services, Inc. for approximately
$5,800. The acquisition was accounted for as a purchase. The excess of the
purchase price above the fair value of the net assets acquired of approximately
$3,982, is
F-32
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
being amortized over 20 years. At December 31, 1996 and 1997 the related
accumulated amortization was approximately $205 and $510, respectively.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the LIFO method for all U.S. inventories. All other inventories are stated
at weighted average cost or FIFO. At December 31, 1996 and 1997, approximately
48% and 70%, respectively, of the Company's inventory value was determined using
the LIFO method. The effect of LIFO as of December 31, 1996 and 1997 was an
increase to inventory of $41 and $66, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Estimated useful lives
range from 4 to 40 years. Machinery and equipment under capital leases are
stated at the present value of the minimum lease payments at the inception of
the lease.
Depreciation is calculated principally on the straight-line method over the
estimated useful lives of the assets. Machinery and equipment held under capital
leases and leasehold improvements are amortized straight-line over the shorter
of the lease term or estimated useful life of the asset.
Expenditures for maintenance and repairs are charged to expense, and
renewals and betterments are capitalized. Upon sale or retirement, the cost of
the asset and the related accumulated depreciation are removed from the
accounts, and the resulting gain or loss is included in the results of
operations.
INCOME TAXES
Kolmar Group's U.S. operations were included in CCL Industries Corporation
U.S. Federal consolidated income tax returns. Kolmar filed separate state income
tax returns with the exception of California, where CCL Industries Corporation
files a combined return including Kolmar. Kolmar Group's Canadian operations
were included in CCL's Canadian income tax returns. The provision for income
taxes is presented as if the Kolmar Group had been a separate taxpayer. Deferred
taxes have been recorded in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes". Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
CONCENTRATION OF CREDIT RISK
Customers are geographically disbursed throughout North America, Mexico and
Australia. The Company had a significant customer that accounted for 16%, 13%
and 19% of net sales in 1995, 1996 and 1997.
F-33
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
Management of Kolmar Group has made estimates and assumptions relating to
the reporting of assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION
Realized foreign currency exchange gains or losses, which result from the
settlement of accounts receivable or accounts payable in currencies other than
U.S. dollars, are credited or charged to operations. Unrealized gains or losses
on foreign currency exchange are insignificant.
The balance sheets of foreign affiliates are translated into U.S. dollars at
the exchange rates in effect on the last day of the reporting period. The
statements of operations of foreign affiliates are translated into U.S. dollars
at the average exchange rate effective for the entire period. The differences
from historical exchange rates are reflected in stockholder's equity as an
adjustment for foreign currency translations.
The Company's Mexican operations were deemed to be operating in a highly
inflationary economy for 1997. As a result, the U.S. dollar is the functional
currency. Monetary items have been translated using current exchange rates and
all other balance sheet items were remeasured at historical exchange rates. Any
gains and losses from remeasurement are included in earnings.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" as of January 1, 1996, which had no material effect on
the combined financial statements. The Company estimates the future undiscounted
cash flows from long-lived assets to determine if there is an impairment in the
carrying value of these assets. Measurement of an impairment loss is determined
by reducing the carrying value of assets to fair value. Assets to be disposed of
by sale or abandonment, as part of a plan committed to and approved by
management, are recorded at the lower of the carrying value or the fair value
less the cost to sell.
ENVIRONMENTAL CLEANUP MATTERS
The Company expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no current
or future benefit is discernible. The Company determines its liability on a site
by site basis and records a liability at the time when it is probable and can be
reasonably estimated. The Company's estimated liability is reduced to reflect
the anticipated participation of other potentially responsible parties in those
instances where it is probable that such parties are legally responsible and
financially capable of paying their respective shares of the relevant costs.
F-34
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(2) INVENTORIES
Inventories at December 31, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Raw materials.................................................... 8,677 $ 7,230
Work-in-process.................................................. 4,824 4,285
Finished goods................................................... 2,184 1,116
------------ ------------
15,685 $ 12,631
------------ ------------
------------ ------------
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
Major classifications of property, plant and equipment at December 31, 1996
and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ -------------
<S> <C> <C>
Land............................................................ 854 $ 842
Buildings....................................................... 14,278 14,773
Machinery and equipment......................................... 18,302 18,277
Furniture and fixtures.......................................... 2,769 3,300
Leasehold improvements.......................................... 887 942
Automobiles..................................................... 249 251
------------ -------------
37,339 38,385
Less: accumulated depreciation and amortization................. (18,347) (19,132)
------------ -------------
18,992 $ 19,253
------------ -------------
------------ -------------
</TABLE>
Depreciation and amortization expense was $2,103, $2,063 and $2,552 for the
years ended December 30, 1995 and December 31, 1996 and 1997, respectively.
(4) INDEBTEDNESS
(A) SHORT-TERM DEBT
(i) Due to affiliate
Loans outstanding and due to Affiliate at December 31, 1996 and 1997
amounted to $26,622 and $34,483, respectively, and represent the
cumulative cash funding provided to the Company by CCL. The loans
fund the Company's working capital needs. The rate of interest on the
debt varied monthly based on prime minus 1/2% (effective rate of
7.77% for 1996 and 7.94% for 1997.
(ii) Note payable
During 1996, the Company maintained a note payable with a financial
institution which was due and renewable every twenty-eight days for a
period of one year. The effective interest rate on the note was
6.60%.
F-35
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(4) INDEBTEDNESS
(B) LONG-TERM DEBT
(i) Due to affiliate
Long-term debt due to Affiliate at December 31, 1996 and 1997
amounted to $20,305 and $23,027, respectively. There is no fixed
determinable schedule for the repayment of the debt. The rate of
interest on the debt varied monthly based on Prime minus 1/2%
(effective rate of 7.77% for 1996 and 7.94% for 1997).
On January 9, 1998, prior to the transaction described in note 1, the debt
due to affiliate was contributed as capital.
(5) BENEFIT PLANS
(A) PENSION PLAN
Kolmar Laboratories, Inc. sponsors a noncontributory defined benefit
pension plan for all its employees who have attained 21 years of age and
have completed one year of continuous service. Pension benefits vest after
five years of service and are based on years of service and average
earnings. Contributions to the plan are based on actuarial estimates and
ERISA funding requirements. The plan's assets are invested in a broad range
of securities, including U.S. Treasury Bonds and foreign and U.S. publicly
traded companies. The Company does not fund any non-contributory defined
benefit pension plans outside of the U.S.
The following table sets forth the plan's funded status at December 31,
1996 and September 27, 1997. The accumulated benefit obligation (ABO) is
based on both current compensation levels and service rendered to the date
of measurement, whereas the projected benefit obligation (PBO) adjusts
F-36
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(5) BENEFIT PLANS (CONTINUED)
the ABO for the estimated compensation levels upon which the ultimate
retirement benefits are based. Accrued pension cost is included in accrued
expenses on the combined balance sheets.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
1996 1997
------------ -------------
<S> <C> <C>
Fair value of plan's assets........................... 15,322 $ 17,302
------------ -------------
Actuarial present value of:
ABO, comprising:
Vested benefits................................... 13,135 13,582
Nonvested benefits................................ 91 116
------------ -------------
13,226 13,698
Adjustment for anticipated salary increases......... 2,344 2,450
------------ -------------
PBO................................................. 15,570 16,148
------------ -------------
PBO (less than) or in excess of Plan assets........... 248 (1,154)
Prior service benefit................................. 58 54
Unrecognized net gain................................. 982 2,706
------------ -------------
Accrued pension cost included in accrued
expenses...................................... 1,288 $ 1,606
------------ -------------
------------ -------------
</TABLE>
Assumptions used to develop the net periodic pension cost were:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Discount rates................................................. 8.5% 7.5% 7.5%
Expected long-term rate of return on assets.................... 9.0% 8.0% 8.0%
Rates of increase in compensation levels....................... 5.5% 4.5% 4.5%
</TABLE>
Net periodic pension cost for the twelve months ended December 30, 1995 and
December 31, 1996 and the nine months ended September 27, 1997 included the
following components:
<TABLE>
<CAPTION>
NINE MONTHS
DECEMBER 30, DECEMBER 31, ENDED
1995 1996 SEPTEMBER 27, 1997
------------ ------------ ------------------
<S> <C> <C> <C>
Service cost--benefits earned during the period........ 390 484 $ 369
Interest cost on projected benefit obligation.......... 1,013 1,075 854
Actual return on plan's assets......................... (2,779) (1,505) (2,553)
Actuarial gains deferred for later recognition......... 1,740 407 1,652
Amortization of unrecognized prior service cost........ (4) (4) (4)
------------ ------------ -------
Net periodic pension cost.............................. 360 457 $ 318
------------ ------------ -------
------------ ------------ -------
</TABLE>
For the three months ended December 31, 1997, Kolmar Laboratories, Inc.
charged pension costs of $110 to operations.
F-37
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(5) BENEFIT PLANS (CONTINUED)
(B) 401(K) PLAN
Kolmar Laboratories, Inc. maintains a defined contribution plan (the
Plan) to provide eligible employees with additional income upon retirement.
Under the Plan, employees can contribute up to 20% of their salary through
payroll deductions. Kolmar Laboratories, Inc., at the discretion of the
Board of Directors, matches up to 50% of amounts contributed by the
employees to a maximum of 3% of earnings. The payroll deductions are
considered tax deferred under Section 401(a) of the Internal Revenue Code.
Kolmar Laboratories, Inc.'s contributions to the Plan, including
administrative costs, were $156, $202 and $272 in 1995, 1996 and 1997,
respectively.
(6) INCOME TAXES
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal........................................................ $ -- $ -- $ --
State.......................................................... 49 55 92
Foreign........................................................ 617 1,087 1,069
--------- --------- ---------
666 1,142 1,161
--------- --------- ---------
Deferred:
Federal........................................................ -- -- --
State.......................................................... -- -- --
Foreign........................................................ -- -- 134
--------- --------- ---------
-- -- 134
--------- --------- ---------
666 1,142 $ 1,295
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of the statutory Federal income tax rate and the effective
income tax rate follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Statutory Federal rate........................................... 34.0% 34.0% 34.0%
Meals and entertainment expenses................................. .5 .3 .6
State income tax, net of Federal benefit......................... 1.9 .6 1.3
Foreign taxes.................................................... 8.8 3.9 11.9
Change in valuation allowance.................................... (6.2) (20.4) (20.2)
--------- --------- ---------
Effective tax rate............................................... 39.0% 18.4% 27.6%
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-38
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(6) INCOME TAXES (CONTINUED)
At December 31, 1996 and 1997, the gross deferred tax assets and liabilities
were as follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Reserve for environmental matters...................................... $ 5,800 $ 5,800
Inventory reserve...................................................... 425 394
Vacation pay reserve................................................... 399 310
Net operating loss carryover--U.S...................................... 2,028 1,617
Depreciation........................................................... 955 1,022
Foreign deferred tax assets............................................ 886 1,473
Other.................................................................. 2,760 2,110
Valuation allowance.................................................... (9,338) (8,394)
--------- ---------
Total deferred tax assets.............................................. $ 3,915 $ 4,332
--------- ---------
--------- ---------
Deferred tax liabilities:
Insurance receivable................................................... $ 3,300 $ 3,300
Other.................................................................. 615 1,166
--------- ---------
3,915 4,466
--------- ---------
Net deferred tax liability............................................. -- $ 134
--------- ---------
--------- ---------
</TABLE>
Based upon the Company's history of tax losses in certain tax jurisdictions,
a valuation allowance has been provided to fully reserve its deferred tax assets
in excess of its deferred tax liabilities.
As of December 31, 1997, the Company's U.S. net operating loss (NOL)
carryforward is not available to be utilized on a separate entity basis since
the NOLs were or will be utilized in the CCL Industries Corporation U.S.
consolidated tax returns for 1995, 1996 and 1997. For New York State tax
purposes, the Company has approximately $6.6 million of NOL carryforwards
available to offset future New York State taxable income. These losses will
expire in varying amounts in the years 2003-2010. Future changes in ownership,
as defined by the New York State statute, could limit the amount of NOL
carryforwards used in one year.
In addition, Kolmar has Mexican NOL carryforwards as of December 31, 1997 of
approximately $2,564 and recoverable asset tax credits of $555. These tax
attributes expire in the years 2004-2006. The Company also has Australian NOL
carryforwards as of December 31, 1997 of $128.
(7) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases with unaffiliated third
parties, primarily for office and manufacturing space, warehouse equipment, and
automobiles. These leases generally contain renewal options and require the
Company to pay real estate taxes, utilities and liability insurance.
F-39
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(7) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under all operating leases at December 31,
1997 were as follows:
<TABLE>
<S> <C>
1998........................................................ $ 596
1999........................................................ 574
2000........................................................ 555
2001........................................................ 21
2002........................................................ 16
Thereafter.................................................. --
---------
$ 1,762
---------
---------
</TABLE>
Rent expense for the years ended December 30, 1995 and December 31, 1996 and
1997 was $1,010, $1,253 and $1,115, respectively.
DEFERRED COMPENSATION
The Company has deferred compensation agreements with three former employees
that provide for these individuals to receive monthly payments for various
periods, none of which exceed twenty years. At December 31, 1996 and 1997 the
Company has accrued the present value of the payments which amounted to $1,265
and $1,221, respectively. The amounts are classified in other long-term
obligations.
ENVIRONMENTAL CONTINGENCIES
The Company is subject to loss contingencies resulting from environmental
laws and regulations, which include obligations to remove or remediate the
effects on the environment of the disposal or release of certain wastes and
substances at various sites. The Company has established accruals in current
dollars for those hazardous waste sites where it is probable that a loss has
been incurred and the amount of the loss can reasonably be estimated. The
reliability and precision of the loss estimates are affected by numerous
factors, such as different stages of site evaluation, the allocation of
responsibility among potentially responsible parties and the assertion of
additional claims. The Company adjusts its accruals as new remediation
requirements are defined, as information becomes available permitting reasonable
estimates to be made, and to reflect new and changing facts. The Company also
has established receivables for insurance recoveries (for liabilities on
existing sites) that are probable of collection.
At December 31, 1996 and 1997, the Company had established environmental
remediation accruals in the amount of $14,500.
The Company potentially has minor responsibility for the remediation of four
environmental sites for which accruals have been established. These sites are
well advanced in the investigation and cleanup stage. The Company's
environmental accruals at December 31, 1996 and 1997, included $750 for these
sites. The site with the largest total potential cost to the Company is a
nonoperating site. Of the above accruals, this site accounted for $8,500 at
December 31, 1996 and 1997. At December 31, 1996 and 1997, the Company has a
long-term receivable totaling $8,250 for insurance recoveries on this site which
are probable of collection.
The Company maintains environmental exposure for one other site. To date the
Company has not been named a potentially responsible party for this site but
maintained an accrual of $5,250 as of December 31, 1996 and 1997, based on the
advice of outside counsel, for an estimate of probable
F-40
<PAGE>
KOLMAR GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
(7) COMMITMENTS AND CONTINGENCIES (CONTINUED)
groundwater and soil remediation costs. The Company believes this estimate would
cover the full remediation of the site.
While it is impossible at this time to determine with certainty the ultimate
outcome of the environmental matters referred to in this note, management
believes that adequate provisions have been made for probable losses with
respect thereto and that such ultimate outcome, after provisions therefore, will
not have a material adverse effect on the combined financial position of the
Company, but could have a material effect on combined results of operations in a
given year. It is reasonably possible that changes in estimates of recorded
obligations and related receivables may occur in the near term. Should any
losses be sustained in connection with any of such environmental matters in
excess of provisions therefore, they will be charged to income in the future.
LITIGATION
A claim has been asserted by the U.S. Environmental Protection Agency
against Kolmar Laboratories, Inc. as potentially responsible for the remediation
of a superfund site near Port Jervis, New York. The proceedings remain
administrative only, and are not pending as litigation in any U.S. District
Court. The Company has reserves for any potential liability that may arise out
of this claim and has recorded insurance receivables relating to this claim
which it believes are probable of recovery.
There are certain other legal proceedings and claims pending against Kolmar
Group arising out of the normal course of business in which claims for monetary
damages are asserted.
While it is not feasible to predict the outcome of these legal proceedings
and claims with certainty, management is of the belief that any ultimate
liabilities in excess of reserved amounts will not individually or in the
aggregate have a material adverse effect on the Company's financial position or
results of operations.
F-41
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Piedmont Laboratories, Inc.
Gainesville, Georgia
We have audited the accompanying balance sheet of Piedmont Laboratories,
Inc. as of September 29, 1996, and the related statements of income and retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Piedmont Laboratories, Inc.
as of September 29, 1996, and the results of its operations and cash flows for
the year then ended in conformity with generally accepted accounting principles.
Moore, Colson & Company, P.C.
Marietta, Georgia
November 12, 1996
F-42
<PAGE>
PIEDMONT LABORATORIES, INC.
BALANCE SHEET
SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents (Note 1)................................... $ 27,345
Trade accounts receivable, less allowance for doubtful accounts
of $50,000 (Note 1)........................................... 3,714,729
Advances to officers and other employees........................ 62,760
Current maturities of notes receivable from stockholders (Note
3)............................................................ 465,561
Inventories (Notes 1 and 2)..................................... 2,632,866
Prepaid expenses................................................ 57,268
------------
Total current assets.......................................... 6,960,529
------------
PROPERTY AND EQUIPMENT (Note 1):
Land............................................................ 158,200
Building........................................................ 3,413,961
Equipment....................................................... 8,421,574
Furniture and fixtures.......................................... 534,181
Construction in progress........................................ 169,928
------------
Total......................................................... 12,697,844
Less accumulated depreciation and amortization.................. 7,665,902
------------
Property and equipment--net................................... 5,031,942
------------
OTHER ASSETS:
Notes receivable from stockholders, net of current maturities
(Note 3)...................................................... 1,659,146
Deposits........................................................ 164,598
Intangible assets--net of accumulated amortization (Note 1)..... 96,408
Other........................................................... 6,648
------------
Total other assets............................................ 1,926,800
------------
TOTAL....................................................... $13,919,271
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit (Note 4).................................... $ 290,794
Current maturities of long-term debt (Note 4)................... 479,916
Accounts payable................................................ 3,590,533
Accrued expenses................................................ 605,122
Income taxes payable (Notes 1 and 6)............................ 122,489
------------
Total current liabilities..................................... 5,088,854
------------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities (Note 4).............. 1,097,802
Deferred income taxes (Notes 1 and 6)........................... 301,392
------------
Total long-term liabilities................................... 1,399,194
------------
STOCKHOLDERS' EQUITY:
Common stock, no par value, 1,000,000 shares authorized, 166.67
shares issued and outstanding................................. 1,010,000
Additional paid-in capital...................................... 1,075,000
Retained earnings............................................... 5,346,223
------------
Total stockholders' equity.................................... 7,431,223
------------
TOTAL....................................................... $13,919,271
------------
------------
</TABLE>
See notes to financial statements.
F-43
<PAGE>
PIEDMONT LABORATORIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 29, 1996
<TABLE>
<S> <C>
NET SALES...................................................................... $35,540,541
COST OF GOODS SOLD--MATERIALS.................................................. 19,273,324
----------
NET REVENUE FROM SERVICE FEES.................................................. 16,267,217
COST OF GOODS SOLD--PRODUCTION LABOR AND OVERHEAD.............................. 11,055,596
----------
GROSS PROFIT................................................................... 5,211,621
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................................... 3,100,028
----------
INCOME FROM OPERATIONS......................................................... 2,111,593
OTHER (EXPENSE) INCOME:
Interest expense............................................................. (264,362)
Gain on sale of equipment.................................................... 2,679
Interest income.............................................................. 41,625
----------
Total other, net........................................................... (220,058)
----------
INCOME BEFORE PROVISION FOR INCOME TAXES....................................... 1,891,535
PROVISION FOR INCOME TAXES (Notes 1 and 6)..................................... 739,831
----------
NET INCOME..................................................................... 1,151,704
RETAINED EARNINGS, BEGINNING OF THE YEAR....................................... 4,194,519
----------
RETAINED EARNINGS, END OF THE YEAR............................................. $5,346,223
----------
----------
</TABLE>
See notes to financial statements.
F-44
<PAGE>
PIEDMONT LABORATORIES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 29, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $1,151,704
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 765,103
Provision for doubtful accounts receivable and advances to officers and
other employees........................................................... 1,550
Gain on sale of equipment................................................... (2,679)
Decrease in deferred income taxes........................................... (45,155)
Changes in operating assets and liabilities:
Trade accounts receivable................................................. (1,289,780)
Advances to officers and other employees.................................. 23,385
Inventories............................................................... (571,184)
Prepaid expenses.......................................................... (47,139)
Deposits and other assets................................................. (33,304)
Accounts payable.......................................................... 1,264,154
Accrued expenses.......................................................... (40,259)
Income taxes refundable or payable........................................ 273,486
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................................... 1,449,882
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........................................... (992,313)
Notes receivable from stockholders............................................ (200,000)
Payments received on notes receivable from stockholders....................... 19,302
Increase in intangible assets................................................. (30,184)
Proceeds from sale of equipment............................................... 15,000
----------
NET CASH USED BY INVESTING ACTIVITIES........................................... (1,188,195)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in bank line of credit........................................... 290,794
Principal payments of:
Long-term debt.............................................................. (536,177)
Capital lease obligation.................................................... (2,452)
----------
NET CASH USED BY FINANCING ACTIVITIES........................................... (247,835)
----------
INCREASE IN CASH AND EQUIVALENTS................................................ 13,852
CASH AND EQUIVALENTS, BEGINNING OF THE YEAR..................................... 13,493
----------
CASH AND EQUIVALENTS, END OF THE YEAR........................................... $ 27,345
----------
----------
</TABLE>
See notes to financial statements.
F-45
<PAGE>
PIEDMONT LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 29, 1996
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
The Company is primarily engaged in contract filling of containers with
aerosol and liquid products for customers located throughout North America
with a significant concentration in the southeastern United States.
The Company has elected September 30 as its fiscal year end utilizing a
52/53 week convention.
B. 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,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
C. Accounts Receivable--Allowance for Doubtful Accounts
Bad debts are provided using the allowance for doubtful accounts method
based on historical experience and management's evaluation of outstanding
accounts receivable at the end of each year.
D. Inventories
Inventories are valued at the lower of cost or market using the
first-in, first-out method (Note 2).
E. Property and Equipment
Property and equipment are recorded at cost. When assets are retired, or
otherwise disposed of, the related cost and accumulated depreciation or
amortization are removed from the accounts, and any resulting gain or loss
is reflected in the statement of income. Depreciation and amortization for
financial statement purposes are provided using the straight-line method
over their estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
ESTIMATED LIFE
--------------
<S> <C>
Building...................................................................... 10 - 35 years
Equipment..................................................................... 5 - 10 years
Furniture and fixtures........................................................ 5 - 7 years
</TABLE>
Depreciation for income tax purposes is computed using primarily
accelerated methods as prescribed by Federal tax laws.
F-46
<PAGE>
PIEDMONT LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 29, 1996
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. Intangible Assets
Intangible assets are recorded at cost and amortized using the
straight-line method over their estimated useful lives. At September 29,
1996, intangible assets were as follows:
<TABLE>
<CAPTION>
ESTIMATED
TYPE 1996 LIFE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Product development................................................... $ 45,470 3 years
Loan fees............................................................. 52,085 6-7 years
Consulting fees (Note 9).............................................. 30,184 --
---------
Total............................................................. 127,739
Less: Accumulated amortization........................................ 31,331
---------
Intangible assets--net................................................ $ 96,408
---------
---------
</TABLE>
Amortization expense amounted to $4,488 for the year ended September 29,
1996.
G. Income Taxes
The Company utilizes the method of accounting for income taxes pursuant
to Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes" (SFAS 109), which requires deferred income taxes to
reflect the tax consequences of temporary differences between the assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. The principal temporary differences relate to
depreciation, inventories, accrued liabilities and the allowance for
doubtful accounts.
H. Fair Value of Financial Instruments
In 1996, the Company adopted SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments." For the financial instruments of cash and
equivalents, trade accounts receivable and payable, notes receivable, bank
line of credit and accrued expenses, carrying amounts approximate fair value
due to their short maturities. The estimated fair value of long-term debt
approximates its carrying amount.
I. Cash Flow Information
Net cash provided by operating activities includes interest payments on
all indebtedness of $254,632 and payments of income taxes of $511,500 for
the year ended September 29, 1996.
The Company considers cash on hand and deposits in banks as cash and
equivalents for purposes of the statement of cash flows.
F-47
<PAGE>
PIEDMONT LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 29, 1996
2. INVENTORIES
Inventories consisted of the following at September 29, 1996:
<TABLE>
<S> <C>
Finished goods.................................................. $1,399,872
Raw materials................................................... 1,232,994
---------
Total....................................................... $2,632,866
---------
---------
</TABLE>
3. NOTES RECEIVABLE FROM STOCKHOLDERS
<TABLE>
<S> <C>
Note receivables from principal stockholder, interest at 5.6%,
monthly payments of $13,177 including interest through August
2013, unsecured (Note 9)...................................... $1,924,707
Note receivable from stockholder dated March 14, 1996,
noninterest bearing, due on January 1, 1997, secured by common
stock of the Company (Note 9)................................. 200,000
---------
Total....................................................... 2,124,707
Less current maturities..................................... 465,561
---------
Notes receivable, net of current maturities................. $1,659,146
---------
---------
</TABLE>
4. BANK LINE OF CREDIT AND LONG-TERM DEBT
At September 29, 1996, bank line of credit and long-term debt consisted
of the following:
<TABLE>
<S> <C>
Bank line of credit dated July 1, 1988, revised April 20, 1994,
under a receivable financing agreement, interest at 1% above
the prime rate, with a total credit limit of $2,500,000,
collateralized by all assets of the Company and the personal
guarantee of the principal stockholder. At September 29, 1996,
the interest rate was 9.25%................................... $ 290,794
Installment loan with a bank dated April 20, 1994, interest at
8.5%, monthly payments of $34,781 including interest through
April 1999, collateralized by accounts receivable,
inventories, all other assets of the Company and the personal
guarantee of the principal stockholder........................ 937,031
Installment loan with a bank dated July 24, 1986, interest at a
variable rate based upon the bank's five-year certificate of
deposit rate and corporate income tax rates, monthly payments
of $6,779 including interest through August 1, 2006,
collateralized by real estate, equipment and a letter of
credit. At September 29, 1996, the interest rate was 7.40%.... 549,320
</TABLE>
F-48
<PAGE>
PIEDMONT LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 29, 1996
4. BANK LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
Installment loan with a bank dated August 23, 1985, interest at
a variable rate based upon the bank's prime rate and corporate
income tax rates, monthly payments of $9,646 including
interest through December 1, 1998, collateralized by real
estate and a letter of credit. At September 29, 1996, the
interest rate was 6.95%....................................... 81,815
Installment loan with a bank dated September 11, 1992, interest
at 11%, monthly payments of $844 including interest through
October 11, 1997, collateralized by automotive equipment...... 9,552
---------
Total....................................................... 1,868,512
Less:
Bank line of credit....................................... 290,794
Current maturities of long-term debt...................... 479,916
---------
Long-term debt.......................................... $1,097,802
---------
---------
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
YEAR ENDING:
- ----------------------------------------------------------------
1998.......................................................... $ 424,623
1990.......................................................... 249,242
2000.......................................................... 49,131
2001.......................................................... 43,600
Later years................................................... 331,206
---------
Total....................................................... $1,097,802
---------
---------
</TABLE>
Under the receivable financing, term note and intercreditor agreements
dated July 1, 1988, the bank has issued irrevocable letters of credit
totaling $350,000 on behalf of the Company to the bank holding the
installment loans dated July 24, 1986 and August 23, 1985. In exchange, the
note holder has agreed to accelerate all amounts owing on the loans against
the letters of credit rather than the Company, in the event of default as
defined under the individual loan agreements.
Under the terms of the installment loans with a bank dated April 20,
1994 and May 1, 1991, the Company is required to be in compliance with
various provisions relating to working capital, indebtedness, capital
expenditures, stockholders' equity and officers' compensation. As of
September 29, 1996, the Company was not in compliance with the capital
expenditures provision; however, in management's opinion, the noncompliance
with this provision, in light of the events subsequent to year-end (Note 9),
does not have a material impact on the Company's financial position.
5. LEASE OBLIGATION
The Company leases warehouse and office space and various equipment
under operating leases with rent amounting to $395,352 for the year ended
September 29, 1996.
F-49
<PAGE>
PIEDMONT LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 29, 1996
5. LEASE OBLIGATION (CONTINUED)
The following is a schedule of future minimum lease payments under
operating leases:
<TABLE>
<S> <C>
YEAR ENDING:
- ----------------------------------------------------------------
1997.......................................................... $ 493,624
1998.......................................................... 436,298
1999.......................................................... 60,805
2000.......................................................... 28,327
2001.......................................................... 14,164
---------
Total....................................................... $1,033,218
---------
---------
</TABLE>
6. INCOME TAXES
The provision for income taxes for the year ended September 29, 1996 is
summarized as follows:
<TABLE>
<S> <C>
Current:
Federal......................................................... $ 665,920
State........................................................... 119,066
---------
Total......................................................... 784,986
---------
Deferred:
Federal......................................................... (38,382)
State........................................................... (6,773)
---------
Total......................................................... (45,155)
---------
PROVISION FOR INCOME TAXES................................ $ 739,831
---------
---------
</TABLE>
For the year ended September 29, 1996, the Company's effective tax rate
varied from the statutory federal income tax rate principally due to
nondeductible meals and entertainment expenses and officer's life insurance
premiums.
The deferred income tax liability of $336,352 as of September 29, 1996,
resulted from the approximate tax effects of cumulative temporary
differences relating to depreciation, inventories, accrued liabilities and
the allowance for doubtful accounts. A valuation allowance has not been
recognized based upon management's evaluation that it is more likely than
not that the future tax benefits relating to the inventories, accrued
liabilities and the allowance for doubtful accounts will be realized.
7. SELF-INSURANCE PROGRAMS
The Company participates in a self-insured group health program whereby
the first $50,000 of claims for each employee will be paid by the Company
for the plan year ended September 30, 1996, up to an aggregate of
approximately $804,000. For the plan year ended September 30, 1996, claims
paid under this program were approximately $804,000.
F-50
<PAGE>
PIEDMONT LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 29, 1996
7. SELF-INSURANCE PROGRAMS (CONTINUED)
The Company also participates in a self-insured workmen's compensation
program whereby the Company will pay the first $100,000 per claim,
$1,000,000 per occurrence, with a total aggregate of $9,000,000 for the plan
year ended September 30, 1996. Claims under this plan amounted to $25,948
for the year ended September 29, 1996.
8. PROFIT-SHARING PLAN
The Company has a defined contribution profit-sharing plan under Section
401(k) of the Internal Revenue Code covering all employees who meet certain
age and length of service requirements. The Company matches 25% of employee
contributions up to 6% of each covered employee's compensation.
Contributions by the Company amounted to $34,041 for the year ended
September 29, 1996.
9. SUBSEQUENT EVENT
Effective September 30, 1996, all of the common stock of the Company was
sold. As part of this transaction, the notes receivable from former
stockholders were paid in full (Note 3) and the personal guarantees of the
former principal stockholder on applicable outstanding indebtedness of the
Company were released (Note 4). In addition, a two-year employment and
noncompete agreement was executed between the former principal stockholder
and the Company.
F-51
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY GUARANTOR OR BT ALEX. BROWN
INCORPORATED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... iii
Prospectus Summary......................................................... 1
Risk Factors............................................................... 16
Use of Proceeds............................................................ 24
Capitalization............................................................. 25
Unaudited Pro Forma Condensed Combined Financial Data...................... 26
Selected Historical and Unaudited Pro Forma Combined Financial Data........ 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 36
The Exchange Offer......................................................... 44
Business................................................................... 51
Management................................................................. 61
Security Ownership of Certain Beneficial Owners and Management............. 65
Certain Relationships and Related Transactions............................. 67
Description of Certain Terms of the Preferred Stock and the Warrant
Agreement................................................................. 70
Description of Acquisition Agreements...................................... 71
Description of the Senior Secured Credit Facility.......................... 72
Description of Notes....................................................... 74
Certain Federal Tax Consequences........................................... 108
Plan of Distribution....................................................... 109
Legal Matters.............................................................. 109
Change in Independent Accountants.......................................... 110
Experts.................................................................... 110
Index to Financial Statements.............................................. F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS.
$105,000,000
OSG
OUTSOURCING SERVICES GROUP, INC.
10 7/8% SERIES B
SENIOR SUBORDINATED NOTES
DUE 2006
-----------------------------
PROSPECTUS
-----------------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
THE COMPANY
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") empowers a Delaware corporation to indemnify any
persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal 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 an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include 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, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was unlawful. A Delaware
corporation may indemnify officers and directors against expenses (including
attorneys' fees) in an action by or in the right of the corporation 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 which such officer or director actually and reasonably
incurred.
Article Seventh of the Certificate of Incorporation of the Company, as
amended, a copy of which is filed as Exhibit 3.1 to the Registration Statement,
allows the Company to maintain director and officer liability insurance on
behalf of any person who is or was a director or officer of the Company or such
person who serves or served as director, officer, employee or agent, of another
corporation, partnership or other enterprise at the request of the Company.
Article Seventh of the Company's Certificate of Incorporation, as amended,
provides for indemnification of the officers and directors of the Company, to
the fullest extend permitted by applicable law.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Articles
Sixth and Seventh of the Certificate of Incorporation of the Company, as
amended, provide that no director of the Company shall be personally liable to
the Company or its shareholders for monetary damages for any breach of his
fiduciary duty as a director; provided, however, that such clause shall not
apply to any liability of a director (1) for any breach of the Director's duty
of loyalty to the Company or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, (3) pursuant to Section 174 of the Delaware Corporation Law, or (4) for any
transaction from which the director derived an improper personal benefit.
THE GUARANTORS
The Guarantors, Aerosol, Kolmar and Piedmont, are incorporated under the
laws of the States of California, Delaware and Georgia, respectively. As with
the Delaware Corporation Law, the California Corporations Code and the Business
Corporations Code of Georgia authorize a corporation, under certain
circumstances, to indemnify its directors and officers (including to reimburse
them for expenses incurred).
As with the Company's Certificate of Incorporation, as amended, and Bylaws,
each of the Guarantor's organizational documents and Bylaws generally provide
for the indemnification of officers and directors to the fullest extent
permitted by law.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Purchase Agreement dated February 26, 1998, between Outsourcing Services Group, Inc. (the "Company") and
BT Alex. Brown Incorporated ("BT").
3.1 Certificate of Incorporation of Aerosol Services Holding Corporation ("ASHC") (which later changed its
name to "Outsourcing Services Group, Inc."), as amended to date.
3.2 By-Laws of ASHC.
3.3 Articles of Incorporation of ASC Merger Corp. ("ASCMC") (which later changed its name to "Aerosol
Services Company, Inc."), as amended to date.
3.4 By-Laws of ASCMC, as amended to date.
3.5 Certificate of Incorporation of Kolmar Laboratories, Inc. ("Kolmar"), as amended to date.
3.6 By-Laws of Kolmar, as amended to date.
3.7 Restated Articles of Incorporation of Piedmont Laboratories, Inc. ("Piedmont"), as amended to date.
3.8 By-Laws of Piedmont.
4.1 Indenture, dated March 3, 1998, among the Company, the Guarantors listed therein and U.S. Bank Trust
National Association (formerly First Trust National Association), as Trustee, relating to the 10 7/8%
Series B Senior Subordinated Notes due 2006 of the Company (the "New Notes") and the 10 7/8% Senior
Subordinated Notes due 2006 of the Company (the "Old Notes").
4.2 Form of New Note (included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of March 3, 1998, by and among the Company, the Guarantors
listed therein and BT.
4.4 Registration Rights Agreement, dated as of February 14, 1994, by and among ASHC and the investors that
are parties thereto.
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company.
*5.2 Opinion of Paul, Hastings, Janofsky & Walker LLP, counsel to the Company.
9.1 Amended and Restated Stockholder Agreement, dated as of June 30, 1997, among the Company and certain
stockholders listed therein.
9.2 Amendment to Stockholder Agreement, dated December 31, 1997, among the Company and certain stockholders
listed therein.
10.1 Credit Agreement, dated as of January 8, 1998 ("Credit Agreement"), among the Company, as guarantor,
Aerosol Services Company, Inc. ("Aerosol"), Piedmont and additional subsidiaries of the Company, as
Borrowers, the Lenders party thereto, BT Commercial Corporation, as Agent, and Heller Financial, Inc.,
as Co-Agent.
10.2 Amendment and Waiver No. 1, dated as of April 29, 1998, to the Credit Agreement, by and among the
Company, Aerosol and Piedmont, as initial Borrowers, Kolmar, as an additional Borrower, each financial
institution from time to time party to the Credit Agreement, BT Commercial Corporation, as Agent for
Lenders and Heller Financial, Inc., as Co-agent.
10.3 Outsourcing Services Group, Inc. 1998 Stock Option Plan.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.4 Stock Option Agreement, dated December 31, 1997, between the Company and Christopher Denney.
10.5 Amended and Restated Warrant Agreement between the Company and Chase Capital, L.P., dated January 8,
1998.
10.6 Amended and Restated Management Services Agreement, dated January 8, 1998, by and between The
Gordon+Morris Group, the Company, Aerosol, Piedmont and Kolmar.
10.7 Advisory and Financial Services Agreement by and between the Company and HarbourVest Partners LLC, dated
January 8, 1998.
10.8 Employment and Non-Competition Agreement between the Company and Christopher Denney, dated January 9,
1998.
10.9 Share and Asset Purchase Agreement, dated October 28, 1997, between CCL Industries, Inc., CCL Industries
Corporation and the Company.
10.10 Amendment to Share and Asset Purchase Agreement, dated January 1, 1998, between CCL Industries, Inc.,
CCL Industries Corporation and the Company.
10.11 Modification Agreement, dated January 8, 1998, between CCL Industries, Inc., CCL Industries Corporation
and the Company.
10.12 Agreement and Plan of Merger, dated June 20, 1997, by and between Aerosol Companies Holding Corporation
("ACHC") and ASHC.
10.13 Stock Purchase Agreement, dated as of June 27, 1996, by and among ACHC, Samuel D. Garretson, Garretson,
O'Sullivan Charitable Trust, certain other shareholders listed therein and Piedmont.
10.14 Amendment to Stock Purchase Agreement, dated September 30, 1996, by and among ACHC, Samuel D. Garretson,
Garretson, O'Sullivan Charitable Trust, certain other shareholders listed therein and Piedmont.
10.15 Purchase and Merger Agreement, dated February 14, 1994, by and among Aerosol, Walter Lim and Howard Lim,
as the Sellers, ASHC and ASCMC.
10.16 Amendment and Termination of Employment Contract, dated December 31, 1997, for Howard C. Lim.
10.17 Amendment and Termination of Employment Contract, dated December 31, 1997, for Samuel D. Garretson.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for the Company.
16.1 Letter from Deloitte & Touche LLP regarding Change in Independent Accountants.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Moore, Colson & Company, P.C.
*23.5 Consent of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company (included in Exhibit
5.1).
*23.6 Consent of Paul, Hastings, Janofsky & Walker LLP, counsel to the Company (included in Exhibit 5.2)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
24.1 Power of Attorney (included in signature page).
25.1 Statement of Eligibility and Qualification on Form T-1 of U.S. Bank Trust National Association, as
Trustee under the Indenture relating to the New Notes.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter of Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*99.4 Form of Letter to Clients.
*99.5 Form of Exchange Agent Agreement.
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the Offering.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrants
pursuant to the foregoing provisions, or otherwise, the
II-4
<PAGE>
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the 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 its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
(d) The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Outsourcing Services Group, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Los Angeles, State of California, on the 17th day of June, 1998.
<TABLE>
<S> <C>
OUTSOURCING SERVICES GROUP, INC.
By: /s/ CHRISTOPHER DENNEY
------------------------------------------
Christopher Denney
CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Joseph W. Sortais and Drew H. Adams, his
true and lawful attorney in fact, each with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities
(including his capacity as a director and/or officer of Outsourcing Services
Group, Inc.) to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the same offering as this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each such attorney in fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys in fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chief Executive Officer,
/s/ CHRISTOPHER DENNEY President and Director
- ------------------------------ (Principal Executive June 17, 1998
Christopher Denney Officer)
Chief Financial Officer,
/s/ JOSEPH W. SORTAIS Treasurer and Secretary
- ------------------------------ (Principal Financial and June 17, 1998
Joseph W. Sortais Accounting Officer)
/s/ WALTER K. LIM
- ------------------------------ Chairman of the Board June 17, 1998
Walter K. Lim
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ SAMUEL D. GARRETSON
- ------------------------------ Director June 17, 1998
Samuel D. Garretson
/s/ HOWARD C. LIM
- ------------------------------ Director June 18, 1998
Howard C. Lim
/s/ JOHN H. MORRIS
- ------------------------------ Director June 18, 1998
John H. Morris
/s/ DREW H. ADAMS
- ------------------------------ Assistant Secretary and June 18, 1998
Drew H. Adams Director
/s/ FRANK EDELSTEIN
- ------------------------------ Director June 18, 1998
Frank Edelstein
/s/ ROBERT M. WADSWORTH
- ------------------------------ Director June 17, 1998
Robert M. Wadsworth
/s/ JOSEPH A. MARINO
- ------------------------------ Director June 17, 1998
Joseph A. Marino
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Aerosol Services Company, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Los Angeles, State of California, on the 17th day of June, 1998.
<TABLE>
<S> <C>
AEROSOL SERVICES COMPANY, INC.
By: /s/ CHRISOPHER DENNEY
------------------------------------------
Christopher Denney
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Joseph W. Sortais and Drew H. Adams, his
true and lawful attorney in fact, each with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities
(including his capacity as a director and/or officer of Aerosol Services
Company, Inc.) to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the same offering as this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each such attorney in fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys in fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ CHRISTOPHER DENNEY Chief Executive Officer
- ------------------------------ and Director (Principal June 17, 1998
Christopher Denney Executive Officer)
Chief Financial Officer,
/s/ JOSEPH W. SORTAIS Treasurer and Secretary
- ------------------------------ (Principal Financial and June 17, 1998
Joseph W. Sortais Accounting Officer)
/s/ WALTER K. LIM
- ------------------------------ Chairman of the Board June 17, 1998
Walter K. Lim
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ SAMUEL D. GARRETSON
- ------------------------------ Director June 17, 1998
Samuel D. Garretson
/s/ HOWARD C. LIM
- ------------------------------ Director June 18, 1998
Howard C. Lim
/s/ JOHN H. MORRIS
- ------------------------------ Director June 18, 1998
John H. Morris
/s/ DREW H. ADAMS
- ------------------------------ Assistant Secretary and June 18, 1998
Drew H. Adams Director
/s/ FRANK EDELSTEIN
- ------------------------------ Director June 18, 1998
Frank Edelstein
/s/ ROBERT M. WADSWORTH
- ------------------------------ Director June 17, 1998
Robert M. Wadsworth
/s/ JOSEPH A. MARINO
- ------------------------------ Director June 17, 1998
Joseph A. Marino
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Kolmar Laboratories, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Los Angeles, State of California, on the 17th day of June, 1998.
<TABLE>
<S> <C>
KOLMAR LABORATORIES, INC.
By: /s/ CHRISTOPHER DENNEY
------------------------------------------
Christopher Denney
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Joseph W. Sortais and Drew H. Adams, his
true and lawful attorney in fact, each with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities
(including his capacity as a director and/or officer of Kolmar Laboratories,
Inc.) to sign any and all amendments (including post-effective amendments) to
this Registration Statement, and any registration statement relating to the same
offering as this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each such attorney in fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys in fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ CHRISTOPHER DENNEY Chief Executive Officer
- ------------------------------ and Director (Principal June 17, 1998
Christopher Denney Executive Officer)
Chief Financial Officer,
/s/ JOSEPH W. SORTAIS Treasurer and Secretary
- ------------------------------ (Principal Financial and June 17, 1998
Joseph W. Sortais Accounting Officer)
/s/ WALTER K. LIM
- ------------------------------ Chairman of the Board June 17, 1998
Walter K. Lim
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ SAMUEL D. GARRETSON
- ------------------------------ Director June 17, 1998
Samuel D. Garretson
/s/ HOWARD C. LIM
- ------------------------------ Director June 18, 1998
Howard C. Lim
/s/ JOHN H. MORRIS
- ------------------------------ Director June 18, 1998
John H. Morris
/s/ DREW H. ADAMS
- ------------------------------ Assistant Secretary and June 18, 1998
Drew H. Adams Director
/s/ FRANK EDELSTEIN
- ------------------------------ Director June 18, 1998
Frank Edelstein
/s/ ROBERT M. WADSWORTH
- ------------------------------ Director June 17, 1998
Robert M. Wadsworth
/s/ JOSEPH A. MARINO
- ------------------------------ Director June 17, 1998
Joseph A. Marino
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Piedmont Laboratories, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Los Angeles, State of California, on the 17th day of June, 1998.
<TABLE>
<S> <C>
PIEDMONT LABORATORIES, INC.
By: /s/ CHRISTOPHER DENNEY
------------------------------------------
Christopher Denney
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Joseph W. Sortais and Drew H. Adams, his
true and lawful attorney in fact, each with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities
(including his capacity as a director and/or officer of Piedmont Laboratories,
Inc.) to sign any and all amendments (including post-effective amendments) to
this Registration Statement, and any registration statement relating to the same
offering as this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each such attorney in fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys in fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ CHRISTOPHER DENNEY Chief Executive Officer
- ------------------------------ and Director (Principal June 17, 1998
Christopher Denney Executive Officer)
Chief Financial Officer,
/s/ JOSEPH W. SORTAIS Treasurer and Secretary
- ------------------------------ (Principal Financial and June 17, 1998
Joseph W. Sortais Accounting Officer)
/s/ WALTER K. LIM
- ------------------------------ Chairman of the Board June 17, 1998
Walter K. Lim
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ SAMUEL D. GARRETSON
- ------------------------------ Director June 17, 1998
Samuel D. Garretson
/s/ HOWARD C. LIM
- ------------------------------ Director June 18, 1998
Howard C. Lim
/s/ JOHN H. MORRIS
- ------------------------------ Director June 18, 1998
John H. Morris
/s/ DREW H. ADAMS
- ------------------------------ Assistant Secretary and June 18, 1998
Drew H. Adams Director
/s/ FRANK EDELSTEIN
- ------------------------------ Director June 18, 1998
Frank Edelstein
/s/ ROBERT M. WADSWORTH
- ------------------------------ Director June 17, 1998
Robert M. Wadsworth
/s/ JOSEPH A. MARINO
- ------------------------------ Director June 17, 1998
Joseph A. Marino
</TABLE>
II-13
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
$105,000,000
10 7/8% Senior Subordinated Notes Due 2006
PURCHASE AGREEMENT
February 26, 1998
BT ALEX. BROWN INCORPORATED
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Outsourcing Services Group, Inc., a Delaware corporation (the
"COMPANY"), and each of the Company's Subsidiaries listed on the signature pages
hereof (together with any Subsidiary that in the future executes a supplemental
indenture pursuant to which such Subsidiary agrees to guarantee the Notes (as
defined) the "GUARANTORS" and, together with the Company, the "ISSUERS") hereby
confirm their agreement with you (the "INITIAL PURCHASER") as set forth below.
1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchaser
$105,000,000 aggregate principal amount of its 10-7/8% Senior Subordinated Notes
due 2006 (the "NOTES"). The Notes will be guaranteed (collectively, the
"GUARANTEES") on a senior subordinated basis by each of the Guarantors. The
Notes and the Guarantees are collectively referred to herein as the
"SECURITIES". The Notes are to be issued under an indenture (the "INDENTURE")
to be dated as of March 3, 1998 by and among the Company, the Guarantors and
First Trust National Association, as Trustee (the "TRUSTEE").
The Securities will be offered and sold to the Initial Purchaser
without being registered under the Securities Act of 1933, as amended (the
"ACT"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum dated February 6, 1998 (the
"PRELIMINARY MEMORANDUM") and a final offering memorandum dated February 26,
1998 (the "FINAL MEMORANDUM"; the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "MEMORANDUM") setting forth or
including a description of the terms of the Securi-
<PAGE>
-2-
ties, the terms of the offering of the Securities and a description of the
Company and its Subsidiaries.
The Company understands that the Initial Purchaser proposes to make an
offering of the Securities only on the terms and in the manner set forth in the
Final Memorandum and Sections 4 and 8 hereof as soon as the Initial Purchaser
deems advisable after this Agreement has been executed and delivered to persons
in the United States whom the Initial Purchaser reasonably believes to be
qualified institutional buyers ("QUALIFIED INSTITUTIONAL BUYERS" or "QIBS") as
defined in Rule 144A under the Act, as such rule may be amended from time to
time ("RULE 144A"), in transactions under Rule 144A, and outside the United
States to certain persons in reliance on Regulation S under the Act.
The Initial Purchaser and its direct and indirect transferees of the
Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as EXHIBIT A (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Issuers have agreed,
among other things, to file a registration statement (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
registering the Securities or the Exchange Notes (as defined in the Registration
Rights Agreement) and related guarantees under the Act.
2. REPRESENTATIONS AND WARRANTIES. The Issuers, jointly and
severally, represent and warrant to and agree with the Initial Purchaser that:
(a) Neither the Final Memorandum nor any amendment or supplement
thereto as of the date thereof and at all times subsequent thereto up to the
Closing Date (as defined in Section 3 below) contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information relating to
the Initial Purchaser furnished to the Company in writing by the Initial
Purchaser expressly for use in the Final Memorandum or any amendment or
supplement thereto.
(b) As of the Closing Date, the Company will have the authorized,
issued and outstanding capitalization set forth in the Final Memorandum; all of
the subsidiaries of the Company are listed in SCHEDULE I attached hereto (each a
"SUBSIDIARY"
<PAGE>
-3-
and collectively the "SUBSIDIARIES"); all of the outstanding shares of capital
stock of the Company and the Subsidiaries have been, and as of the Closing Date
will be, duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights; all of the
outstanding shares of capital stock of the Company and of each of the
Subsidiaries, except as set forth in the Final Memorandum, will be free and
clear of all liens and encumbrances (other than those imposed by the Act and the
securities or "Blue Sky" laws of certain jurisdictions); except as set forth in
the Final Memorandum, there are no (i) options, warrants or other rights to
purchase, (ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests in the Company or any of the Subsidiaries
outstanding. Except for the Subsidiaries or as disclosed in the Final
Memorandum, neither the Company nor the Subsidiaries owns, directly or
indirectly, any shares of capital stock or any other equity or long term debt
securities or has any equity interest in any firm, partnership, joint venture or
other entity.
(c) Each of the Company and the Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all requisite corporate power and
authority to own its properties and conduct its business as now conducted and as
described in the Final Memorandum; each of the Company and the Subsidiaries is
duly qualified to do business as a foreign corporation in good standing in all
other jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of the Company and
the Subsidiaries, taken as a whole (any such event, a "MATERIAL ADVERSE
EFFECT").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes, the
Exchange Notes and the Private Exchange Notes (as defined in the Registration
Rights Agreement). The Notes, when issued, will be in the form contemplated by
the Indenture. The Notes, the Exchange Notes and the Private Exchange Notes
have each been duly and validly authorized by the Company and, when executed by
the Company and authenticated by the Trustee in accordance with the provisions
of the Indenture and, in the case of the Notes, when delivered to and paid for
by the Initial Purchaser in accordance with the terms of this
<PAGE>
-4-
Agreement, and in the case of the Exchange Notes and the Private Exchange Notes,
when issued in exchange for the Notes as contemplated in the Registration Rights
Agreement, will constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against the Company
in accordance with their terms,(A) except that the enforcement thereof may be
subject to (i) bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity (regardless of
whether enforcement is brought in a proceeding at law or in equity) and the
discretion of the court before which any proceeding therefor may be brought and
(B) except insofar as the usury waiver contained in Section 4.09 of the
Indenture may be unenforceable.
(e) Each Guarantor has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under its Guarantee, its
guarantee of the Exchange Notes (each, an "EXCHANGE NOTES GUARANTEE") and its
guarantee of the Private Exchange Notes (each, "PRIVATE EXCHANGE NOTES
GUARANTEE"). The Guarantees, when issued, will be in the form contemplated by
the Indenture. The Guarantees, the Exchange Notes Guarantees and the Private
Exchange Notes Guarantees have each been duly and validly authorized by the
Guarantors and, in the case of the Guarantees, when delivered to and paid for by
the Initial Purchaser in accordance with the terms of this Agreement, and in the
case of the Exchange Notes Guarantees and the Private Exchange Notes Guarantees,
when issued in exchange for the Guarantees as contemplated in the Registration
Rights Agreement, will constitute valid and legally binding obligations of the
Guarantors, entitled to the benefits of the Indenture, and enforceable against
the Guarantors in accordance with their terms, (A) except that enforcement
thereof may be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is brought in a proceeding at law or in
equity) and the discretion of the court before which any proceeding therefor may
be brought and (B) except insofar as the usury waiver contained in Section 4.09
of the Indenture may be unenforceable.
(f) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Indenture.
The Indenture meets the requirements for qualification under the Trust Indenture
Act of 1939, as amended and as in effect on the date hereof (the "TIA") even
though it is not necessary to qualify the Indenture under the
<PAGE>
-5-
TIA in connection with the sale of the Securities to the Initial Purchaser and
the offering of the Securities by the Initial Purchaser in the manner set forth
in the Final Memorandum and Sections 4 and 8 hereof. The Indenture has been
duly and validly authorized by the Issuers and, when executed and delivered by
the Issuers (assuming the due authorization, execution and delivery by the
Trustee), will constitute a valid and legally binding agreement of each of the
Issuers, enforceable against each of the Issuers in accordance with its terms,
(A) except that the enforcement thereof may be subject to (i) bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity (regardless of whether enforcement is brought
in a proceeding at law or in equity) and the discretion of the court before
which any proceeding therefor may be brought and (B) except insofar as the usury
waiver contained in Section 4.09 of the Indenture may be unenforceable.
(g) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and validly
authorized by each of the Issuers and, when executed and delivered by the
Issuers, assuming due authorization, execution and delivery thereof by the
Initial Purchaser, will constitute a valid and legally binding agreement of each
of the Issuers, enforceable against each of the Issuers in accordance with its
terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity (regardless of whether enforcement is brought
in a proceeding at law or in equity) and the discretion of the court before
which any proceeding therefor may be brought and (B) except insofar as the usury
waiver contained in Section 4.09 of the Indenture may be unenforceable and
(C) any rights to indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations.
(h) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. This Agreement and the
consummation by the Issuers of the transactions contemplated hereby have been
duly and validly authorized by the Issuers. This Agreement has been duly
executed and delivered by the Issuers.
<PAGE>
-6-
(i) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for (i) the issuance and
sale by the Company of the Notes to the Initial Purchaser or the consummation by
the Company of the other transactions contemplated hereby and (ii) the issuance
and sale by the Guarantors of the Guarantees or the consummation by the
Guarantors of the other transactions contemplated hereby, except such as may be
required under state securities or "Blue Sky" laws in connection with the
purchase and resale of the Securities by the Initial Purchaser in the manner
contemplated by the Final Memorandum and Sections 4 and 8 hereof or any consent,
approval, authorization or order as will be obtained on or prior to the Closing
Date (including any waiver or amendment to the Credit Agreement (as defined)
permitted by Section 7(1) hereto). None of the Company and the Subsidiaries is
(i) in violation of its certificate of incorporation or bylaws (or similar
organizational document), (ii) in breach or violation of any statute, law,
judgment, decree, order, rule or regulation applicable to any of them or any of
their respective properties or assets, except for any such breach or violation
which would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) in breach of or default under (nor has any event occurred
which, with notice or passage of time or both, would constitute a default under)
or in violation of any of the terms or provisions of, any indenture, mortgage,
deed of trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or instrument to which any of
them is a party or to which any of them or their respective properties or assets
is subject (collectively, "CONTRACTS"), except for any such breach, default,
violation or event which would not, individually or in the aggregate, have a
Material Adverse Effect.
(j) The execution, delivery and performance by the Issuers of this
Agreement, the Indenture and the Registration Rights Agreement and the
consummation by the Issuers of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Securities to the
Initial Purchaser) will not conflict with or constitute or result in a breach of
or a default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of any of (A) the terms or
provisions of any Contract, except for any such conflict, breach, violation,
default or event which would not, individually or in the aggregate, have a
Material Adverse Effect, (B) the certificate of incorporation or bylaws (or
similar organizational document) of the Company or any of the Subsidiaries or
(C) (assuming compliance with all applicable state securities or "Blue Sky" laws
and assuming the accuracy of the representations and warranties
<PAGE>
-7-
of the Initial Purchaser in Section 8 hereof) any statute, judgment, decree,
order, rule or regulation applicable to the Company or any of the Subsidiaries
or any of their respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the aggregate, have a
Material Adverse Effect.
(k) Each of Deloitte & Touche LLP, KPMG Peat Marwick LLP, Coopers &
Lybrand L.L.P. and Moore, Colson & Company, P.C., who are reporting on the
audited consolidated financial statements of the Company and the Subsidiaries
included in the Final Memorandum, are independent public accountants with
respect to the Company within the meaning of the Act. The consolidated
financial statements of the Company and the Subsidiaries and related notes
thereto included in the Final Memorandum present fairly in all material respects
the consolidated financial position of the Company and its consolidated
subsidiaries, the results of their operations and the changes in their
consolidated cash flow at the dates and for the periods specified and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, except as otherwise stated therein. The summary and
selected financial and statistical data in the Final Memorandum present fairly
in all material respects the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial statements
included therein unless otherwise so stated therein.
(l) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final Memorandum
(i) comply as to form in all material respects with the applicable requirements
of Regulation S-X promulgated under the Securities Act of 1933, as amended (the
"ACT"), (ii) have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and (iii) have been
properly computed on the bases described therein; the assumptions used in the
preparation of the pro forma financial data and other pro forma financial
information included in the Final Memorandum are reasonable and the adjustments
used therein are appropriate to give effect to the transactions or circumstances
referred to therein.
(m) There is not pending or, to the knowledge of the Issuers,
threatened any action, suit, proceeding, inquiry or investigation to which the
Company or any of the Subsidiaries is a party, or to which the property or
assets of the Company or any of the Subsidiaries are subject, before or brought
by any court, arbitrator or governmental agency or body which
<PAGE>
-8-
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the issuance of the Exchange Notes or the Private Exchange
Notes.
(n) Except as otherwise disclosed in the Final Memorandum, each of
the Company and the Subsidiaries possesses all licenses, permits, certificates,
consents, orders, approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals, presently required or necessary to own or lease, as the case may be,
and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Final
Memorandum ("PERMITS"), except where the failure to obtain such Permits would
not, individually or in the aggregate, have a Material Adverse Effect; each of
the Company and the Subsidiaries has fulfilled and performed all of its
obligations with respect to such Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the holder
of any such Permit; and none of the Company or the Subsidiaries has received any
notice of any proceeding relating to revocation or modification of any such
Permit, except as described in the Final Memorandum and except where such
revocation or modification would not, individually or in the aggregate, have a
Material Adverse Effect.
(o) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein or disclosed in writing to
the Initial Purchaser or its Affiliates, (i) none of the Company or the
Subsidiaries has incurred any liabilities or obligations, direct or contingent,
or entered into or agreed to enter into any transactions or contracts (written
or oral) not in the ordinary course of business, which liabilities, obligations,
transactions or contracts would, individually or in the aggregate, be material
to the general affairs, management, business, condition (financial or
otherwise), prospects or results of operations of the Company and the
Subsidiaries, taken as a whole, (ii) none of the Company or any of the
Subsidiaries has purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock (other than with respect to any of such Subsidiaries, the purchase of, or
dividend or distribution on, capital stock owned by the Company or a
Subsidiary), except that the Company has declared, and has paid in part,
dividends
<PAGE>
-9-
on its Series A Preferred Stock and Series B Preferred Stock and (iii) there
shall not have been any change in the capital stock or long-term indebtedness of
the Company or the Subsidiaries.
(p) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect; and other than tax deficiencies which the
Company or any of the Subsidiaries is contesting in good faith and for which it
has provided reserves in accordance with generally accepted accounting
principles, the Company has paid all taxes shown as due thereon and there is no
tax deficiency that has been asserted against the Company or any of the
Subsidiaries that would have, individually or in the aggregate, a Material
Adverse Effect.
(q) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Issuers believe to be
reliable and accurate.
(r) None of the Company, the Subsidiaries or any agent acting on
their behalf has taken or will take any action that might cause this Agreement
or the sale of the Securities to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date.
(s) Each of the Company and the Subsidiaries has good and marketable
title to all real property and good title to all personal property described in
the Final Memorandum as being owned by it and good and marketable title to a
leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it, free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect, (A) except that the enforcement
thereof may be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is brought in a proceeding at law or in
equity) and the discretion of the court before which any proceeding therefor may
be brought and (B) except insofar as the usury waiver contained in Section 4.09
of the Indenture may be unenforceable. All leases, contracts and agreements to
which the
<PAGE>
-10-
Company or any of the Subsidiaries is a party or by which any of them is bound
are valid and enforceable against the Company or such Subsidiary, as the case
may be, and are valid and enforceable against the other party or parties thereto
and are in full force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect except that the
enforcement thereof may be subject to (A) (i) bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforcement is brought in a proceeding at law or
in equity) and the discretion of the court before which any proceeding therefor
may be brought and (B) except insofar as the usury waiver contained in
Section 4.09 of the Indenture may be unenforceable. The Company and the
Subsidiaries own or possess adequate licenses or other rights to use all
patents, trademarks, service marks, trade names, copyrights and know-how
necessary to conduct the businesses now or proposed to be operated by them as
described in the Final Memorandum, and none of the Company or any of the
Subsidiaries has received any notice of infringement of or conflict with (or
knows of any such infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade names, copyrights
or know-how which would reasonably be expected to have a Material Adverse
Effect.
(t) There are no legal or governmental proceedings involving or
affecting the Company or any Subsidiary or any of their respective properties or
assets that would be required to be described in a prospectus filed in
accordance with Form S-1 pursuant to the Act that are not described in the Final
Memorandum, nor are there any material contracts or other documents that would
be required to be described in a prospectus filed in accordance with Form S-1
pursuant to the Act that are not described in the Final Memorandum.
(u) Except as disclosed in the Final Memorandum or as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect (A) each of the Company and the Subsidiaries is in compliance
with applicable Environmental Laws (as defined below), (B) each of the Company
and the Subsidiaries has made all filings and provided all notices required
under any applicable Environmental Law, and has, and is in compliance with, all
Permits required under any applicable Environmental Laws and each of them is in
full force and effect, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for
<PAGE>
-11-
information pending or, to the knowledge of the Company or any of the
Subsidiaries, threatened against the Company or any of the Subsidiaries under
any Environmental Law, (D) no lien, charge, encumbrance or restriction has been
recorded under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or the
Subsidiaries, (E) none of the Company or any of the Subsidiaries has received
notice that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or any comparable state law, (F) no property or facility of
the Company or any of the Subsidiaries is (i) listed or proposed for listing on
the National Priorities List under CERCLA or is (ii) listed in the Comprehensive
Environmental Response, Compensation, Liability Information System List
promulgated pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
For purposes of this Agreement, "ENVIRONMENTAL LAWS" means the common
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of hazardous materials and (iii) underground and
above ground storage tanks and related piping, and emissions, discharges,
releases or threatened releases therefrom.
(v) Except as would not reasonably be expected to have a Material
Adverse Effect, there is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the Subsidiaries which is pending
or, to the knowledge of the Company or the Subsidiaries, threatened.
(w) Each of the Company and the Subsidiaries carries insurance in
such amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties based on customary industry practices.
(x) Neither the Company nor the Subsidiaries has any knowledge of any
liability or liabilities which would, in the aggregate, reasonably be expected
to have a Material Adverse Effect, for any prohibited transaction or funding
deficiency or
<PAGE>
-12-
any complete or partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which the Company or any of the
Subsidiaries makes or ever has made a contribution and in which any employee of
the Company or any of the Subsidiaries is or has ever been a participant. With
respect to such plans, the Company and the Subsidiaries are in compliance in all
respects with all applicable provisions of ERISA, except for non-compliance
which would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(y) Each of the Company, the Guarantors and Kolmar Canada, Inc.
(i) makes and keeps accurate books and records and (ii) maintains internal
accounting controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is permitted
only in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at reasonable
intervals.
(z) None of the Company or the Subsidiaries is an "investment
company" or "promoter" or "principal underwriter" for an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder.
(aa) The Notes, the Guarantees, the Indenture, the Registration Rights
Agreement, the Credit Agreement, dated as of January 8, 1996 (the "CREDIT
AGREEMENT"), among the Company, as guarantor, certain Subsidiaries, as initial
borrowers, the lender party thereto and BT Commercial Corporation, as agent, and
the Share and Asset Purchase Agreement dated as of October 28, 1997, as amended
(the "ACQUISITION AGREEMENT"), among CCL Industries Inc., CCL Industries
Corporation and the Company and the preferred stock of the Company will conform
in all material respects to the descriptions thereof in the Final Memorandum.
(bb) No holder of securities of the Company or any Subsidiary will be
entitled to have such securities registered under the registration statements
required to be filed by the Issuers pursuant to the Registration Rights
Agreement, other than as expressly permitted thereby.
<PAGE>
-13-
(cc) Immediately after the consummation of the transactions
contemplated by each of the Acquisition Agreement, the Credit Agreement, this
Agreement and the Indenture, the fair value and present fair saleable value of
the assets of each of the Issuers will exceed the sum of its stated liabilities
and identified contingent liabilities; none of the Issuers is, nor will any of
the Issuers be, after giving effect to the execution, delivery and performance
of the Acquisition Agreement, the Credit Agreement, this Agreement and the
Indenture, and the consummation of the transactions contemplated hereby and
thereby, (a) left with unreasonably small capital with which to carry on its
business as it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise insolvent.
(dd) None of the Issuers or any of their respective Affiliates (as
defined in Rule 501(b) of Regulation D under the Act) has directly, or through
any agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the Act) which is or
could be integrated with the sale of the Securities in a manner that would
require the registration under the Act of the Securities or (ii) engaged in any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Securities or
in any manner involving a public offering within the meaning of Section 4(2) of
the Act. Assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 8 hereof, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Initial Purchaser in the
manner contemplated by this Agreement to register any of the Securities under
the Act or to qualify the Indenture under the TIA.
(ee) No securities of any of the Issuers are of the same class (within
the meaning of Rule 144A under the Act) as the Securities and listed on a
national securities exchange registered under Section 6 of the Exchange Act, or
quoted in a U.S. automated inter-dealer quotation system.
(ff) None of the Issuers has taken, nor will any of them take,
directly or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the price of
the Securities.
(gg) None of the Issuers, any of their respective Affiliates or any
person acting on any of their behalf (other than the Initial Purchaser) has
engaged in any directed selling efforts (as that term is defined in Regulation S
under the Act
<PAGE>
-14-
("REGULATION S")) with respect to the Securities; the Issuers and their
respective Affiliates and any person acting on behalf of any of them (other than
the Initial Purchaser) have complied with the offering restrictions requirement
of Regulation S.
(hh) The Final Memorandum contains all material developments relating
to the Company and the Subsidiaries, taken as a whole, occurring after the date
of the most recent historical financial statements included therein.
Any certificate signed by any officer of the Company or any Subsidiary
and delivered to the Initial Purchaser or to counsel for the Initial Purchaser
at or prior to the Closing shall be deemed a joint and several representation
and warranty by the Company and each of the Subsidiaries to the Initial
Purchaser as to the matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Issuers agree to issue
and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase
the Securities, at 97.0% of their principal amount.
One or more certificates in definitive form for the Notes and
Guarantees that the Initial Purchaser has agreed to purchase hereunder, and in
such denomination or denominations and registered in such name or names as the
Initial Purchaser requests upon notice to the Company at least 36 hours prior to
the Closing Date, shall be delivered by or on behalf of the Issuers to the
Initial Purchaser, against payment by or on behalf of the Initial Purchaser of
the purchase price therefor by wire transfer (same day funds), to such account
or accounts as the Company shall specify prior to the Closing Date, or by such
means as the parties hereto shall agree prior to the Closing Date. Such
delivery of and payment for the Securities shall be made at the offices of
Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New
York time, on March 3, 1998, or at such other place, time or date as the Initial
Purchaser, on the one hand, and the Company, on the other hand, may agree upon,
such time and date of delivery against payment being herein referred to as the
"CLOSING DATE." The Company will make such certificate or certificates for the
Securities available for checking by the Initial Purchaser at the offices of
Cahill Gordon & Reindel in New York, New York, or at such other place as BT
Alex. Brown Incorporated may designate, at least 24 hours prior to the Closing
Date.
<PAGE>
-15-
4. OFFERING BY THE INITIAL PURCHASER. The Initial Purchaser
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchaser is advisable
solely to persons whom the Initial Purchaser reasonably believes to be (i) QIBs
and (ii) persons permitted to purchase the Notes in offshore transactions in
reliance upon Regulation S under the Act.
5. COVENANTS OF THE ISSUERS. The Issuers covenant and agree with
the Initial Purchaser that:
(a) The Issuers will advise the Initial Purchaser promptly and (if
requested by the Initial Purchaser) confirm such advice in writing of any
amendment or supplement to the Final Memorandum or any amendment or supplement
thereto of which the Initial Purchaser shall not previously have been advised
and will furnish a copy for a reasonable period of time prior to the proposed
amendment or supplement. The Issuers will promptly, upon the reasonable request
of the Initial Purchaser or counsel for the Initial Purchaser, make any
amendments or supplements to the Preliminary Memorandum or the Final Memorandum
or any change to a proposed amendment or supplement to the Final Memorandum that
may be necessary or advisable in connection with the resale of the Securities by
the Initial Purchaser.
(b) Prior to the sale of all the Notes by the Initial Purchaser in
accordance with Section 4, the Issuers will cooperate with the Initial Purchaser
in arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchaser
may designate and will continue such qualifications in effect for as long as may
be necessary to complete the resale of the Securities by the Initial Purchaser;
PROVIDED, HOWEVER, that in connection therewith, none of the Issuers shall be
required to qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction or subject itself to taxation in excess
of a nominal dollar amount in any such jurisdiction where it is not then so
subject.
(c) If, at any time prior to the completion of the distribution of
the Securities by the Initial Purchaser any event occurs or information becomes
known as a result of which the Final Memorandum as then amended or supplemented
would include any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements therein, in
<PAGE>
-16-
the light of the circumstances under which they were made, not misleading, or if
for any other reason it is necessary at any time to amend or supplement the
Final Memorandum to comply with applicable law, the Issuers will promptly notify
the Initial Purchaser thereof and will prepare, at the expense of the Issuers,
an amendment or supplement to the Final Memorandum that corrects such statement
or omission or effects such compliance.
(d) The Issuers will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchaser may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Securities remain outstanding, the
Company will furnish to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee
or to the holders of the Notes.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, a copy of any available
unaudited interim financial statements of the Company for any period subsequent
to the period covered by the most recent financial statements appearing in the
Final Memorandum.
(h) None of the Issuers or any of their Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Securities in a manner which would require the registration of the
Securities under the Act.
(i) The Issuers will not engage in any form of general solicitation
or general advertising (as those terms are used in Regulation D under the Act)
in connection with the offering of the Securities or in any manner involving a
public offering of the Securities within the meaning of Section 4(2) of the Act
other than the Exchange Offer.
(j) For so long as any of the Securities remain outstanding, the
Company will make available at its expense, upon request, to any holder of such
Securities and any prospective purchasers thereof the information specified in
Rule 144A(d)(4)
<PAGE>
-17-
under the Act, unless the Company is then subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(k) The Company will use its best efforts to (i) permit the
Securities to be designated Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL market (the "PORTAL MARKET") and (ii)
permit the Securities to be eligible for clearance and settlement through The
Depository Trust Company.
(l) In connection with Securities offered and sold in an off-shore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Securities not made in accordance with the provisions of
Regulation S and will not, except in accordance with the provisions of
Regulation S, if applicable, issue any such Securities in the form of definitive
securities.
6. EXPENSES. The Issuers jointly and severally agree to pay all
costs and expenses incident to the performance of their respective obligations
under this Agreement, whether or not the transactions contemplated herein are
consummated or this Agreement is terminated pursuant to Section 11 hereof,
including all costs and expenses incident to (i) the printing, word processing
or other production of documents with respect to the transactions contemplated
hereby, including any costs of printing the Preliminary Memorandum and the Final
Memorandum and any amendment or supplement thereto, and any "Blue Sky"
memoranda, (ii) all arrangements relating to the delivery to the Initial
Purchaser of copies of the foregoing documents, (iii) the fees and disbursements
of the counsel, the accountants and any other experts or advisors retained by
the Issuers, (iv) preparation (including printing), issuance and delivery to the
Initial Purchaser of the Securities, (v) the qualification of the Securities
under state securities and "Blue Sky" laws, including filing fees and reasonable
fees and disbursements of counsel for the Initial Purchaser relating thereto,
(vi) one-half of the expenses in connection with any meetings with prospective
investors in the Securities other than the cost of the meeting rooms, (vii) fees
and expenses of the Trustee including fees and expenses of its counsel,
(viii) all expenses and listing fees incurred in connection with the application
for quotation of the Securities on the PORTAL Market and (ix) any fees charged
by investment rating agencies for the rating of the Securities. If the sale of
the Securities provided for herein is not consummated because any condition to
the obligations of the
<PAGE>
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Initial Purchaser set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated or because of any failure, refusal or inability on the
part of the Issuers to perform all obligations and satisfy all conditions on
their part to be performed or satisfied hereunder (in each case other than
solely by reason of a default by the Initial Purchaser of its obligations
hereunder after all conditions hereunder have been satisfied in accordance
herewith), the Issuers jointly and severally agree to promptly reimburse the
Initial Purchaser upon demand for all out-of-pocket expenses (including fees,
disbursements and charges of Cahill Gordon & Reindel, counsel for the Initial
Purchaser) that shall have been incurred by the Initial Purchaser in connection
with the proposed purchase and sale of the Securities.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The
obligation of the Initial Purchaser to purchase and pay for the Notes shall, in
its sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Issuers,
in form and substance satisfactory to counsel for the Initial Purchaser, to the
effect that:
(i) Each of the Company, Aerosol Services Company, Inc. ("AEROSOL")
and Kolmar Laboratories, Inc. ("KOLMAR") is validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and
has all requisite corporate power and corporate authority to (a) enter into
and perform its obligations under the Indenture, this Agreement and the
Registration Rights Agreement and (b) own, lease and operate its properties
and to conduct its business as described in the Final Memorandum. Each of
the Company, Aerosol and Kolmar is duly qualified to do business as a
foreign corporation in good standing in the jurisdictions listed on
Schedule II hereto.
(ii) The Company has all requisite corporate power and corporate
authority to execute, deliver and perform each of its obligations under the
Notes, the Exchange Notes and the Private Exchange Notes; each of Aerosol
and Kolmar has all requisite corporate power and corporate authority to
execute, deliver and perform each of its obligations under its Guarantee,
its Exchange Notes Guarantee and its Private Exchange Notes Guarantee; the
Inden-
<PAGE>
-19-
ture meets the requirements for qualification under the TIA as in effect on
the date of such opinion; the Indenture has been duly authorized by each of
the Company, Aerosol and Kolmar and, when duly executed and delivered by
each Issuer (assuming the due authorization, execution and delivery thereof
by the Trustee), will constitute the valid and legally binding agreement of
each Issuer, enforceable against each Issuer in accordance with its terms,
except (i) to the extent that the enforceability thereof may be limited by
(A) bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity) and
(ii) that such firm need express no opinion as to the enforceability or
effect of Section 4.09 of the Indenture.
(iii) The Notes have each been duly authorized by the Company and, when
duly executed and delivered by the Company and paid for by the Initial
Purchaser in accordance with the terms of this Agreement (assuming the due
authorization, execution and delivery of the Indenture by the Trustee and
due authentication and delivery of the Notes by the Trustee in accordance
with the Indenture), will be valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except (i) to the extent that the
enforceability thereof may be limited by (A) bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (ii) that such firm need express no
opinion as to the enforceability or effect of Section 4.09 of the
Indenture.
(iv) The Guarantees by each of Aerosol and Kolmar have been duly
authorized by Aerosol and Kolmar, respectively, and, when duly executed and
delivered by Aerosol and Kolmar, respectively, in accordance with the terms
of this Agreement (assuming the due authorization, execution and delivery
of the Indenture by the Trustee and the Indenture and the Guarantee by
Piedmont), will be valid and binding obligations of the Guarantors
enforceable against each of the Guarantor in accordance with their terms,
ex-
<PAGE>
-20-
cept (i) to the extent that the enforceability thereof may be limited by
(A) bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity), and
(ii) that such firm need express no opinion as to the enforceability or
effect of Section 4.09 of the Indenture.
(v) The Exchange Notes and the Private Exchange Notes have been duly
authorized by the Company, and if the Exchange Notes and the Private
Exchange Notes were duly executed and delivered by the Company in
accordance with the terms of the Registration Rights Agreement and the
Indenture on the date of such opinion (assuming the due authorization,
execution and delivery of the Indenture by the Trustee and due
authentication and delivery of the Exchange Notes and the Private Exchange
Notes by the Trustee in accordance with the Indenture), they would be valid
and binding obligations of the Company, entitled to the benefits of the
Indenture, and enforceable against the Company in accordance with their
terms, except (i) to the extent that the enforceability thereof may be
limited by (A) bankruptcy, insolvency, (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity) and (ii) that such firm need express no opinion as to the
enforceability or effect of Section 4.09 of the Indenture.
(vi) The Exchange Notes Guarantees and the Private Exchange Notes
Guarantees of Aerosol and Kolmar have been duly authorized by Aerosol and
Kolmar, respectively, and, if the Exchange Notes Guarantees and the Private
Exchange Notes Guarantees were duly executed and delivered by Aerosol and
Kolmar, respectively, in accordance with the terms of the Registration
Rights Agreement and the Indenture on the date of such opinion (assuming
due authorization, execution and delivery of the Indenture by the Trustee
and the Indenture, the Exchange Note Guarantee and the Piedmont Exchange
Note Guarantee by Piedmont), they would be valid and binding obligations of
the Guarantors, enforceable against the Guarantors in accordance with their
terms, except (i) to the extent that the enforceability
<PAGE>
-21-
thereof may be limited by (A) bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity), and (ii) that such firm need express no opinion as to the
enforceability or effect of Section 4.09 of the Indenture.
(vii) The Registration Rights Agreement has been duly authorized by
each of the Company, Aerosol and Kolmar and, when duly executed and
delivered by each of the Company, Aerosol and Kolmar (assuming due
authorization, execution and delivery thereof by the Initial Purchaser and
Piedmont), will be a valid and binding agreement of each of the Issuers,
enforceable against each of the Issuers in accordance with its terms,
except (i) to the extent that the enforceability thereof may be limited by
(A) bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity) and
(ii) that any rights to indemnity or contribution thereunder may be limited
by federal and state securities laws and public policy considerations.
(viii) This Agreement and the consummation by each of the Company,
Aerosol and Kolmar of the transactions contemplated hereby have been duly
authorized by each of the Company, Aerosol and Kolmar. This Agreement has
been duly executed and delivered by each of the Company, Kolmar and
Aerosol.
(ix) The Indenture, the Notes, the Guarantees and the Registration
Rights Agreement, conform in all material respects to the descriptions
thereof contained in the Final Memorandum.
(x) The statements set forth under the headings "Risk Factors --
Subordination of the Notes and the Guarantees," "Description of Certain
Terms of the Preferred Stock and the Warrant Agreement," "Exchange Offer;
Registration Rights" and "Description of Notes" in the Final Memorandum,
insofar as such statements constitute a summary of legal matters, documents
or proceedings referred
<PAGE>
-22-
to therein, fairly present such legal matters, documents and proceedings in
all material respects.
(xi) The execution and delivery by the Company, Kolmar and Aerosol of
this Agreement, the Registration Rights Agreement and the Indenture, the
issuance and sale of the Securities to the Initial Purchaser and the
performance of the Company's, Kolmar's and Aerosol's respective obligations
pursuant to this Agreement, the Registration Rights Agreement and the
Indenture (i) will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under the
Articles of Incorporation or similar organizational document or bylaws of
any of the Company, Kolmar or Aerosol, (ii) will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default (with the passage of time or otherwise) under, or
result in the imposition or creation of (or the obligation to create or
impose) any security interest, mortgage, pledge, claim, lien, encumbrance
or adverse interest of any nature (each, a "Lien") on any properties of the
Company, Kolmar or Aerosol or any of their respective subsidiaries or an
acceleration of indebtedness pursuant to any of the agreements listed on
Schedule III hereto, where, in any such instance, such breach, default,
Lien, acceleration of indebtedness or conflict could reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
general affairs, management, business condition (financial or otherwise),
prospects or results of operations of the Company and the Subsidiaries,
taken as a whole, and (iii) will not conflict with or violate any
Applicable Law (as hereinafter defined) or Applicable Order (as hereinafter
defined), it being understood that we express no opinion as to any
violation of any Applicable Law or Applicable Order as a result of the
Initial Purchaser's involvement, the involvement of any of the Initial
Purchaser's affiliates or the involvement of subsequent purchasers of the
Securities from the Initial Purchaser because of the Initial Purchaser's
legal or regulatory status or because of other facts specifically
pertaining to the Initial Purchaser, the Initial Purchaser's affiliates or
such other purchasers. The term "Applicable Law" means any law, rule and
regulation of the United States of America, the State of California, the
State of New York and any General Corporation Law of the State of Delaware
that, in our experience, is normally applicable to transactions of the type
contemplated by this Agreement, the Registration Rights Agreement and the
Indenture, provided, that we express no opinion as to the "blue sky" or
state
<PAGE>
-23-
securities laws of any jurisdiction; and the term "Applicable Order" means
any order or decree of any United States, Delaware, California or New York
executive, legislative, judicial, administrative or regulatory body,
including without limitation, the Commission (each, a "Governmental
Authority"), by which the Company, Kolmar or Aerosol or any of their
respective subsidiaries is bound, the existence of which is actually known
to us or has been specifically disclosed to us in writing by the Company,
Kolmar or Aerosol.
(xii) Assuming (i) the accuracy of the representations and warranties
of the Company, Kolmar, Aerosol and Piedmont set forth in Section 2 of this
Agreement and of the Initial Purchaser in Sections 4 and 8 of this
Agreement, (ii) the due performance by the Company, Kolmar, Aerosol and
Piedmont of the covenants and agreements set forth in the Purchase
Agreement and the due performance by the Initial Purchaser of the covenants
and agreements set forth in this Agreement, (iii) the Initial Purchaser's
compliance with the offering and transfer procedures and restrictions
described in the Final Memorandum, (iv) the accuracy of the representations
and warranties made in accordance with this Agreement and the Final
Memorandum by purchasers to whom the Initial Purchaser initially resells
the Securities, and (v) that purchasers to whom the Initial Purchaser
initially resells the Securities receive a copy of the Final Memorandum
prior to such sale, the offer, sale and delivery by the Company of the
Securities to you as contemplated by the Final Memorandum, the execution
and delivery by Kolmar and Aerosol of their respective Guarantees as
contemplated by the Final Memorandum and the initial resale of the
Securities by you as contemplated by the Final Memorandum and Sections 4
and 8 of this Agreement, (A) do not require registration under the Act, (B)
do not require any Governmental Approval (as hereinafter defined), which
has not been obtained or made prior to the date hereof and (C) does not
require the qualification of the Indenture under the TIA, it being
understood that we express no opinion as to (a) any subsequent resale of
any Security, (b) state securities or "blue sky" laws and (c) any
Governmental Approval required as a result of the Initial Purchaser's
involvement, the involvement of any of the Initial Purchaser's affiliates
or the involvement of subsequent purchasers of the Securities from the
Initial Purchaser because of the Initial Purchaser's legal or regulatory
status or because of other facts specifically pertaining to the Initial
Purchaser, the Initial Purchaser's affiliates or such other purchasers.
<PAGE>
-24-
"Governmental Approval" means any consent, approval, license, authorization
or validation of, or filing, recording or registration with, any
Governmental Authority pursuant to Applicable Laws.
(xiii) Assuming (i) the accuracy of the representations and warranties
of the Company, Kolmar, Aerosol and Piedmont set forth in Section 2 of the
Purchase Agreement and of the Initial Purchaser in Sections 4 and 8 of the
Purchase Agreement, (ii) the due performance by the Company, Kolmar,
Aerosol and Piedmont of the covenants and agreements set forth in the
Purchase Agreement and the due performance by the Initial Purchaser of the
covenants and agreements set forth in the Purchase Agreement, (iii) the
Initial Purchaser's compliance with the offering and transfer procedures
and restrictions described in the Final Memorandum, (iv) the accuracy of
the representations and warranties made in accordance with the Purchase
Agreement and the Final Memorandum by purchasers to whom the Initial
Purchaser initially resells the Securities, and (v) that purchasers to whom
the Initial Purchaser initially resells the Securities receive a copy of
the Final Memorandum prior to such sale, no Governmental Approval which has
not been obtained or taken and is not in full force and effect is required
to authorize or is required in connection with the execution, delivery or
performance of any of this Agreement, the Indenture or the Registration
Rights Agreement, except such as may be required (a) in connection with the
performance of the Registration Rights Agreement, by the federal securities
laws in connection with (i) registration thereunder of the Securities, the
Exchange Notes, the Private Exchange Notes, the Exchange Notes Guarantees
or the Private Exchange Notes Guarantees or (ii) qualification of the
Indenture under the TIA, (b) under state securities or "blue sky" laws in
connection with the offer and sale of the Securities or the registration
thereof or of the Exchange Notes, the Private Exchange Notes, the Exchange
Notes Guarantees or the Private Exchange Notes Guarantees and (c) by such
consents, authorizations, approvals, licenses orders, filings,
registrations or qualifications as have been obtained or made prior to the
date hereof. Such counsel will express no opinion, however, as to any such
consents, authorizations, approvals, licenses, orders, filings,
registrations or qualifications required as a result of the Initial
Purchaser's involvement, the involvement of any of the Initial Purchaser's
affiliates or the involvement of subsequent purchasers of the Securities,
the Exchange Notes, the Private Exchange Notes, the Exchange Notes
<PAGE>
-25-
Guarantees or the Private Exchange Notes Guarantees from the Initial
Purchaser because of the Initial Purchaser's legal or regulatory status or
because of other facts specifically pertaining to the Initial Purchaser,
the Initial Purchaser's affiliates or such other purchasers.
(xiv) None of the Company or any of the Subsidiaries is, or immediately
after the sale of the Securities to be sold hereunder and the application
of the proceeds from such sale (as described in the Final Memorandum under
the caption "Use of Proceeds"), will be, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(xv) Neither the consummation of the transactions contemplated by this
Agreement nor the sale, issuance, execution or delivery of the Securities
will violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
At the time the foregoing opinion is delivered, Skadden, Arps, Slate,
Meagher & Flom LLP shall additionally state that it has participated in
conferences with officers and other representatives of the Company and the
Subsidiaries, representatives of the Initial Purchaser and counsel for the
Initial Purchaser and representatives of the independent accountants of the
Company and the Subsidiaries, at which conferences the contents of the Final
Memorandum and related matters were discussed and, although such firm is not
passing upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Final Memorandum and
has made no independent check or verification thereof, except to the extent
specified in subsections 7(a)(ix) and (x) above, on the basis of the foregoing,
no facts have come to such firm's attention that have led it to believe that the
Final Memorandum as of its date and as of the Closing Date, contained an untrue
statement of a material fact or omitted 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, except that such firm need express no opinion or
belief with respect to the financial statements, schedules and other financial
and statistical data included therein or excluded therefrom. For purposes of
the foregoing, such firm may note that the Final Memorandum has been prepared in
the context of a Rule 144A transaction and not as part of a registration
statement under the Securities Act.
In rendering the foregoing opinions, Skadden, Arps, Slate, Meagher &
Flom LLP may (i) state that their opinion is
<PAGE>
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limited to matters governed by the federal laws of the United States of America,
the laws of the States of New York and California and the General Corporation
Law of the State of Delaware, and (ii) rely, to the extent such counsel deems
proper, upon the representations set forth herein and on certificates of public
officials and officers of the Company, with respect to the accuracy of factual
matters contained therein which were not independently established; provided
that such certificates are provided to the Initial Purchaser.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Paul, Hastings, Janofsky & Walker LLP, counsel for the Issuers, in
form and substance satisfactory to counsel for the Initial Purchaser, to the
effect that:
(i) Piedmont Laboratories, Inc. ("PIEDMONT") is duly incorporated and
is existing and in good standing under the laws of the State of Georgia,
and has the corporate power and authority to own its properties and to
conduct its business as described in the Final Memorandum. Piedmont is
duly qualified to do business as a foreign corporation in good standing in
all other jurisdictions where the ownership or leasing of its properties or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect.
(ii) The Company has the authorized, issued and outstanding capital
stock as set forth in the Final Memorandum under the caption
"Capitalization"; all of the outstanding shares of capital stock of the
Issuers have been duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights; all of the outstanding shares of capital stock of the Guarantors
are owned, directly or indirectly, by the Company, free and clear of all
perfected security interests (other than those granted in connection with
the Credit Agreement) and, to the knowledge of such counsel, free and clear
of all other liens, encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and
<PAGE>
-27-
the securities or "Blue Sky" laws of certain jurisdictions) or voting.
(iii) Except as set forth in the Final Memorandum (A) no options,
warrants or other rights to purchase from the Company or any Guarantor
shares of capital stock or ownership interests in the Company or any of the
Guarantors are outstanding, (B) no agreements or other obligations to
issue, or other rights to convert, any obligation into, or exchange any
securities for, shares of capital stock or ownership interests in the
Company or any Guarantor are outstanding and (C) no holder of securities of
the Company or any of the Guarantors is entitled to have such securities
registered under a registration statement filed pursuant to the
Registration Rights Agreement.
(iv) Piedmont has the corporate power and authority to execute,
deliver and perform each of its obligations under the Indenture, its
Guarantees, its Exchange Notes Guarantees and its Private Exchange Notes
Guarantees;
(v) The execution, delivery and performance of the obligations of
Piedmont under the Indenture, the Guarantees, the Exchange Notes
Guarantees, and the Private Exchange Notes Guarantees have been duly and
validly authorized by Piedmont.
(vi) Piedmont has the corporate power and authority to execute,
deliver and perform its obligations under the Registration Rights
Agreement; the execution, delivery and performance of the obligations of
Piedmont under the Registration Rights Agreement have been duly and validly
authorized by Piedmont.
(vii) Piedmont has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby; the execution, delivery and
performance of the obligations of Piedmont under this Agreement and the
consummation by Piedmont of the transactions contemplated thereby have been
duly and validly authorized by Piedmont. This Agreement has been duly
executed and delivered by Piedmont.
(viii) To such counsel's knowledge, no legal or governmental proceedings
are pending or threatened to which the Company or any of the Guarantors is
a party or to which any of their respective properties or assets is subject
which, if determined adversely to the Company or the Guar-
<PAGE>
-28-
antors, would result, individually or in the aggregate, in a Material
Adverse Effect, or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum under the caption "Use of
Proceeds."
(ix) The execution, delivery and performance by the Issuers of this
Agreement, the Indenture and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Securities to
the Initial Purchaser) will not conflict with or constitute or result in a
breach of or a default under (or an event which with notice or passage of
time or both would constitute a default under) or violation of any of (i)
the terms or provisions of any Contract listed on Schedule III hereto,
except for any such conflict, breach, violation, default or event which
would not, individually or in the aggregate, have a Material Adverse
Effect, (ii) the certificate of incorporation or bylaws of Piedmont, or
(iii) (assuming compliance with all applicable state securities or "Blue
Sky" laws and assuming the accuracy of the representations and warranties
of the Initial Purchaser in Section 8 hereof) any statute, law, judgment,
decree, order, rule or regulation of the United States of America, the
State of California or the State of Georgia known to such counsel to be
applicable to the Company or any of the Guarantors or any of their
respective properties or assets with respect to transactions contemplated
by this Agreement, except for any such conflict, breach or violation which
would not, individually or in the aggregate, have a Material Adverse
Effect.
(x) To the knowledge of such counsel based on their experience with
the Issuers and a review of their articles of incorporation (or similar
organizational document) and bylaws, none of the Issuers is (i) in
violation of its articles of incorporation (or similar organizational
document) or (in any material respect) its bylaws, (ii) in breach or
violation of any statute, law, judgment, decree, order, rule or regulation
which in such counsel's experience is normally applicable to the business
of any of them as described in the Final Memorandum or any of their
respective properties or assets, except for any such breach or violation
which would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) in breach or default under (nor has any event occurred
which,
<PAGE>
-29-
with notice or passage of time or both, would constitute a default under)
or in violation of any of the terms or provisions of the Contracts listed
on Schedule III hereto, except for any such breach, default, violation or
event which would not, individually or in the aggregate, have a Material
Adverse Effect.
(xi) The Company and the Guarantors have obtained all Permits listed
on Schedule IV hereto, which to such counsel's knowledge are all permits
necessary to conduct the businesses now or proposed to be conducted by them
as described in the Final Memorandum, the lack of which would, individually
or in the aggregate, have a Material Adverse Effect. To such counsel's
knowledge each of the Company and the Guarantors has fulfilled and
performed all of its obligations with respect to such Permits in all
material respects and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results
in any other material impairment of the rights of the holder of any such
Permit.
(xii) To such counsel's knowledge, the Company and the Guarantors own
or possess adequate licenses or other rights to use all patents,
trademarks, service marks, trade names, copyrights and know-how necessary
to conduct the businesses now or proposed to be operated by them as
described in the Final Memorandum, and none of the Company or any of the
Guarantors has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how which, if such assertion of
infringement or conflict were sustained, would have a Material Adverse
Effect.
Such counsel has participated to a limited extent in the preparation
of the Final Memorandum and has reviewed the Sections described below in clauses
(A) and (B). From time to time such counsel has had discussions with the
officers, directors and employees of the Company, representatives of Skadden,
Arps, Slate, Meagher & Flom LLP, and representatives of the Initial Purchaser
concerning the information contained in the Final Memorandum. Based thereon, it
is such counsel's opinion that
(A) The Credit Agreement and the acquisition agreements conform in
all material respects to the descriptions thereof contained in the Final
Memorandum under the respective captions "Description of the Senior Secured
<PAGE>
-30-
Credit Facility" and "Description of Acquisition Agreements".
(B) The statements set forth in the Final Memorandum under the
headings "Risk Factors -- Restrictions Imposed by Terms of the Company's
Indebtedness," "Business -- Environmental Compliance and Governmental
Regulation and Product Liability," and "Certain Relationships and Related
Transactions" insofar as such statements constitute a summary of legal
matters, documents, proceedings or conclusions of law referred to therein,
fairly represent such legal matters, documents, proceedings and
conclusions, in all material respects.
In rendering the foregoing opinions, Paul, Hastings, Janofsky & Walker
LLP may (i) state that their opinion is limited to matters governed by the
federal laws of the United States of America, the laws of the States of
California and Georgia, (ii) rely, to the extent such counsel deems proper, upon
the representations set forth herein and on certificates of public officials and
officers of the Company, with respect to the accuracy of factual matters
contained therein which were not independently established; provided that such
certificates have been provided to the Initial Purchaser.
References to the Final Memorandum in this subsection (b) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
(c) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser, dated
as of the Closing Date and addressed to the Initial Purchaser, of Cahill Gordon
& Reindel, counsel for the Initial Purchaser, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchaser may reasonably require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(d) The Initial Purchaser shall have received from each of Deloitte &
Touche LLP, KPMG Peat Marwick LLP, Coopers & Lybrand L.L.P. and Moore, Colson &
Company, P.C. a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance satisfactory to counsel for the Initial Purchaser.
<PAGE>
-31-
(e) The representations and warranties of the Issuers contained in
this Agreement shall be true and correct in all material respects on and as of
the date hereof and on and as of the Closing Date as if made on and as of the
Closing Date; the statements of the Issuers' officers made pursuant to any
certificate delivered in accordance with the provisions hereof shall be true and
correct in all material respects on and as of the date made and on and as of the
Closing Date; the Issuers shall have performed in all material respects all
covenants and agreements and satisfied all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date; and, except as
described in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), subsequent to the date of the most recent
financial statements in such Final Memorandum, there shall have been no event or
development, and no information shall have become known, that, individually or
in the aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(f) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(g) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), none of the Company or any of the Subsidiaries shall have
sustained any loss or interference with respect to its business or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slowdown or work stoppage or
from any legal or governmental proceeding, order or decree, which loss or
interference, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
(h) The Initial Purchaser shall have received a certificate of each
of the Issuers, dated the Closing Date, signed on behalf of each of the Issuers
by its Chairman of the Board, President or any Senior Vice President and the
Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Issuers contained in
this Agreement are true and correct in all material respects on and as of
the date hereof and on and as of the Closing Date, and the Issuers have
performed in all material respects all covenants and agreements and
satisfied all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date (with respect to Sections 7(a),
(b) and (c), satisfied in all material respects);
<PAGE>
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(ii) At the Closing Date, except as disclosed in the Final Memorandum,
since the date hereof or since the date of the most recent financial
statements in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), no event or development has
occurred, and no information has become known, that, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse
Effect; and
(iii) To such officer's knowledge, the sale of the Securities hereunder
has not been enjoined (temporarily or permanently).
(i) On the Closing Date, the Initial Purchaser shall have received
the Registration Rights Agreement executed by each of the Issuers.
(j) The Indenture shall have been duly executed and delivered by each
Issuer and the Trustee, and the Notes and the Guarantees shall have been duly
executed by the Company and the Guarantors, respectively, and the Notes shall
have been duly authenticated by the Trustee;
(k) The Initial Purchaser shall have received a true and correct copy
of the Acquisition Agreement and any amendments thereto, and there shall have
been no material amendments, alterations, modifications or waivers of any
provisions of the Acquisition Agreement since the date of this Agreement.
(l) The Initial Purchaser shall have received a true and correct copy
of the Credit Agreement and any amendments or waivers thereto and there shall
have been no amendments, alterations, modifications or waivers of any provisions
of the Credit Agreement since the date of this Agreement other than consent
thereunder to permit the Indebtedness evidenced by the Securities and such other
amendments or waivers as may be satisfactory to the Initial Purchaser.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial
<PAGE>
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Purchaser and counsel for the Initial Purchaser. The Company shall furnish
to the Initial Purchaser such conformed copies of such documents, opinions,
certificates, letters, schedules and instruments in such quantities as the
Initial Purchaser shall reasonably request.
8. OFFERING OF SECURITIES; RESTRICTIONS ON TRANSFER. (a) The
Initial Purchaser represents and warrants (as to itself only) that it is a QIB
and that it is not acquiring the Securities with any present intention of
offering or selling any of the Securities in any transaction that would violate
the Act or the securities laws of any state of the United States or any other
applicable jurisdiction. The Initial Purchaser agrees with the Issuers (as to
itself only) that (i) it has not and will not solicit offers for, or offer or
sell, the Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act or in
a manner that the initial purchaser reasonably believes; and (ii) it has and
will solicit offers for the Securities only from, and will offer the Securities
only to (A) in the case of offers inside the United States, persons whom the
Initial Purchaser reasonably believes to be QIBs or, if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to the Initial
Purchaser that each such account is a QIB, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A and (B) in the case of offers outside the United
States, to persons other than U.S. persons in reliance upon Regulation S of the
Act ("foreign purchasers," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)); PROVIDED,
HOWEVER, that, in the case of this clause (B), in purchasing such Securities
such persons are deemed to have represented and agreed as provided under the
caption "Transfer Restrictions" contained in the Final Memorandum (or, if the
Final Memorandum is not in existence, in the most recent Memorandum).
(b) The Initial Purchaser represents and warrants (as to itself only)
with respect to offers and sales outside the United States that (i) it has and
will comply with all applicable laws and regulations in each jurisdiction in
which it acquires, offers, sells or delivers Securities or has in its possession
or distributes any Memorandum or any such other material, in all cases at its
own expense; (ii) the Securities have not been and will not be offered or sold
within the United
<PAGE>
-34-
States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the Act or pursuant to an exemption from the
registration requirements of the Act; (iii) it has offered the Securities and
will offer and sell the Securities (A) as part of its distribution at any time
and (B) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date, only in accordance with Rule 903 of Regulation S
and, accordingly, neither it nor any persons acting on its behalf have engaged
or will engage in any directed selling efforts (within the meaning of Regulation
S) with respect to the Securities, and any such persons have complied and will
comply with the offering restrictions requirement of Regulation S; and (iv) it
agrees that, at or prior to confirmation of sales of the Securities, it will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may
not be offered and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of the distribution of
the Securities at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering and the closing date of the
offering, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above
have the meaning given to them in Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S. The Initial Purchaser acknowledges that
the Company, and for purposes of the opinions to be delivered to the Initial
Purchaser pursuant to this Agreement, counsel to the Company and counsel to the
Initial Purchaser, will rely upon the accuracy and truth of the foregoing
representations, and the Initial Purchaser hereby consents to such reliance.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Issuers jointly and
severally agree to indemnify and hold harmless the Initial Purchaser and the
affiliates, directors, officers, agents, representatives and employees of the
Initial Purchaser or their affiliates, and each other person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Initial Purchaser
<PAGE>
-35-
or such other person may become subject under the Act, the Exchange Act or
otherwise, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto or
any application or other document, or any amendment or supplement thereto,
executed by an Issuer or based upon written information furnished by or on
behalf of an Issuer filed in any jurisdiction in order to qualify the
Securities under the securities or "Blue Sky" laws thereof or filed with
any securities association or securities exchange (each an "APPLICATION");
or
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading,
and will reimburse, as incurred, the Initial Purchaser and each such
other person for any legal or other expenses incurred by the Initial Purchaser
or such other person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action subject to the limitations set forth in Section 9(c)
hereof; PROVIDED, HOWEVER, the Issuers will not be liable (i) in any such case
to the extent that any such loss, claim, damage, or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any Memorandum or any amendment or supplement thereto
or any Application in reliance upon and in conformity with written information
concerning the Initial Purchaser furnished to an Issuer by the Initial Purchaser
specifically for use therein or (ii) with respect to the Preliminary Memorandum
or any Final Memorandum, to the extent that any such loss, claim, damage or
liability arises solely from the fact that the Initial Purchaser sold Securities
to a person to whom there was not sent or given a copy of the Final Memorandum
(as amended or supplemented) at or prior to the written confirmation of such
sale if the Company shall have previously furnished copies thereof to the
Initial Purchaser in accordance with Section 5(d) hereof and the Final
Memorandum (as amended or supplemented) would have corrected any such untrue
statement or omission. This indemnity agreement will be in addition to any
liability that the Issuers may otherwise have to the indemnified parties. The
Issuers shall not be li-
<PAGE>
-36-
able under this Section 9 for any settlement of any claim or action effected
without their prior written consent, which shall not be unreasonably withheld
(for purposes of this sentence, it is deemed reasonable to withhold consent if
such settlement (A) does not include an unconditional written release of the
Issuers, in form and substance reasonably satisfactory to the Issuers, from all
liability on claims that are the subject matter of such proceeding or
(B) includes any statement as to an admission of fault, culpability or failure
to act by or on behalf of any Issuer).
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Issuers, their respective directors, their respective officers, affiliates,
agents, representatives and employees or their affiliates and each person, if
any, who controls an Issuer within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act against any losses, claims, damages or
liabilities to which an Issuer or any such director, officer or controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any amendment or
supplement thereto or any Application, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto or any Application, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning the Initial Purchaser, furnished
to an Issuer by the Initial Purchaser specifically for use therein; and subject
to the limitation set forth immediately preceding this clause, will reimburse,
as incurred, any reasonable legal or other expenses incurred by an Issuer or any
such director, officer or controlling person in connection with investigating or
defending against or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability that the Initial
Purchaser may otherwise have to the indemnified parties. The Initial Purchaser
shall not be liable under this Section 9 for any settlement of any claim or
action effected without its consent, which shall not be unreasonably withheld.
The Issuers shall not, without the prior written consent of the Initial
Purchaser, effect any settlement or compromise of any pending or threatened
proceeding in respect of which the Initial Purchaser is or could have been a
party, or indemnity could have been
<PAGE>
-37-
sought hereunder by the Initial Purchaser, unless such settlement (A) includes
an unconditional written release of the Initial Purchaser, in form and substance
reasonably satisfactory to the Initial Purchaser, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such
indemnified party is entitled to indemnification under this Section 9, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 9, notify the indemnifying party of
the commencement thereof in writing; but the omission to so notify the
indemnifying party (i) will not relieve it from any liability under paragraph
(a) or (b) above unless and to the extent such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification
obligation provided in paragraphs (a) and (b) above. In case any such action
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; PROVIDED,
HOWEVER, that if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest (as defined by such counsel), (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after receipt by the indemnifying party of notice of
the institution of such action, then, in each such case, the indemnifying
party shall not have the right to direct the defense of such action on behalf
of such indemnified party or parties and such indemnified party or parties
shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed
to
<PAGE>
-38-
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be
liable for the expenses of more than one separate counsel (in addition to
local counsel) in any one action or separate but substantially similar
actions in the same jurisdiction arising out of the same general allegations
or circumstances, designated by BT Alex. Brown Incorporated in the case of
paragraph (a) of this Section 9 or the Company in the case of paragraph (b)
of this Section 9, representing the indemnified parties under such paragraph
(a) or paragraph (b), as the case may be, who are parties to such action or
actions) or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs
and expenses of any settlement of such action effected by such indemnified
party without the prior written consent of the indemnifying party (which
consent shall not be unreasonably withheld), unless such indemnified party
waived in writing its rights under this Section 9, in which case the
indemnified party may effect such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
benefits received by the Issuers on the one hand and
<PAGE>
-39-
the Initial Purchaser on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (before deducting expenses) received by
the Issuers bear to the total discounts and commissions received by the Initial
Purchaser. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers on the one hand, or the Initial
Purchaser on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
alleged statement or omission, and any other equitable considerations
appropriate in the circumstances. The Issuers and the Initial Purchaser agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), the Initial Purchaser shall not be obligated to
make contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that the Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact, and
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
paragraph (d), each person, if any, who controls the Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall
have the same rights to contribution as the Initial Purchaser, and each director
of an Issuer, each officer of an Issuer and each person, if any, who controls an
Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, shall have the same rights to contribution as the Issuers.
10. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Issuers, their
respective officers and the Initial Purchaser set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Issuers, any of their respective officers or directors, the Initial
Purchaser or any controlling person referred to in Section 9 hereof and
(ii) delivery of and payment for the Securities. The respective agreements,
covenants,
<PAGE>
-40-
indemnities and other statements set forth in Sections 6, 9 and 15 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchaser by notice to the Company given prior to the
Closing Date in the event that any of the Issuers shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on its part to
be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Closing Date:
(i) the Company or any of the Subsidiaries shall have sustained any
loss or interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slowdown or work stoppage
or any legal or governmental proceeding, which loss or interference, in the
sole judgment of the Initial Purchaser, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchaser, any event or development that, individually or in the aggregate,
has or could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of the Company or any of
the Subsidiaries), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) Since January 1, 1998, trading in securities generally on the New
York Stock Exchange, American Stock Exchange or the NASDAQ National Market
shall have been suspended or minimum or maximum prices shall have been
established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchaser, makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Securities as contemplated
by the Final Memorandum; or
<PAGE>
-41-
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASER. The statements
set forth in the last paragraph of the cover page and the third, fifth, sixth
and seventh paragraphs under the heading "Private Placement" in the Final
Memorandum (to the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial Purchaser to the
Issuers for the purposes of Sections 2(a) and 9 hereof.
13. NOTICES. All communications hereunder shall be in writing and,
if sent to the Initial Purchaser, shall be mailed or delivered to BT Alex.
Brown Incorporated, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department, with a copy to Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, Attention: William M. Hartnett; if sent to
the Issuers, shall be mailed or delivered to the Company at 425 So. Ninth
Avenue, City of Industry, CA 91746, Attention: Chief Financial Officer, with a
copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los
Angeles, CA 90071-3144, Attention: Jerome L. Coben.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchaser, the Issuers and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Issuers contained in Section 9 of this Agreement shall also be for the
benefit of the affiliates, directors, officers, agents, representatives and
employees of the Initial Purchaser or their affiliates and any person or persons
<PAGE>
-42-
who control the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchaser
contained in Section 9 of this Agreement shall also be for the benefit of the
directors, officers, affiliates, agents, representatives and employees and their
affiliates of the Company and any person or persons who control the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of Securities from the Initial Purchaser will be deemed a successor
because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
-43-
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company,
the Guarantors set forth below and the Initial Purchaser.
Very truly yours,
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joseph Sortais
-----------------------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
AEROSOL SERVICES COMPANY, INC.
By: /s/ Joseph Sortais
-----------------------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
KOLMAR LABORATORIES, INC.
By: /s/ Joseph Sortais
-----------------------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
PIEDMONT LABORATORIES, INC.
By: /s/ Joseph Sortais
-----------------------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
<PAGE>
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The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT ALEX. BROWN INCORPORATED
By: /s/ CHRISTIE SHEFFIELD
--------------------------
Name: Christie Sheffield
Title: Vice President
<PAGE>
SCHEDULE I
SUBSIDIARIES
Jurisdiction of
Name Stockholder(s) Incorporation
---- -------------- ---------------
Aerosol Services Company, Outsourcing Services California
Inc. Group, Inc.
Kolmar Laboratories, Inc. Outsourcing Services Delaware
Group, Inc.
Piedmont Laboratories, Inc. Outsourcing Services Georgia
Group, Inc.
Kolmar Canada Inc. Kolmar Laboratories, Inc. Canada
Kolmar de Mexico, S.A. de Kolmar Laboratories, Inc. Mexico
C.V.
Kolmer (Aust.) Pty. Ltd. Kolmar Laboratories, Inc. Australia
<PAGE>
SCHEDULE II
UNITED STATES JURISDICTIONS IN WHICH THE
ISSUERS OWN OR LEASE PROPERTY
OSG: Delaware
Aerosol: California
Piedmont: Georgia
Kolmar: Delaware
California
New York
Pennsylvania
<PAGE>
SCHEDULE III
MATERIAL AGREEMENT OF THE ISSUERS
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AEROSOL SERVICES HOLDING CORPORATION
A STOCK CORPORATION
I, the undersigned, for the purpose of incorporating and organizing
a corporation under the General Corporation Law of the State of Delaware, do
hereby certify as follows:
FIRST: The name of the corporation (the "Corporation") is Aerosol
Services Holding Corporation.
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1013 Centre Road, City of Wilmington, County of New
Castle, Delaware 19805. The name of the Corporation's registered agent at
such address is Corporation Service Corporation.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall
have authority to issue is 1,000 shares of Common Stock, par value of $.001
per share.
<PAGE>
FIFTH: Elections of directors need not be by written ballot except
and to the extent provided in the by-laws of the Corporation.
SIXTH: To the full extent permitted by the General Corporation Law
of the State of Delaware or any other applicable laws presently or hereafter
in effect, no director of the Corporation shall be personally liable to the
Corporation or its stockholders for or with respect to any acts or omissions
in the performance of his or her duties as a director of the Corporation.
Any repeal or modification of this Article Sixth shall not adversely affect
any right or protection of a director of the Corporation existing immediately
prior to such repeal or modification.
SEVENTH: Each person who is or was or had agreed to become a
director or officer of the corporation, or each such person who is or was
serving or who had agreed to serve at the request of the Board of Directors
or an officer of the Corporation as an employee or agent of the Corporation
or as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person), shall be indemnified by
the Corporation to the full extent permitted by the General Corporation Law
of the State of Delaware or any other applicable laws as presently or
hereafter in effect. Without limiting the generality or the effect of the
foregoing, the Corporation may enter into one or more agreements with any
person which provide for indemnification greater or different than that
provided in this Article.
2
<PAGE>
Any repeal or modification of this Article Seventh shall not adversely affect
any right or protection existing hereunder immediately prior to such repeal
or modification.
EIGHTH: In furtherance and not in limitation of the rights,
powers, privileges, and discretionary authority granted or conferred by the
General Corporation Law of the State of Delaware or other statutes or laws of
the State of Delaware, the Board of Directors is expressly authorized to
make, alter, amend or repeal the by-laws of the Corporation, without any
action on the part of the stockholders, but the stockholders may make
additional by-laws and may alter, amend or repeal any by-law whether adopted
by them or otherwise. The Corporation may in its by-laws confer powers upon
its Board of Directors in addition to the foregoing and in addition to the
powers and authorities expressly conferred upon the Board of Directors by
applicable law.
NINTH: The Corporation reserves the right at any time and from
time to time to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, and other provisions authorized by the
laws of the State of Delaware at the time in force may be added or inserted,
in the manner now or hereafter prescribed herein or by applicable law; and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other
3
<PAGE>
persons whomsoever by and pursuant to this Certificate of Incorporation in
its present form or as hereafter amended are granted subject to this
reservation.
TENTH: The name and mailing address of the incorporator is
Catherine A. Treinen, 2603 Main Street, Suite 900, Irvine, California 92714.
ELEVENTH: The names and mailing addresses of the persons who are
to serve as directors of the Corporation until the first annual meeting of
stockholders or until their successors are elected and qualified are as
follows:
NAME MAILING ADDRESS
---- ---------------
John H. Morris 620 Newport Center Drive
Suite 1400
Newport Beach, California 92660
Michael S. Gordon 620 Newport Center Drive
Suite 1400
Newport Beach, California 92660
IN WITNESS WHEREOF, I the undersigned, being the incorporator
hereinabove named, do hereby execute this Certificate of Incorporation this
9th day of November, 1993.
/s/ Catherine A. Treinen
-------------------------------
Catherine A. Treinen
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
AEROSOL SERVICES HOLDING CORPORATION
Aerosol Services Holding Corporation, a Delaware corporation,
pursuant to Section 241 of the General Corporation Law of Delaware, hereby
certifies on February 14, 1994, that:
FIRST: The Corporation has not received any payment for any of its
stock.
SECOND: The elected directors of the Corporation have adopted the
following resolution amending the Corporation's Certificate of Incorporation:
FOURTH: The corporation is authorized to issue 1,000,000 shares of
common stock, par value of $.001 per share ("Common Stock") and 30,000 shares
of preferred stock, par value of $.001 per share ("Preferred Stock").
The rights, preferences, privileges and restrictions granted to and
imposed upon Preferred Stock are set forth below in this Article Fourth.
Section 1. DIVIDENDS.
(a) DIVIDENDS. The holders of Preferred Stock shall be entitled to
receive, out of any assets at the time legally available therefor and when
and as declared by the Board of Directors, noncumulative dividends ("Current
Dividends") in cash equal to Two Dollars and Fifty Cents ($2.50) per share
per quarter, and no more, accruing from the date of issuance and payable
quarterly commencing on March 30, 1994 and thereafter on the 30th day of each
June, September, December and March (each a "Dividend Payment Date"). If
Current Dividends are not declared and paid with respect to any Dividend
Payment Date on or before the tenth
5
<PAGE>
day following such Dividend Payment Date, then in lieu of Current Dividends
with respect to such Dividend Payment Date, the holders of Preferred Stock
shall be entitled to receive, out of any assets at the time legally available
therefor and when and as declared by the Board of Directors, cumulative
dividends ("Deferred Dividends") in cash equal to Three Dollars and
Twenty-Five Cents ($3.25) per share, and no more, for the quarter preceding
such Dividend Payment Date, which Deferred Dividends until paid shall be
increased on each subsequent Dividend Payment Data by (i) Two and One-Half
Percent (2.5%) if Current Dividends and all Deferred Dividends are paid with
respect to such subsequent Dividend Payment Date or (ii) Three and
One-Quarter percent (3.25%) if Current Dividends and all Deferred Dividends
are not paid with respect to such subsequent Dividend Payment Date. If any
partial payment is made with respect to Current Dividends and Deferred
Dividends, such payment shall first be applied to Deferred Dividends. If the
Preferred Stock is not outstanding on each day during any quarter, then
dividends accrued or payable for such quarter shall be reduced
proportionately based on the number of days during such quarter in which the
Preferred Stock is outstanding. All Current Dividends and Deferred Dividends
are prior and in preference to any declaration or payment or any distribution
(as defined in Section 1(b) below) on Common Stock. Current Dividends shall
accrue on each share of Preferred Stock from day to day only until the next
Dividend Payment Date. Deferred Dividends shall accrue on each share of
Preferred Stock from day to day from the applicable Dividend Payment Date
until paid. Until all accrued dividends on Preferred Stock have been paid,
or declared and set apart, no distribution shall be paid on, or declared and
set apart for, any Common Stock.
(b) DISTRIBUTION. The term "distribution" as used in this Section 1
means the transfer of cash or property without consideration, whether by way
of dividend or otherwise, payable other than in common Stock, or the purchase
or redemption of shares of the corporation (other than redemptions set forth
in Section 3 below or repurchases of Common Stock held by employees of the
corporation or any of its subsidiaries upon termination of their employment
pursuant to agreements providing for such repurchase) for cash or property.
Section 2. LIQUIDATION RIGHTS.
(a) PREFERRED STOCK PREFERENCE. In the event of any liquidation,
dissolution or winding up of the corporation, whether voluntary or
involuntary, the holders of Preferred Stock shall be entitled to be paid out
of the assets of the corporation available for distribution to its
stockholders, whether such assets are capital, surplus
6
<PAGE>
or earnings, before any payment or declaration and setting apart for payment
of any amount shall be made in respect of Common Stock, an amount equal to
One Hundred Dollars ($100.00) per share, plus an amount equal to all accrued
and unpaid dividends thereon. If upon any liquidation, dissolution, or
winding up of the corporation, whether voluntary or involuntary, the assets
to be distributed to the holders of Preferred Stock shall be insufficient to
permit the payment to such stockholders of the full preferential amounts
stated above, then all of the assets of the corporation to be distributed
shall be distributed among the holders of Preferred Stock in proportion to
the number of shares of Preferred Stock then held by them.
(b) COMMON STOCK PAYMENT OR DISTRIBUTION. After the payment or
distribution to the holders of Preferred Stock of the full preferential
amounts required by subsection 3(a) and if any assets remain in the
corporation, the holders of Common Stock then outstanding shall be entitled
to a payment or distribution of the remaining assets of the corporation.
(c) MERGER. CONSOLIDATION OR SALE OF ASSETS. The merger or
consolidation of the corporation into or with another corporation in which
the corporation shall not survive and the stockholders of the corporation
immediately prior to such transaction shall own less than fifty percent of
the voting stock of the surviving corporation, and the sale, transfer or
lease (but not including a transfer or lease by pledge or mortgage to a bona
fide lender or a transfer by or in connection with a foreclosure by a bona
fide lender) of all or substantially all of the assets of the corporation,
shall be deemed to be a liquidation, dissolution or winding up of the
corporation as those terms as used in this Section 2.
Section 3. REDEMPTION OF PREFERRED STOCK.
(a) OPTIONAL REDEMPTION. At any time after February 14, 1999
[five years after the issuance date] and upon not less than five days prior
notice to holders of Preferred Stock, the corporation may, at the option of
the Board of Directors, redeem all or part of the outstanding shares of
Preferred Stock at a redemption price equal to One Hundred Dollars ($100.00)
per share, together with all accrued and unpaid dividends to and including
the redemption date (the "Redemption Price"). Such notice to a holder of
Preferred Stock (the "Redemption Notice") shall specify the date of
redemption, the Redemption Price and the number of shares of Preferred Stock
of such holder to be redeemed, and shall call upon such holder to surrender
such holder's redeemed stock to the corporation on the redemption date at the
place designated in the Redemption Notice. If less than all of the
outstanding shares of
7
<PAGE>
Preferred Stock are to be redeemed, then the corporation shall redeem a pro
rata portion from each holder of Preferred Stock according to the respective
number of shares of Preferred Stock held by such holder.
(b) MANDATORY REDEMPTION. The corporation shall redeem all outstanding
shares of Preferred Stock at the Redemption Price on the earlier of (i)
February 14, 2005 [eleven years after the issuance date], or (ii) the
refinancing of the corporation's Senior Subordinated Notes (the "Notes") at a
lower interest rate than 12%; PROVIDED that the terms of such refinancing
shall not reduce the average maturity of the Notes outstanding on the
effective date of such refinancing or require amortization of principal to
commence prior to December 31, 2001. The corporation shall give a Redemption
Notice to each holder of Preferred Stock at least five days prior thereto.
(c) CHANCE OF CONTROL REDEMPTION.
(l) A "Change of Control" shall be deemed to have occurred on the
date on which the stockholders of the corporation on the date of initial
issuance of Preferred Stock (the "Initial Stockholders") and their affiliates
cease to directly or indirectly beneficially own 50% or more of the
outstanding voting power of the corporation; PROVIDED that capital stock of
the corporation issued to, or held by an employee stock ownership plan of the
corporation or any of its subsidiaries, shall be disregarded for purposes of
this definition, and PROVIDED, FURTHER, that capital stock of the corporation
sold or otherwise transferred by an Initial Stockholder or any of its
affiliates to such employee stock ownership plan shall be deemed held by an
Initial Stockholder. The corporation shall give written notice of a Change
of Control to the holders of Preferred Stock within ten days thereafter.
(2) At the option of the holders of a majority of Preferred Stock
exercised by written notice (the "Election Notice") given to the corporation
within thirty days after the Change of Control, the corporation shall redeem
all outstanding shares of Preferred Stock at the Redemption Price on the
redemption date specified in the Election Notice (which Redemption Date shall
be not less than sixty nor more than ninety days after the Change of
Control). Upon receipt of the Election Notice, the corporation shall give a
Redemption Notice to each holder of Preferred Stock.
(d) RIGHTS OF HOLDERS AFTER REDEMPTION DATE. On or after the
redemption date, each holder of shares of Preferred Stock called for
redemption shall surrender the certificate evidencing such shares to the
corporation at the place
8
<PAGE>
designated in the Redemption Notice and shall thereupon be entitled to
receive payment of the Redemption Price. From and after the redemption date
(unless the corporation fails to pay the Redemption Price in which case all
the rights of the holders of Preferred Stock shall continue), the holders of
the shares of Preferred Stock called for redemption shall cease to have any
rights as holders of Preferred Stock of the corporation except the right to
receive, without interest, the Redemption Price thereof upon surrender of
certificates representing such shares, and such shares shall not thereafter
be transferred (except with the consent of the corporation) on the books of
the corporation and shall not be deemed outstanding for any purpose
whatsoever. Any money deposited for the redemption of shares of Preferred
Stock which is unclaimed by a holder of Preferred Stock for two years after
the redemption date thereof shall be returned to the corporation.
(e) RESTRICTIONS ON REDEMPTION. The corporation shall not redeem any
Preferred Stock where such action would be in violation of applicable law.
Section 4. VOTING RIGHTS. Except as otherwise required by law, the
holders of Preferred Stock shall not be entitled to vote on any matter.
Except as otherwise required by law, in all cases where the holders of
Preferred Stock have the right to vote, the holders of Preferred Stock and
the holders of Common Stock shall vote together and not as separate classes
and the holders of Preferred Stock shall be entitled to one vote for each
share of Preferred Stock held by them.
Section 5. NO REISSUANCE OF PREFERRED STOCK. Shares of Preferred
Stock acquired by the corporation by reason of redemption, purchase,
conversion or otherwise shall not be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the corporation shall
be authorized to issue.
THIRD: The foregoing amendment to the Certificate of Incorporation
of the Corporation has been duly adopted in accordance with the provisions of
Section 241 of the General Corporation Law of Delaware.
9
<PAGE>
IN WITNESS WHEREOF, Aerosol Services Holding Corporation, by its
directors, has caused its name to be hereunto subscribed as of the date first
above written.
/s/ Drew Adams
----------------------------
Drew Adams, Director
/s/ Michael S. Gordon
----------------------------
Michael S. Gordon, Director
/s/ John H. Morris
----------------------------
John H. Morris, Director
10
<PAGE>
CERTIFICATE OF MERGER
OF
AEROSOL COMPANIES HOLDING CORPORATION,
a Delaware corporation
INTO
AEROSOL SERVICES HOLDING CORPORATION,
a Delaware corporation
(UNDER SECTION 251 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
Aerosol Services Holding Corporation, a Delaware corporation,
hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) Aerosol Services Holding Corporation, a Delaware
corporation ("ASHC"); and
(b) Aerosol Companies Holding Corporation, a Delaware
corporation ("ACHC").
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by ASHC and by ACHC in accordance with
the provisions of subsection (c) of Section 251 of the General Corporation
Law of the State of Delaware.
3. The surviving corporation is ASHC.
4. The certificate of incorporation of ASHC shall be the
certificate of incorporation of the surviving corporation, except that:
(a) Article First of ASHC's certificate of incorporation shall be
amended to read as follows:
"FIRST: The name of the corporation is Outsourcing Services Group,
Inc. (hereinafter called the "Corporation")."
11
<PAGE>
(b) Article Fourth of ASHC's certificate of incorporation shall be
amended to read as follows:
"FOURTH: The corporation is authorized to issue two classes of
shares designated respectively "Common Stock" and "Preferred
Stock." The Common Stock shall consist of 2,000,000 authorized
shares, par value of $.001 per share. The Preferred Stock shall
consist of 30,000 authorized shares and shall be issued in series.
The first such series shall be designated "Series A Preferred
Stock" and shall consist of 3,750 shares, par value of $.001 per
share. The second series shall be designated "Series B Preferred
Stock" and shall consist of 26,250 shares, par value of $.001 per
share.
The rights, preferences, privileges and restrictions granted to and
imposed upon Preferred Stock are set forth below in this Article
Fourth.
Section 1. DIVIDENDS.
(a) DIVIDENDS -- SERIES A PREFERRED STOCK. The holders of
Series A Preferred Stock shall be entitled to receive, out of any
assets at the time legally available therefor and when and as
declared by the Board of Directors, noncumulative dividends
("Series A Current Dividends") in cash equal to Two Dollars and
Fifty Cents ($2.50) per share per quarter, and no more, accruing
from February 14, 1994 and payable quarterly commencing on March
30, 1994 and thereafter on the 30th day of each June, September,
December and March (each a "Series A Dividend Payment Date"). If
Series A Current Dividends are not declared and paid with respect
to any Series A Dividend Payment Date on or before the tenth day
following such Series A Dividend Payment Date, then in lieu of
Series A Current Dividends with respect to such Series A Dividend
Payment Date, the holders of Series A Preferred Stock shall be
entitled to receive, out of any assets at the time legally
available therefor and when and as declared by the Board of
Directors, cumulative dividends ("Series A Deferred Dividends") in
cash equal to Three Dollars and Twenty-Five Cents ($3.25) per
share, and no more, for the quarter preceding such Series A
Dividend Payment Date, which Series A Deferred Dividends until paid
shall be increased on each subsequent Series A Dividend Payment
Date by (i) Two and One-Half Percent (2.5%) if Series A Current
Dividends and all Series A Deferred Dividends are paid with respect
to such subsequent Series A Dividend Payment Date or (ii) Three and
One-Quarter percent (3.25%) if Series A Current Dividends and all
Series A Deferred Dividends are not paid with respect to such
subsequent Series A Dividend Payment Date. If any partial payment
is made with respect to Series
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<PAGE>
A Current Dividends and Series A Deferred Dividends, such payment
shall first be applied to Series A Deferred Dividends. If the
Series A Preferred Stock is not outstanding on each day during any
quarter, then dividends accrued or payable for such quarter shall
be reduced proportionately based on the number of days during such
quarter in which the Series A Preferred Stock is outstanding. All
Series A Current Dividends and Series A Deferred Dividends are
prior and in preference to any declaration or payment of any
distribution (as defined in Section 1(c) below) on Common Stock.
Series A Current Dividends shall accrue on each share of Series A
Preferred Stock from day to day only until the next Series A
Dividend Payment Date. Series A Deferred Dividends shall accrue on
each share of Series A Preferred Stock from day to day from the
applicable Series A Dividend Payment Date until paid. Until all
accrued dividends on Series A Preferred Stock have been paid, or
declared and set apart, no distribution shall be paid on, or
declared and set apart for, any Common Stock.
(b) DIVIDENDS -- SERIES B PREFERRED STOCK. The holders of
Series B Preferred Stock shall be entitled to receive, out of any
assets at the time legally available therefor and when and as
declared by the Board of Directors, cumulative dividends ("Series B
Dividends"), in cash equal to Two Dollars ($2.00) per share per
quarter, and no more, accruing from June 30, 1997 and payable
quarterly commencing on September 30, 1997 and thereafter on the
30th day of each December, March, June and September until
redemption of the Series B Preferred Stock. If the Series B
Preferred Stock is not outstanding on each day of any quarter, then
dividends accrued or payable for such quarter shall be reduced
proportionately based on the number of days during such quarter in
which the Series B Preferred Stock is outstanding. The Series B
Dividends shall accrue and be cumulative whether or not they have
been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available therefore. All
Series B Dividends are prior and in preference to any declaration
or payment of any distribution (as defined in Section 1(c) below)
on Common Stock. Until all accrued dividends on Series B Preferred
Stock have been paid, or declared and set apart, no distribution
shall be paid on, or declared and set apart for, any Common Stock.
Notwithstanding anything to the contrary contained herein, the
Board of Directors shall not be required to declare and pay
dividends on the Series B Preferred Stock solely because it has
declared and paid dividends on the Series A Preferred Stock. The
Board of Directors shall timely declare and pay dividends on Series
B Preferred Stock as described in this Section 1(b) from assets
legally available therefore unless prevented by restrictions or
limitations imposed from time to time by lenders to the Corporation.
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<PAGE>
(c) DISTRIBUTION. The term "distribution" as used in this
Section 1 means the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable
other than in Common Stock or the purchase or redemption of shares
of the Corporation (other than redemptions set forth in Section 3
below or repurchases of Common Stock held by employees of the
Corporation or any of its subsidiaries upon termination of their
employment pursuant to agreements providing for such repurchase)
for cash or property.
Section 2. LIQUIDATION RIGHTS.
(a) PREFERRED STOCK PREFERENCE. In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of Preferred Stock shall be
entitled to be paid out of the assets of the Corporation available
for distribution to its stockholders, whether such assets are
capital, surplus or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of
Common Stock, with respect to holders of (1) the Series A Preferred
Stock, an amount equal to One Hundred Dollars ($100.00) per share,
plus an amount equal to all accrued and unpaid dividends thereon
through the date of redemption (the "Series A Redemption Price"),
and (2) the Series B Preferred Stock, an amount equal to One
Hundred Forty-Five and 97/100 Dollars ($145.97) per share, plus an
amount equal to all accrued and unpaid dividends thereon through
the date of redemption (the "Series B Redemption Price"; the Series
A Redemption Price and the Series B Redemption Price are each a
"Redemption Price"). If upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed to the holders of Preferred Stock
shall be insufficient to permit the payment to such stockholders of
the full preferential amounts stated above, then all of the assets
of the Corporation to be distributed shall be distributed among the
holders of Preferred Stock in proportion to the amounts due to such
holders hereunder.
(b) COMMON STOCK PAYMENT OR DISTRIBUTION. After the payment
or distribution to the holders of Preferred Stock of the full
preferential amounts required by Section 2(a) and if any assets
remain in the Corporation, the holders of Common Stock then
outstanding shall be entitled to a payment or distribution of the
remaining assets of the Corporation.
(c) MERGER, CONSOLIDATION OR SALE OF ASSETS. The merger or
consolidation of the Corporation into or with another corporation
in which the
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<PAGE>
Corporation shall not survive and the stockholders of the
Corporation immediately prior to such transaction shall own less
than fifty percent of the voting stock of the surviving
Corporation, and the sale, transfer or lease (but not including a
transfer or lease by pledge or mortgage to a bona fide lender or a
transfer by or in connection with a foreclosure by a bona fide
lender) of all or substantially all of the assets of the
Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation as those terms are used in this
Section 2 and Section 3.
Section 3. REDEMPTION OF PREFERRED STOCK.
(a) OPTIONAL REDEMPTION. At any time after the completion of
an offering by the Corporation of its shares of Common Stock
pursuant to an effective registration statement filed with the
Securities and Exchange Commission or at any time after June 30,
2000, and upon not less than five days prior notice to holders of
Preferred Stock of a Series thereof, the Corporation may, at the
option of the Board of Directors, redeem all or part of the
outstanding shares of Preferred Stock or a Series thereof at the
applicable Redemption Price. Such notice to a holder of Preferred
Stock (the "Redemption Notice") shall specify the date of
redemption, the applicable Redemption Price and the number of
shares of Preferred Stock of such holder to be redeemed, and shall
call upon such holder to surrender such holder's redeemed stock to
the Corporation on the Redemption Date at the place designated in
the Redemption Notice. If less than all of the outstanding shares
of Preferred Stock or a Series thereof are to be redeemed, then the
Corporation shall redeem a pro rata portion from each holder of
Preferred Stock or Series thereof according to the respective
number of shares of Preferred Stock or Series thereof held by such
holder.
(b) MANDATORY REDEMPTION. The Corporation shall redeem all
outstanding shares of Preferred Stock at the applicable Redemption
Price on the earlier to occur of (i) a liquidation, dissolution or
winding up of the Corporation, (ii) an initial public offering of
the Corporation's common stock pursuant to an effective
registration statement registered under the Securities Exchange Act
of 1933, which results in net proceeds to the Corporation of not
less than 20,000,000 and (iii) June 30, 2006. The Corporation
shall give a Redemption Notice to each holder of Preferred Stock at
least five days prior thereto.
(c) CHANGE OF CONTROL REDEMPTION.
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<PAGE>
(1) A "Change of Control" shall be deemed to have
occurred on the date on which the stockholders of the Corporation
on the day immediately preceding the event that gives rise to the
Change of Control (the "Prior Stockholders") and their affiliates
cease to directly or indirectly beneficially own 50% or more of the
outstanding voting power of the Corporation; PROVIDED that capital
stock of the Corporation issued to, or held by an employee stock
ownership plan of the Corporation or any of its subsidiaries, shall
be disregarded for purposes of this definition, and PROVIDED,
FURTHER, that capital stock of the Corporation sold or otherwise
transferred by a Prior Stockholder or any of its affiliates to such
employee stock ownership plan shall be deemed held by a Prior
Stockholder. The Corporation shall give written notice of a Change
of Control to the holders of Preferred Stock within ten days
thereafter.
(2) At the option of the holders of a majority of the
Preferred Stock exercised by written notice (the "Election Notice")
given to the Corporation within thirty days after the Change of
Control, the Corporation shall redeem (a "Change of Control
Redemption") all outstanding shares of Preferred Stock at the
applicable Redemption Price on the Redemption Date specified in the
Election Notice (which Redemption Date shall be not less than sixty
nor more than ninety days after the Change of Control). Upon
receipt of the Election Notice, the Corporation shall give a
Redemption Notice to each holder of Preferred Stock.
(d) RIGHTS OF HOLDERS AFTER REDEMPTION DATE. On or after
the Redemption Date, each holder of shares of Preferred Stock
called for redemption shall surrender the certificate evidencing
such shares to the Corporation at the place designated in the
Redemption Notice and shall thereupon be entitled to receive
payment of the applicable Redemption Price. From and after the
Redemption Date (unless the Corporation fails to pay the applicable
Redemption Price in which case all the rights of the holders of
Preferred Stock shall continue), the holders of the shares of
Preferred Stock called for redemption shall cease to have any
rights as holders of Preferred Stock of the Corporation except the
right to receive, without interest, the applicable Redemption Price
thereof upon surrender of certificates representing such shares,
and such shares shall not thereafter be transferred (except with
the consent of the Corporation) on the books of the Corporation and
shall not be deemed outstanding for any purposes whatsoever. Any
money deposited for the redemption of shares of Preferred Stock
which is unclaimed by a holder of Preferred Stock for two years
after the Redemption Date thereof shall be returned to the
Corporation.
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<PAGE>
(e) RESTRICTIONS ON REDEMPTION. The Corporation shall not
redeem any Preferred Stock where such action would be in violation
of applicable law.
Section 4. VOTING RIGHTS. Except as otherwise required by
law, the holders of Preferred Stock shall not be entitled to vote
on any matter. Except as otherwise required by law, in all cases
where the holders of Preferred Stock have the right to vote, the
holders of Preferred Stock and the holders of Common Stock shall
vote together and not as separate classes and the holders of
Preferred Stock shall be entitled to one vote for each share of
Preferred Stock held by them.
Section 5. NO REISSUANCE OF PREFERRED STOCK. Shares of
Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall not be
reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Corporation shall be
authorized to issue."
5. The executed Agreement and Plan of Merger is on file at the
principal place of business of ASHC at 425 Ninth Avenue, City of Industry,
California 91746.
6. A copy of the Agreement and Plan of Merger will be furnished
by ASHC, on request and without cost, to any stockholder of ASHC or ACHC.
IN WITNESS WHEREOF, ASHC has caused this Certificate to be signed
by Joseph W. Sortais, its Chief Financial Officer, and attested by Walter K.
Lim, its President, on the 27th day of June, 1997.
AEROSOL SERVICES HOLDING CORPORATION, a
Delaware corporation
By: /s/ Joseph W. Sortais
---------------------------------
Joseph W. Sortais
Chief Financial Officer
17
<PAGE>
ATTEST:
By: /s/ Walter K. Lim
----------------------------
Walter K. Lim
President
18
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OUTSOURCING SERVICES GROUP, INC.
Outsourcing Services Group, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The Board of Directors of the Corporation and the stockholders of
the Corporation have duly adopted resolutions setting forth a proposed
amendment to Article FOURTH of the Certificate of Incorporation of the
Corporation. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that Article FOURTH of the Corporation's Certificate of
Incorporation is hereby amended to read in its entirety as follows:
"FOURTH: The corporation is authorized to issue two classes of shares
designated respectively "Common Stock" and "Preferred Stock." The
Common Stock shall consist of 6,000,000 authorized shares, par value
of $.001 per share. The Preferred Stock shall consist of 30,000
authorized shares and shall be issued in series. The first such
series shall be designated "Series A Preferred Stock" and shall
consist of 3,750 shares, par value of $.001 per share. The second
series shall be designated "Series B Preferred Stock" and shall
consist of 26,250 shares, par value of $.001 per share.
The rights, preferences, privileges and restrictions granted to
and imposed upon Preferred Stock are set forth below in this Article
Fourth.
Section 6. DIVIDENDS.
(a) DIVIDENDS -- SERIES A PREFERRED STOCK. The holders of
Series A Preferred Stock shall be entitled to receive, out of any
assets at the time legally available therefor and when and as declared
by the Board of Directors, noncumulative dividends ("Series A Current
Dividends") in cash equal to Two Dollars and Fifty Cents ($2.50) per
share per quarter, and no more, accruing from February 14, 1994 and
payable quarterly commencing on March 30, 1994 and thereafter on the
30th day of each June, September, December and March (each a "Series A
Dividend Payment Date"). If Series A Current Dividends are
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not declared and paid with respect to any Series A Dividend Payment Date
on or before the tenth day following such Series A Dividend Payment
Date, then in lieu of Series A Current Dividends with respect to such
Series A Dividend Payment Date, the holders of Series A Preferred
Stock shall be entitled to receive, out of any assets at the time
legally available therefor and when and as declared by the Board of
Directors, cumulative dividends ("Series A Deferred Dividends") in
cash equal to Three Dollars and Twenty-Five Cents ($3.25) per share,
and no more, for the quarter preceding such Series A Dividend Payment
Date, which Series A Deferred Dividends until paid shall be increased
on each subsequent Series A Dividend Payment Date by (i) Two and One-
Half Percent (2.5%) if Series A Current Dividends and all Series A
Deferred Dividends are paid with respect to such subsequent Series A
Dividend Payment Date or (ii) Three and One-Quarter percent (3.25%) if
Series A Current Dividends and all Series A Deferred Dividends are not
paid with respect to such subsequent Series A Dividend Payment Date.
If any partial payment is made with respect to Series A Current
Dividends and Series A Deferred Dividends, such payment shall first be
applied to Series A Deferred Dividends. If the Series A Preferred
Stock is not outstanding on each day during any quarter, then
dividends accrued or payable for such quarter shall be reduced
proportionately based on the number of days during such quarter in
which the Series A Preferred Stock is outstanding. All Series A
Current Dividends and Series A Deferred Dividends are prior and in
preference to any declaration or payment of any distribution (as
defined in Section 1(c) below) on Common Stock. Series A Current
Dividends shall accrue on each share of Series A Preferred Stock from
day to day only until the next Series A Dividend Payment Date. Series
A Deferred Dividends shall accrue on each share of Series A Preferred
Stock from day to day from the applicable Series A Dividend Payment
Date until paid. Until all accrued dividends on Series A Preferred
Stock have been paid, or declared and set apart, no distribution shall
be paid on, or declared and set apart for, any Common Stock.
(b) DIVIDENDS -- SERIES B PREFERRED STOCK. The holders of
Series B Preferred Stock shall be entitled to receive, out of any
assets at the time legally available therefor and when and as declared
by the Board of Directors, cumulative dividends ("Series B
Dividends"), in cash equal to Two Dollars ($2.00) per share per
quarter, and no more, accruing from June 30, 1997 and payable
quarterly commencing on September 30, 1997 and thereafter on the 30th
day of each December, March, June and September until redemption of
the Series B Preferred Stock. If the Series B Preferred Stock is not
outstanding on each day of any quarter, then dividends accrued or
payable for such quarter shall be reduced proportionately based on the
number of days during such quarter in which the Series B Preferred
Stock is outstanding. The Series B Dividends shall
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accrue and be cumulative whether or not they have been declared and
whether or not there are profits, surplus or other funds of the
Corporation legally available therefore. All Series B Dividends are
prior and in preference to any declaration or payment of any
distribution (as defined in Section 1(c) below) on Common Stock. Until
all accrued dividends on Series B Preferred Stock have been paid, or
declared and set apart, no distribution shall be paid on, or declared
and set apart for, any Common Stock. Notwithstanding anything to the
contrary contained herein, the Board of Directors shall not be required
to declare and pay dividends on the Series B Preferred Stock solely
because it has declared and paid dividends on the Series A Preferred
Stock. The Board of Directors shall timely declare and pay dividends on
Series B Preferred Stock as described in this Section 1(b) from assets
legally available therefore unless prevented by restrictions or
limitations imposed from time to time by lenders to the Corporation.
(c) DISTRIBUTION. The term "distribution" as used in this
Section 1 means the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other
than in Common Stock or the purchase or redemption of shares of the
Corporation (other than redemptions set forth in Section 3 below or
repurchases of Common Stock held by employees of the Corporation or
any of its subsidiaries upon termination of their employment pursuant
to agreements providing for such repurchase) for cash or property.
Section 7. LIQUIDATION RIGHTS.
(a) PREFERRED STOCK PREFERENCE. In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of Preferred Stock shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, whether such assets are capital,
surplus or earnings, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of Common
Stock, with respect to holders of (1) the Series A Preferred Stock, an
amount equal to One Hundred Dollars ($100.00) per share, plus an
amount equal to all accrued and unpaid dividends thereon through the
date of redemption (the "Series A Redemption Price"), and (2) the
Series B Preferred Stock, an amount equal to One Hundred Forty-Five
and 97/100 Dollars ($145.97) per share, plus an amount equal to all
accrued and unpaid dividends thereon through the date of redemption
(the "Series B Redemption Price"; the Series A Redemption Price and
the Series B Redemption Price are each a "Redemption Price"). If upon
any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed to the holders
of Preferred Stock shall be insufficient
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to permit the payment to such stockholders of the full preferential
amounts stated above, then all of the assets of the Corporation to be
distributed shall be distributed among the holders of Preferred Stock in
proportion to the amounts due to such holders hereunder.
(b) COMMON STOCK PAYMENT OR DISTRIBUTION. After the payment or
distribution to the holders of Preferred Stock of the full
preferential amounts required by Section 2(a) and if any assets remain
in the Corporation, the holders of Common Stock then outstanding shall
be entitled to a payment or distribution of the remaining assets of
the Corporation.
(c) MERGER, CONSOLIDATION OR SALE OF ASSETS. The merger or
consolidation of the Corporation into or with another corporation in
which the Corporation shall not survive and the stockholders of the
Corporation immediately prior to such transaction shall own less than
fifty percent of the voting stock of the surviving Corporation, and
the sale, transfer or lease (but not including a transfer or lease by
pledge or mortgage to a bona fide lender or a transfer by or in
connection with a foreclosure by a bona fide lender) or all or
substantially all of the assets of the Corporation, shall be deemed to
be a liquidation, dissolution or winding up of the Corporation as
those terms are used in this Section 2 and Section 3.
Section 8. REDEMPTION OF PREFERRED STOCK.
(a) OPTIONAL REDEMPTION. At any time after the completion of an
offering by the Corporation of its shares of Common Stock pursuant to
an effective registration statement filed with the Securities and
Exchange Commission or at any time after June 30, 2000, and upon not
less than five days prior notice to holders of Preferred Stock of a
Series thereof, the Corporation may, at the option of the Board of
Directors, redeem all or part of the outstanding shares of Preferred
Stock or a Series thereof at the applicable Redemption Price. Such
notice to a holder of Preferred Stock (the "Redemption Notice") shall
specify the date of redemption, the applicable Redemption Price and
the number of shares of Preferred Stock of such holder to be redeemed,
and shall call upon such holder to surrender such holder's redeemed
stock to the Corporation on the Redemption Date at the place
designated in the Redemption Notice. If less than all of the
outstanding shares of Preferred Stock or a Series thereof are to be
redeemed, then the Corporation shall redeem a pro rata portion from
each holder of Preferred Stock or Series thereof according to the
respective number of shares of Preferred Stock or Series thereof held
by such holder.
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(b) MANDATORY REDEMPTION. The Corporation shall redeem all
outstanding shares of Preferred Stock at the applicable Redemption
Price on the earlier to occur of (i) a liquidation, dissolution or
winding up of the Corporation, (ii) an initial public offering of the
Corporation's common stock pursuant to an effective registration
statement registered under the Securities Exchange Act of 1933, which
results in net proceeds to the Corporation of not less than
$20,000,000 and (iii) June 30, 2010. The Corporation shall give a
Redemption Notice to each holder of Preferred Stock at least five days
prior thereto.
(c) CHANGE OF CONTROL REDEMPTION.
(1) A "Change of Control" shall be deemed to have occurred
on the date on which the stockholders of the Corporation on the day
immediately preceding the event that gives rise to the Change of
Control (the "Prior Stockholders") and their affiliates cease to
directly or indirectly beneficially own 50% or more of the
outstanding voting power of the Corporation; PROVIDED that capital
stock of the Corporation issued to, or held by an employee stock
ownership plan of the Corporation or any of its subsidiaries, shall
be disregarded for purposes of this definition, and PROVIDED,
FURTHER, that capital stock of the Corporation sold or otherwise
transferred by a Prior Stockholder or any of its affiliates to such
employee stock ownership plan shall be deemed held by a Prior
Stockholder. The Corporation shall give written notice of a Change
of Control to the holders of Preferred Stock within ten days
thereafter.
(2) At the option of the holders of a majority of the
Preferred Stock exercised by written notice (the "Election Notice")
given to the Corporation within thirty days after the Change of
Control, the Corporation shall redeem (a "Change of Control
Redemption") all outstanding shares of Preferred Stock at the
applicable Redemption Price on the Redemption Date specified in the
Election Notice (which Redemption Date shall be not less than sixty
nor more than ninety days after the Change of Control). Upon
receipt of the Election Notice, the Corporation shall give a
Redemption Notice to each holder of Preferred Stock.
(d) RIGHTS OF HOLDERS AFTER REDEMPTION DATE. On or after the
Redemption Date, each holder of shares of Preferred Stock called for
redemption shall surrender the certificate evidencing such shares to
the Corporation at the
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place designated in the Redemption Notice and shall thereupon be
entitled to receive payment of the applicable Redemption Price. From
and after the Redemption Date (unless the Corporation fails to pa the
applicable Redemption Price in which call all the rights of the holders
of Preferred Stock shall continue), the holders of the shares of
Preferred Stock called for redemption shall cease to have any rights as
holders of Preferred Stock of the Corporation except the right to
receive, without interest, the applicable Redemption Price thereof upon
surrender of certificates representing such shares, and such shares
shall not thereafter be transferred (except with the consent of the
Corporation) on the books of the Corporation and shall not be deemed
outstanding for any purposes whatsoever. Any money deposited for the
redemption of shares of Preferred Stock which is unclaimed by a holder
of Preferred Stock for two years after the Redemption Date thereof shall
be returned to the Corporation.
(e) RESTRICTIONS ON REDEMPTION. The Corporation not redeem any
Preferred Stock where such action would be in violation of applicable
law.
Section 9. VOTING RIGHTS. Except as otherwise required by law,
the holders of Preferred Stock shall not be entitled to vote on any
matter. Except as otherwise required by law, in all cases where the
holders of Preferred Stock have the right to vote, the holders of
Preferred Stock and the holders of Common Stock shall vote together
and not as separate classes and the holders of Preferred Stock shall
be entitled to one vote for each share of Preferred Stock held by
them.
Section 10. NO REISSUANCE OF PREFERRED STOCK. Shares of
Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall not be reissued, and all such
shares shall be cancelled, retired and eliminated from the shares
which the Corporation shall be authorized to issue."
2. The necessary number of issued and outstanding shares required by
statute were voted in favor of the amendment.
3. Such amendment was duly adopted in accordance with the provisions of
Section 242 and 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Outsourcing Services Group, Inc. has caused this
certificate to be signed by Joseph Sortais, its Chief Financial Officer, this
8th day of January, 1998.
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OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joseph Sortais
---------------------------------------
Joseph Sortais, Chief Financial Officer
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EXHIBIT 3.2
AEROSOL SERVICES HOLDING CORPORATION
BY-LAWS
<PAGE>
AEROSOL SERVICES HOLDING CORPORATION
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 6. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II - DIRECTORS
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Number and Term of Office. . . . . . . . . . . . . . . . . . . . 4
Section 3. Vacancies and New Directorships. . . . . . . . . . . . . . . . . 5
Section 4. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Written Action . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. Participation in Meetings by Conference Telephone. . . . . . . . 6
Section 9. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 11. Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III - NOTICES
Section 1. Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE IV - OFFICERS
Section 1. Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Succession . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Authority and Duties . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6. President. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7. Execution of Documents and Action with Respect to Securities
of Other Corporations. . . . . . . . . . . . . . . . . . . . . . 11
Section 8. Vice President . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9. Secretary and Assistant Secretaries. . . . . . . . . . . . . . . 12
Section 10. Treasurer and Assistant Treasurers . . . . . . . . . . . . . . . 13
Section 11. Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 12. General Counsel. . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V - STOCK
Section 1. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3. Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . 15
Section 4. Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI - GENERAL PROVISIONS
Section 1. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3. Reliance upon Books, Reports and Records . . . . . . . . . . . . 18
Section 4. Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII - AMENDMENTS
Section 1. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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AEROSOL SERVICES HOLDING CORPORATION
BY-LAWS
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE OF MEETINGS. All meetings of the
stockholders for the election of directors or for any other purpose shall be
held at such time and place, within or without the State of Delaware, as may
be authorized by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders,
commencing with the year 1995, shall be held on the first Tuesday in May if
not a legal holiday, and if a legal holiday, then on the next business day
following, at 10:00 a.m., or at such other date and time as shall be
designated from time to time by the Board of Director, at which meeting the
stockholders shall elect by a plurality vote by the directors to succeed
those whose terms expire and shall transact such other business as may
properly be brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by Certificate
of Incorporation, may be called by the Board of Directors, the Chairman of
the Board
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or the President, and shall be called by the President or the Secretary at
the request in writing of stockholders owning not less than ten percent in
amount of entire capital stock of the Corporation issued and outstanding and
entitled to vote. Such request shall be sent to the President and the
Secretary and shall state the purpose or purposes of the proposed meeting.
Any special meeting of stockholders shall be held at such place, on such
date, and at such time as the Chairman of the Board, the President or the
Secretary, as the case may be, shall fix.
Section 4. NOTICE OF MEETINGS. Written notice of every meeting of the
stockholders, stating the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which this meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting,
except as otherwise provided herein or by law. When a meeting is adjourned
to another place, date or time, written notice need not be given of the
adjourned meeting if the place, date and time thereof are announced at the
meeting at which the adjournment is taken; provided, however, that if the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have
been transacted at the original meeting.
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Section 5. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by law or by the
Certificate of Incorporation. If, however, such quorum 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 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.
Section 6. VOTING. Except as otherwise provided by law or by the
Certificate of Incorporation, each stockholder shall be entitled at every
meeting of the stockholders to one vote for each share of stock having voting
power standing in the name of such stockholder on the books of the
Corporation on the record date for the meeting and such votes may be cast
either in person or by written proxy. Every proxy must be executed in writing
by the stockholder or his or her duly authorized attorney. Such proxy shall
be filed with the Secretary of the Corporation before or at the time of the
meeting. The vote upon any question brought before a meeting of the
stockholders, except as otherwise required by these by-laws, may be by voice
vote. Every vote taken by written ballot shall be counted by one or more
inspectors of election appointed by the Board of Directors. When a quorum is
present at any
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meeting, the vote of the holders of a majority of the stock which has voting
power present in person or represented by proxy and which has actually voted
shall decide any question properly brought before such meeting, unless the
question is one upon which by express provision of law, the Certificate of
Incorporation or these by-laws, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
ARTICLE II
DIRECTORS
Section 1. POWERS. The business and affairs of the Corporation shall
be managed by or under the direction of 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 law or by the Certificate of Incorporation directed or
required to be exercised or done by the stockholders.
Section 2. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of one or more members. The number of directors shall be fixed by
resolution of the Board of Directors or by the stockholders at the annual
meeting or a special meeting. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 3 of this Article,
and each director elected shall hold office until his successor is elected
and qualified, except as required by law. Any decrease in the authorized
number of directors shall not be effective until
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the expiration of the term of the directors then in office, unless, at the
time of such decrease there shall be vacancies on the Board which are being
eliminated by such decrease.
Section 3. VACANCIES AND NEW DIRECTORSHIPS. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors which occur between annual meetings of the stockholders may be
filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so elected shall
hold office until the next annual meeting of the stockholders and until their
successors are elected and qualified, except as required by law.
Section 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice immediately after the annual meeting of the
stockholders and at such other time and place as shall from time to time be
determined by the Board of Directors.
Section 5. SPECIAL MEETINGS. Special Meetings of the Board of
Directors may be called by the Chairman of the Board or the President on one
day's notice to each director by whom such notice is not waived, given either
personally or by mail, telegram, telephone, or facsimile, shall be called by
the President or the Secretary in like manner and on like notice on the
written request of any two directors.
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Section 6. QUORUM. At all meetings of the Board of Directors, a
majority of the total number of directors then in office shall constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time to another place, time or date, without notice
other than announcement at the meeting, until a quorum shall be present.
Section 7. WRITTEN ACTION. 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 or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes or proceedings of the Board or Committee.
Section 8. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any
such committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
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Section 9. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation
and each to have such lawfully delegable powers and duties as the Board may
confer. Each such committee shall serve at the pleasure of the Board of
Directors. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. Except as otherwise provided by law, any
such committee, to the extent provided in the 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. Any committee or committees so designated
by the Board shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Unless otherwise
prescribed by the Board of Directors, a majority of the members of the
committee shall constitute a quorum for the transaction of business, and the
act of a majority of the members present at a meeting at which there is a
quorum shall be the act of such committee. Each committee shall prescribe
its own rules for calling and holding meetings and its method of procedure,
subject to any rules prescribed by the Board of Directors, and shall keep a
written record of all actions taken by it.
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Section 10. COMPENSATION. The Board of Directors may establish such
compensation for, and reimbursement of the expenses of, directors for
attendance at meetings of the Board of Directors or committees, or for other
services by directors to the Corporation, as the Board of Directors may
determine.
Section 11. RULES. The Board of Directors may adopt such special rules
and regulations for the conduct of their meetings and the management of the
affairs of the Corporation as they may deem proper, not inconsistent with law
or these by-laws.
ARTICLE III
NOTICES
Section 1. GENERALLY. Whenever by law or under the provisions of the
Certificate of Incorporation or these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, 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 United States
mail. Notice to directors may also be given by telegram, telephone, or
facsimile.
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Section 2. WAIVERS. Whenever any notice is required to be given by law
or under the provisions of the Certificate of Incorporation or these by-laws,
a waiver thereof in writing, signed by the person or persons entitled to much
notice, whether before or after the time of the event for which notice is to
be given, shall be deemed equivalent to such notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE IV
OFFICERS
Section 1. GENERALLY. The officers of the Corporation shall be elected
by the Board of Directors and shall consist of a President, a Secretary and a
Treasurer. The President shall be a member of the Board of Directors. The
Board of Directors may also choose any or all of the following: a Chairman
of the Board of Directors, one or more Vice Presidents, a Controller, a
General Counsel, and one or more Assistant Secretaries and Assistant
Treasurers. Any number of offices may be held by the same person.
Section 2. COMPENSATION. The compensation of all officers and agents
of the Corporation who are also directors of the Corporation shall be fixed
by
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<PAGE>
the Board of Directors. The Board of Directors may delegate the power to fix
the compensation of other officers and agents of the Corporation to an
officer of the Corporation.
Section 3. SUCCESSION. The officers of the Corporation shall bold
office until their successors are elected and qualified. Any officer elected
or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the directors. Any vacancy occurring in
any office of the Corporation may be filled by the Board of Directors.
Section 4. AUTHORITY AND DUTIES. Each of the officers of the
Corporation shall have such authority and shall perform such duties as are
stated in these by-laws or as may be customarily incident to their respective
offices, or as may be specified from time to time by the Board of Directors
in a resolution which is not inconsistent with these by-laws.
Section 5. CHAIRMAN. The Chairman shall preside at all meetings of the
stockholders and of the Board of Directors and he shall have such other
duties and responsibilities as may be assigned to him by the Board of
Directors. The Chairman shall have overall responsibility for the management
and direction of the business and affairs of the Corporation. The Chairman
shall be the senior officer of the Corporation and in case of the inability
or failure of the President to perform-the duties of that office, shall
perform the duties of the President.
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The Chairman may delegate to any qualified person authority to chair any
meeting of the stockholders, either on a temporary or a permanent basis.
Section 6. PRESIDENT. The President shall be responsible for the
active direction of the daily business of the Corporation. The President
shall report to and be under the supervision of the Chairman. In case of the
inability or failure of the Chairman to perform the duties of that office,
the President shall perform the duties of the Chairman, unless otherwise
determined by the Board of Directors.
Section 7. EXECUTION OF DOCUMENTS. The Chairman of the Board and the
President shall have, and each of them is hereby given, full power and
authority to execute all duly authorized contracts, agreements, deeds,
conveyances or other obligations of the Corporation, applications, consents,
proxies and other powers of attorney, and other documents and instruments,
except where required or permitted by law to be otherwise executed and except
where the execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. In addition,
the Chairman of the Board and the President may delegate to other officers,
employees and agents of the Corporation the power and authority to execute,
on behalf of the Corporation, duly authorized contracts, agreements, deeds,
conveyances, or other obligations of the Corporation, applications, consents,
proxies and other powers of attorney, and other documents and instruments,
with such limitations as the Chairman of the Board or the President may
specify; such
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<PAGE>
authority so delegated by the Chairman of the Board or the President shall
not be re-delegated by the person to whom such execution authority has been
delegated.
Secton 8. VICE PRESIDENT. Each Vice President, however titled, shall
perform such duties and services and shall have such authority and
responsibilities as shall be assigned to or required from time to time by the
Board of Directors, the Chairman or the President.
Section 9. SECRETARY AND ASSISTANT SECRETARIES. (a) The Secretary
shall attend all meetings of the stockholders and all meetings of the Board
of Directors and record all proceedings of the meetings of the stockholders
and of the Board of Directors and shall perform like duties for the standing
committees when requested by the Board of Directors, the Chairman or the
President. The Secretary shall give, or cause to be given, notice of all
meeting of the stockholders and meetings of the Board of Directors. The
Secretary shall perform such duties as may be prescribed by the Board of
Directors, the Chairman or the President. The Secretary shall have charge of
the seal of the Corporation and authority to affix the seal to any
instrument. The Secretary or any Assistant Secretary may attest to the
corporate seal by handwritten or facsimile signature. The Secretary shall
keep and account far all books, documents, papers and records of the
Corporation except those far which some other officer or agent has been
designated as is otherwise properly accountable. The Secretary shall have
authority to sign stock certificates.
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<PAGE>
(b) Assistant Secretaries, in the order of their seniority, shall assist
the Secretary and, if the Secretary is unavailable or fails to act, perform the
duties and exercise the authorities of the Secretary.
Section 10. TREASURER AND ASSISTANT TREASURERS. (a) The Treasurer
shall have the custody of the funds and securities belonging to the
Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Treasurer with the prior approval of the Board of
Directors, the Chairman and the President. The Treasurer shall disburse the
funds and pledge the credit of the Corporation as may be directed by the
Board of Directors and shall render to the Board of Directors, the Chairman
and the President, as and when required by them, or any of them, an account
of all transactions by the Treasurer.
(b) Assistant Treasurers, in the order of their seniority, shall assist the
Treasurer and, if the Treasurer is unable or fails to act, perform the duties
and exercise the powers of the Treasurer.
Section 11. CONTROLLER. The Controller shall be the chief accounting
officer of the Corporation. The Controller shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
in accordance with accepted accounting methods and procedures. The
Controller shall initiate periodic audits of the accounting records, methods
and systems of the Corporation. The
13
<PAGE>
Controller shall render to the Board of Directors, the Chairman and the
President, as and when required by them, or any of them, a statement of the
financial condition of the Corporation.
Section 12. GENERAL COUNSEL. The General Counsel shall be the chief
legal officer of the Corporation. The General Counsel shall provide legal
counsel and advice to the Board of Directors and to the officers with respect
to compliance with applicable laws and regulations. The General Counsel
shall also provide or obtain legal defense of the Corporation. The General
Counsel shall render to the Board of Directors, the Chairman and the
President, as and when required by them, or any of them, a report on the
status of claims against, and pending litigation of, the Corporation.
ARTICLE V
STOCK
Section 1. CERTIFICATES. Certificates representing shares of stock of
the Corporation shall be in such form as shall be determined by the Board of
Directors, subject to applicable legal requirements. Such certificates shall
be numbered and their issuance recorded in the books of the Corporation, and
such certificate shall exhibit the holder's name and the number of shares and
shall be signed by, or in the name of the Corporation by, the Chairman of the
Board or the
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<PAGE>
President and the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the Corporation and shall bear the corporate seal.
Where any such certificate is countersigned by a transfer agent or a
registrar other than the Corporation or its employee, the signatures of any
such officers of the Corporation and the seal of the Corporation, if any,
upon such certificates may be facsimiles, engraved or printed.
Section 2. TRANSFER. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The President 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 that
fact, satisfactory to the President, by the person claiming the certificate
of stock to be lost, stolen or destroyed. As a condition precedent to the
issuance of a new certificate or certificates the President requires the
owner of such lost, stolen or destroyed certificate or certificates to give
the Corporation a bond in such sum and with such surety or sureties as the
President
15
<PAGE>
may direct as indemnity against any claims that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or destroyed or the issuance of the new certificate.
Section 4. RECORD DATE. (a) In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before
the date of such meeting. If no record is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the
16
<PAGE>
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If
no record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by this chapter, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody
of the book in which proceedings of meeting of stockholders are recorded.
Delivery made to a Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts
the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of
17
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Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
ARTICLE VI
GENERAL PROVISIONS
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed from time to time by the Board of Directors.
Section 2. CORPORATE SEAL. The Board of Directors may adopt a
corporate seal and use the same by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of a committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the records of the Corporation
and upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees
of the Board of Directors, or by any other person as to matters the director,
committee member or officer believes
18
<PAGE>
are within such other person's professional or expert competence and who has
been selected with reasonable care by or on behalf of the Corporation.
Section 4. TIME PERIODS. In applying any provision of these by-laws
which requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified
number of days prior to an event, calendar days shall be used, the day of the
doing of the act shall be excluded and the day of the event shall be included.
Section 5. DIVIDENDS. The Board of Directors may from time to time
declare and the Corporation may pay dividends upon its outstanding shares of
capital stock, in the manner and upon the terms and conditions provided by
law and the Certificate of Incorporation.
ARTICLE VII
AMENDMENTS
Section 1. AMENDMENTS. These by-laws may be altered, amended or
repealed, or new by-laws may be adopted, by the stockholders or by the Board
of Directors.
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EXHIBIT 3.3
ARTICLES OF INCORPORATION
OF
ASC MERGER CORP.
NAME
One: The name of the corporation is: ASC Merger Corp.
PURPOSE
Two: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
AGENT FOR SERVICE
Three: The name in the State of California of the corporation's initial
agent for service of process is:
CORPORATION SERVICE COMPANY WHICH WILL DO BUSINESS IN CALIFORNIA AS
CSC-LAWYERS INCORPORATING SERVICE
AUTHORIZED SHARES
Four: The corporation is authorized to issue only one class of shares
of stock; the total number of shares which the corporation is authorized to
issue is one hundred (l00) designated as Common Stock, with a par value of
$.00l per share.
LIABILITY OF DIRECTORS/INDEMNIFICATION
Five: (a) The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(b) The Corporation is authorized to provide for, whether by bylaw,
agreement or resolution of the Board of Directors or shareholders of the
Corporation the indemnification of agents (as defined in Section 317 of the
California General Corporation Law) of the Corporation in excess of that
expressly permitted by such
<PAGE>
Section 317 for breach of duty to the Corporation and its shareholders to the
fullest extent permissible under California law.
(c) Any repeal or modification of the foregoing provisions of this Article
Five by the shareholders of the Corporation shall not adversely affect any right
or protection of a director or agent of the Corporation existing at the time of
such repeal or modification.
DATE: December 28, 1993
/S/ CATHERINE A. TRIENEN
------------------------------
Catherine A. Treinen
Incorporator
2
<PAGE>
===============================================================================
AGREEMENT OF MERGER
Among
AEROSOL SERVICES HOLDING CORPORATION,
ASC MERGER CORP.
and
AEROSOL SERVICES COMPANY, INC.
Dated as of February 14, 1994
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I
THE MERGER
1.01 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 Certificate of Incorporation; By-Laws . . . . . . . . . . . . . . . . . 2
1.05 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.06 Conversion of Securities. . . . . . . . . . . . . . . . . . . . . . . . 3
1.07 Surrender of Shares; Stock Transfer Books . . . . . . . . . . . . . . . 3
ARTICLE II
MISCELLANEOUS
2.01 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.03 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.04 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of February 14, 1994 (the
"AGREEMENT") among AEROSOL SERVICES HOLDING CORPORATION, a Delaware
corporation ("PARENT"), ASC MERGER CORP., a California corporation and a
wholly-owned subsidiary of Parent ("ASC MERGER"), and AEROSOL SERVICES
COMPANY, INC., a California corporation (the "COMPANY").
WHEREAS, the Boards of Directors of Parent, ASC Merger and the
Company have each determined that it is in the best interests of their
respective shareholders for Parent to acquire the Company upon the terms and
subject to the conditions set forth herein, and
WHEREAS, in furtherance thereof, and as more fully described in a
Purchase and Merger Agreement dated February 14, 1994 (the "Agreement of
Purchase and Merger"), it is proposed that ASC Merger shall make an offer
(the "OFFER") to merge with the Company and thus acquire all of the business
of the Company, and through which merger, each share of the issued and
outstanding common stock of the Company, par value $10.00 per share (the
"COMPANY COMMON STOCK") (all issued and outstanding shares of Company Common
Stock being hereinafter collectively referred to as the "SHARES") shall be
exchanged for (i) $5,763.69 per share (the "PER SHARE AMOUNT" net to the
sellers in cash, subject to adjustment as provided in Section 2.01 of the
Agreement of Purchase and Merger; (ii) $540.35 per share (the "PER SHARE
CONVERSION") in face amount of the 10% Cumulative Redeemable Preferred Stock
of Parent; and
WHEREAS, the Board of Directors of the Company has unanimously
approved the making of the Offer and resolved and agreed to recommend that
shareholders of the Company approve the Offer; and
WHEREAS, also in furtherance or such acquisition, the Boards of
Directors of Parent, ASC Merger and the Company have each approved the merger
(the "MERGER") of the Company with and into ASC Merger following the Offer in
accordance with the California Corporation Code of the State of California
("California Law") and upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, ASC merger and the Company hereby agree as follows:
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<PAGE>
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
precedent set forth in Sections 8.01 and 8.02 of the Purchase and Merger
Agreement and in accordance with California Law at the Effective Time (as
defined in Section 1.02) the Company shall be merged with and into ASC
Merger. As a result of the Merger, the separate corporate existence of the
Company shall cease and ASC Merger shall continue as the surviving
corporation of the Merger (the "SURVIVING CORPORATION").
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in
Section 8.01 and 8.02 of the Purchase and Merger Agreement the parties hereto
shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of
State of the State of California, in such form as required by and executed in
accordance with the relevant provisions of California Law (the date and time
of such filing being the "EFFECTIVE TIME").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of California
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and ASC Merger shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the company and ASC
Merger shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION, BY-LAWS. (a) Unless otherwise
determined by parent prior to the Effective Time, at the Effective Time the
Articles of Incorporation of ASC Merger, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Incorporation; PROVIDED, HOWEVER that, at the Effective Time, Article First
of the Articles of Incorporation of the Surviving Corporation shall be
amended to read as follows: "FIRST: The name of the corporation is Aerosol
Services Company, Inc."
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<PAGE>
(b) The By-Laws of ASC Merger, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such By-Laws.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of such ASC Merger
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, and the officers of
ASC Merger immediately prior to the Effective Time shall be the initial
officers of the surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
SECTION 1.06. CONVERSION OF SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of ASC Merger, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time shall be cancelled and shall be converted automatically into
the right to receive an amount equal to the Per Share Amount in cash and the
Per Share conversion in 10% Cumulative Redeemable Preferred Stock of Parent
(the "MERGER CONSIDERATION") payable and issuable to the holder thereof,
without interest, upon surrender of the certificate formerly representing
such Share in the manner provided in Section 1.07.
(b) Each share of Company Common Stock held in the treasury of the
Company and each share held by ASC Merger, Parent or any direct or indirect
wholly-owned subsidiary of Parent or of the Company immediately prior to the
Effective Time shall be cancelled without any conversion thereof and no
payment or distribution shall be made with respect thereto.
(c) Each share of common stock, par value $.001 per share, of ASC
merger issued and outstanding immediately prior to the Effective Time shall
remain outstanding as a fully paid and nonassessable share of common stock,
par value $.001 per share, of the Surviving Corporation.
SECTION 1.07. SURRENDER OF SHARES. Promptly after the Effective Time,
the Surviving Corporation shall cause to be delivered to each record holder,
as of the Effective Time, of an outstanding certificate or certificates which
immedi-
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<PAGE>
ately prior to the Effective Time represented Shares (the "Certificates")
instructions for use in effecting the surrender of the Certificates for
Payment of the Merger Consideration therefor. Upon surrender to the
Surviving Corporation of a Certificate, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration for each
Share formerly represented by such Certificate, and such Certificate shall
then be cancelled. No interest shall be paid or accrued for the benefit of
holders of the Certificates on the Merger Consideration payable upon the
surrender of the Certificates. If payment of the Merger Consideration is to
be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requesting such payment shall
have paid any transfer and other taxes required by reason of the payment of
the Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
(b) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company.
From and after the Effective Time, the holders of Certificates evidencing
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided for herein or by applicable law.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. GOVERNING LAW. The validity, interpretation and effect
of this Agreement shall be exclusively governed by, and construed in
accordance with, the laws of the State of California.
SECTION 2.02. NOTICES. All notices, requests, demands, and other
communications under this Agreement shall be in writing and delivered in
person (including by courier) or by telecopy, or sent by certified mail,
postage prepaid, and properly addressed as follows:
-4-
<PAGE>
TO THE COMPANY:
Aerosol Services Company, Inc.
425 So. Ninth Avenue
City of Industry, California 91746
WITH A COPY TO:
Kindel & Anderson
355 South Flower Street
Los Angeles, California 90071
Attn: Hugh Boss, Esq.
TO PARENT OF ASC MERGER:
c/o The Gordon + Morris Group
620 Newport Center Drive
Suite 1400
Newport Beach, California 92660
Attn: John H. Morris
WITH COPIES TO:
Jones, Day, Reavis & Pogue
2600 Main Street
Suite 900
Irvine, California 92714-6232
Attn: Peter J. Tennyson
All notices and other communications required or permitted under this
Agreement which are addressed as provided in this Section 2.02 shall, if
delivered personally (including delivery by courier) or by telecopy, be
effective upon delivery and shall, if delivered by mail, be effective four (4)
business days
-5-
<PAGE>
following deposit in the United States Mail, postage prepaid. Any party may
from time to time change its address for the purpose of notices to that party
by a similar notice specifying a new address, but no such notice shall be
deemed to have been given until it is actually received by the party sought
to be charged with the contents.
SECTION 2.03. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and
all affixed together shall be deemed to be one and the same instrument.
SECTION 2.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon any binding determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable and legally enforceable manner, to the end that the transactions
contemplated hereby may be completed to the extent possible.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
AEROSOL SERVICES HOLDING AEROSOL SERVICES HOLDING
CORPORATION, a Delaware corporation CORPORATION, a Delaware corporation
By: /s/ BOBBIE J. HALL By: /s/ JOHN H. MORRIS
---------------------------------- ----------------------------------
Title: VICE PRESIDENT AND ASSISTANT Title: PRESIDENT
SECRETARY
ASC MERGER CORPORATION, ASC MERGER CORPORATION,
a California corporation a California corporation
By: /s/ BOBBIE J. HALL By: /s/ JOHN H. MORIS
---------------------------------- ----------------------------------
Title: VICE PRESIDENT AND ASSISTANT Title: PRESIDENT
SECRETARY
AEROSOL SERVICES COMPANY, INC., a AEROSOL SERVICES COMPANY, INC., a
California corporation California corporation
By: /s/ BOBBIE J. HALL By: /s/ WALTER K. LIM
---------------------------------- ----------------------------------
Title: VICE PRESIDENT AND ASSISTANT Title: PRESIDENT
SECRETARY
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<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Drew Adams certifies that:
l. He is the vice-president and the assistant secretary of ASC Merger Corp., a
California corporation.
2. The Agreement of Merger in the form attached was duly approved by the board
of directors and shareholders of the corporation.
3. The shareholder approval was by the holders of 100% of the outstanding
shares of the corporation.
4. There is only one class of shares and the number of shares outstanding is
91.
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of my own knowledge.
DATED: February 14, 1994
/s/ DREW ADAMS
------------------------------
Drew Adams, Vice-President and
Assistant Secretary
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<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Walter Lim and Howard Lim certify that:
1. They are the president and the secretary, respectively, of Aerosol Services
Company, Inc., a California corporation.
2. The Agreement of Merger in the form attached was duly approved by the board
of directors and shareholders of the corporation.
3. The shareholder approval was by the holders of 100% of the outstanding
shares of the corporation.
4. There is only one class of shares and the number of shares outstanding is
400.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
DATE: February 14, 1994
/s/ WALTER K. LIM
-----------------------------------
Walter K. Lim
President
/s/ HOWARD C. LIM
- -------------------------------
Howard C. Lim
Secretary
-9-
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Drew Adam certifies that:
l. He is the vice-president and the assistant secretary of Aerosol Services
Holding Corporation, a Delaware corporation.
2. The Agreement of Merger in the form attached was duly approved by the board
of directors of the corporation.
3. Shareholder approval was not required. The corporation is the parent of
ASC Merger Corp., a constituent corporation in the merger. The corporation
did not issue stock in the merger; its stock, which was exchanged in the
merger, had previously been issued to ASC Merger Corp. for cash.
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of my own knowledge.
DATE: February 14, 1994
/s/ DREW ADAMS
-----------------------------------
Drew Adams, Vice-President and
Assistant Secretary
-10-
<PAGE>
BYLAWS
OF
ASC MERGER CORP
(a California corporation)
ASC MERGER CORP.
BYLAWS
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. Offices . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1. PRINCIPAL EXECUTIVE OFFICE . . . . . . . . . . . . . 2
Section 2. OTHER OFFICES . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. Shareholders . . . . . . . . . . . . . . . . . . . . . . 2
Section 1. PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . 2
Section 2. ANNUAL MEETINGS . . . . . . . . . . . . . . . . . . . 2
Section 3. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . 3
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS . . . . . . . . 3
Section 5. QUORUM . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. ADJOURNED MEETINGS AND NOTICE THEREOF . . . . . . . . 4
Section 7. VOTING . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. RECORD DATE . . . . . . . . . . . . . . . . . . . . . 6
Section 9. CONSENT OF ABSENTEES . . . . . . . . . . . . . . . . 7
Section 10. ACTION WITHOUT MEETING . . . . . . . . . . . . . . . 7
Section 11. PROXIES . . . . . . . . . . . . . . . . . . . . . . . 8
Section 12. INSPECTORS OF ELECTION . . . . . . . . . . . . . . . 8
ARTICLE III. Directors . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1. POWERS . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. COMMITTEES . . . . . . . . . . . . . . . . . . . . . 9
Section 3. NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . 10
Section 4. ELECTION AND TERM OF OFFICE . . . . . . . . . . . . 10
Section 5. VACANCIES . . . . . . . . . . . . . . . . . . . . . 10
Section 6. RESIGNATION . . . . . . . . . . . . . . . . . . . . 11
Section 7. PLACE OF MEETINGS . . . . . . . . . . . . . . . . . 11
Section 8. ANNUAL MEETINGS . . . . . . . . . . . . . . . . . . 12
Section 9. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . 12
Section 10. QUORUM . . . . . . . . . . . . . . . . . . . . . . 12
Section 11. PARTICIPATION IN MEETINGS BY CONFERENCE
TELEPHONE . . . . . . . . . . . . . . . . . . . . . 13
Section 12. WAIVER OF NOTICE . . . . . . . . . . . . . . . . . 13
Section 13. ADJOURNMENT . . . . . . . . . . . . . . . . . . . . 13
Section 14. FEES AND COMPENSATION . . . . . . . . . . . . . . . 13
Section 15. ACTION WITHOUT MEETING . . . . . . . . . . . . . . 13
ARTICLE IV. Officers . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1. OFFICERS . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. ELECTION . . . . . . . . . . . . . . . . . . . . . 14
Section 3. SUBORDINATE OFFICERS . . . . . . . . . . . . . . . 14
Section 4. REMOVAL AND RESIGNATION . . . . . . . . . . . . . . 14
Section 5. VACANCIES . . . . . . . . . . . . . . . . . . . . . 15
Section 6. PRESIDENT . . . . . . . . . . . . . . . . . . . . . 15
Section 7. VICE PRESIDENTS . . . . . . . . . . . . . . . . . . 15
Section 8. SECRETARY . . . . . . . . . . . . . . . . . . . . . 15
Section 9. CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . 16
Section 10. CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . 17
ARTICLE V. Other Provisions . . . . . . . . . . . . . . . . . . . . 17
Section 1. INSPECTION OF CORPORATE RECORDS . . . . . . . . . . 17
Section 2. INSPECTION OF BYLAWS . . . . . . . . . . . . . . . 17
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS . . . . . . . . 18
Section 4. CERTIFICATES OF STOCK . . . . . . . . . . . . . . . 18
Section 5. REPRESENTATION OF SHARES OF OTHER
CORPORATIONS . . . . . . . . . . . . . . . . . . . 19
Section 6. ANNUAL REPORT TO SHAREHOLDERS . . . . . . . . . . . 19
Section 7. CONSTRUCTION AND DEFINITIONS . . . . . . . . . . . 20
Section 8. COMPENSATION . . . . . . . . . . . . . . . . . . . 20
Section 9. INDEMNIFICATION OF AGENTS OF THE CORPORATION;
PURCHASE OF LIABILITY INSURANCE . . . . . . . . . . 20
Section 10. CORPORATE LOANS AND GUARANTEES TO
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . 21
ARTICLE VI. Amendments . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
BYLAWS
for the regulation, except as
otherwise provided by statute or its
Articles of Incorporation,
of
ASC MERGER CORP.
(a California corporation)
ARTICLE I. Offices.
Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive
office of the Corporation shall be fixed and located at such place as the
Board of Directors (herein referred to as the "Board") shall determine.
The Board is granted full power and authority to change said principal
executive office from one location to another.
Section 2. OTHER OFFICES. Branch or subordinate offices may be
established at any time by the Board at any place or places.
ARTICLE II. Shareholders.
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall
be held at the principal executive office of the Corporation unless another
place within or without the State of California is designated by the Board.
Section 2. ANNUAL MEETINGS. The annual meetings of
shareholders shall be held on: on the first Tuesday in May at 10:00 a.m.,
local time, or such other date or such other time as may be fixed by the
Board, provided, however, that should said day fall upon a Saturday, Sunday
or legal holiday observed by the Corporation at its principal executive
office, then any such annual meeting of shareholders shall be held at the
same time and place on the next day thereafter ensuing which is a business
day. At such meetings, directors shall be elected and any other proper
business may be transacted.
Section 3. SPECIAL MEETINGS. Special meetings of the
shareholders may be called at any time by the Board, the Chairman of the
Board, the President or by the holders of shares entitled to cast not less
than ten percent of the votes at such meeting.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written
notice of each annual or special meeting of shareholders shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
shareholder entitled to vote thereat.
Such notice shall be given either personally or by first-class
mail, postage prepaid, or by other means of written communication,
addressed to the shareholder at the address of such shareholder appearing
on the books of the corporation or given by the shareholder to the
Corporation for the purpose of notice, or if no such address appears or is
given, at the place where the principal executive office of the Corporation
is located or by publication at least once in a newspaper of general
circulation in the county in which the principal executive office is
located. After notice is given by mail, the Secretary or the Assistant
Secretary, if any, or transfer agent, shall execute an affidavit of mailing
in accordance with this section.
The notice shall state the place, date and hour of the meeting
and (i) in the case of a special meeting, the general nature of the
business to be transacted, and no other business may be transacted, or (ii)
in the case of the annual meeting, those matters which the Board, at the
time of the mailing of the notice, intends to present for action by the
shareholders, but, subject to the provisions of applicable law, any proper
matter may be presented at the meeting for such action. The notice of any
meeting at which directors are to be elected shall include the names of
nominees intended at the time of notice to be presented by the Board for
election.
Section 5. QUORUM. A majority of the share entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting
of the shareholders. Subject to the Articles of Incorporation of the
Corporation (herein referred to as the "Articles of Incorporation"), the
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any
action taken (other than adjournment) is approved by at least a majority of
the shares required to constitute a quorum.
Section 6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any meeting
of shareholders, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the
absence of a quorum (except as provided in Section 5 of this Article) no
other business may be transacted at such meeting.
It shall not be necessary to give any notice of the time and
place of the adjourned meeting or of the business to be transacted thereat,
other than by announcement at the meeting at which such adjournment is
<PAGE>
taken; provided, however, when any shareholders' meeting is adjourned for
more than 45 days or, if after adjournment a new record date is fixed for
the adjourned meeting, notice of the adjourned meeting shall be given as in
the case of an original meeting.
Section 7. VOTING. The shareholders entitled to notice of any
meeting or to vote at any such meeting shall be only those persons in whose
names shares are registered in the stock records of the Corporation on the
record date determined in accordance with Section 8 of this Article.
Except as provided below and except as may be otherwise provided
in the Articles of Incorporation, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote of
shareholders. Subject to the requirements of the next sentence, every
shareholder entitled to vote at any election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to
which such shareholder's shares are normally entitled, or distribute the
shareholder's votes on the same principle among as many candidates as the
shareholder thinks fit. No shareholder shall be entitled to cumulate votes
(i.e., cast for any candidate a number of votes greater than the number of
votes which such shareholder normally is entitled to cast) unless such
candidate or candidates' names have been place in nomination prior to the
voting and any shareholder has given notice at the meeting prior to the
voting of such shareholder's intention to cumulate the shareholder's votes.
Any holder of shares entitled to vote on any matter may vote
part of the shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, other than elections to
office, but, if the shareholder fails to specify the number of shares such
shareholder is voting affirmatively, it will be conclusively presumed that
the shareholder's approving vote is with respect to all shares such
shareholder is entitled to vote.
Elections for directors need not be by ballot unless a
shareholder demands election by ballot at the meeting and before the voting
begins.
Provided that the quorum requirements of Section 5 above are
satisfied: the affirmative vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present (which
shares voting affirmatively also constitute at least a majority of the
required quorum) shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by the California General
Corporation Law of the Articles of Incorporation, provided that whenever
under the California General Corporation Law shares are disqualified from
voting on any matter, they shall not be considered outstanding for purposes
of the determination of a quorum at any meeting to acct upon, or the
required vote to approve action upon any matter; and in any election of
directors, the candidates receiving the highest number of affirmative votes
of the shares entitled to be voted for them, up to the number of directors
to be elected by such shares, are elected; votes against the director and
votes withheld shall have no legal effect.
Section 8. RECORD DATE. The Board may fix, in advance, a
record date for the determination of the shareholders entitled to notice
of, or to vote at, any meeting of the shareholders, or the shareholders
entitled to receive payment of any dividend or other distribution, or any
allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than 60 days nor less
than 10 days prior to the date of the meeting nor more than 60 days prior
to any other action.
If no record date is fixed by the Board, (i) the record date for
determining shareholders entitled to notice of, or to vote at, a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held, and (ii) the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting,
when no prior action by the Board has been taken, shall be the day on which
the first written consent is given.
A determination of shareholders of record entitled to notice of,
or to vote at, a meeting of shareholders shall apply to any adjournment of
the meeting unless the Board fixes a new record date for the adjourned
meeting. The Board shall fix a new record date if the meeting is adjourned
for more than 45 days from the date set for the original meeting.
Section 9. CONSENT OF ABSENTEES. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are
as valid as though had at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the person entitled to vote, not
present in person or by proxy, signs a written waiver of notice, or a
consent to the holding of the meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Neither
the business to be transacted at nor the purpose of any annual or special
meeting of shareholders, need be specified in any written waiver of notice,
except as provided in the California General Corporation Law.
<PAGE>
Section 10. ACTION WITHOUT MEETING. Subject to Section 603 of
the California General Corporation Law, any action which, under any
provision of the California General Corporation Law, may be taken at any
annual or special meeting of shareholders, may be taken without a meeting
and without prior notice if a consent in writing, setting forth the action
so taken, shall be signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote
thereon were present and voted.
Section 11. PROXIES. Every person entitled to vote shares
shall have the right to do so either in person or by one or more persons
authorized by a valid written proxy signed by such person or such person's
attorney in fact and filed with the Secretary. Subject to the provisions
of this bylaw and applicable law, any duly executed proxy continues in full
force and effect until revoked by the person executing it prior to the vote
pursuant thereto.
Section 12. INSPECTORS OF ELECTION. Prior to any meeting of
shareholders, the Board may appoint inspectors of election to act at the
meeting or any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of the meeting may, and on the request of any shareholder or
his proxy shall, appoint inspectors of election or persons to replace those
who fail to appear or refuse to act at he meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a majority
of shares or their proxies present at the meting shall determine whether
one or three inspectors are to be appointed. The inspectors of election
shall (i) determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies, (ii) receive votes,
ballots or consents, (iii) hear and determine all challenges and questions
in any way arising in connection with the right to vote, (iv) count and
tabulate all votes or consents, (v) determine when the poll shall close and
the election result and (vi) do any other acts that may be proper to
conduct the election or vote with fairness to all shareholders.
The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as
expeditiously as it is practicable. If there are three inspectors of
election, the decision, act or certificate of majority is effective in all
respects as the decision, act or certificate of all.
ARTICLE III. Directors.
Section 1. POWERS. Subject to limitations of the Articles of
Incorporation, these Bylaws and the California General Corporation Law
relating to actions required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the Corporation shall be
managed and all corporate powers shall be exercised by or under the
direction of the Board.
Section 2. COMMITTEES. The Board may, by resolution adopted by
a majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the
pleasure of the Board. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent member of
the committee. The appointment of members or alternate members of a
committee requires the vote of a majority of the authorized number of
directors. Any such committee, to the extent provided in the resolution of
the Board, shall have all the authority of the board, except with respect
to (i) the approval of any action required to be approved by the
shareholders or by the outstanding shares under the California General
Corporation Law, (ii) the filling of vacancies on the Board or in any
committee, (iii) the fixing of compensation of the directors for serving on
the Board or on any committee, (iv) the adoption, amendment or repeal of
Bylaws, (v) the amendment or repeal of any resolution of the Board which by
its express terms is not so amendable or repealable, (vi) a distribution to
the shareholders, except at a rate or in a periodic amount or within a
price range determined by the Board and (vii) the appointment of other
committees of the Board or the members thereof.
Section 3. NUMBER OF DIRECTORS. The authorized number of
directors shall be three (3) until changed by an amendment of the Articles
of Incorporation or this Section 3 duly approved by the shareholders,
subject to the California General Corporation Law. However, any reduction
of the authorized number of directors does not remove any director prior to
the expiration of such director's term of office.
Section 4. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of the shareholders, but if any such annual
meeting is not held or the directors are not elected thereat, the directors
may be elected at any special meeting of shareholders held for that
purpose. Subject to Section 5 of this Article, each director shall hold
office until the next annual meeting and until a successor has been elected
and qualified.
Section 5. VACANCIES. A vacancy or vacancies in the Board
shall be deemed to exist in case of the death, resignation or removal of
any director, if the authorized number of directors be increased or if the
shareholders fail at any annual or special meeting of shareholders at which
<PAGE>
any directors are elected, to elect the full authorized number of directors
to be voted at that meeting.
Vacancies in the Board, except those existing as a result of a
removal of a director, may be filled by a majority of the remaining
directors, or, if the number of remaining directors is less than a quorum,
by (i) the unanimous written consent of the remaining directors, (ii) the
affirmative vote of a majority of the remaining directors at a meeting held
pursuant to notice or waivers of notice complying with Section 307 of the
California General Corporation Law, or (iii) by a sole remaining director,
and each director so elected shall hold office until the next annual
meeting and until such director's successor has been elected and qualified.
Vacancies in the Board created by the removal of a director may
be filled only by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of
the required quorum) or by the unanimous written consent of all shares
entitled to vote for the election of directors.
The shareholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors. Any such
election by written consent other than to fill a vacancy created by removal
requires the consent of a majority of the outstanding shares entitled to
vote.
Section 6. RESIGNATION. Any director may resign effective upon
giving written notice to the President, the Secretary or the Board, unless
the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a successor
may be elected to take office when the resignation becomes effective.
Section 7. PLACE OF MEETINGS. Regular or special meetings of
the Board shall be held at any place within or without the State of
California which has been designated in the notice of the meeting or, if
not stated therein, as designated by resolution of the Board. In the
absence of such designation, meetings shall be held at the principal
executive office of the Corporation.
Section 8. ANNUAL MEETINGS. Immediately following each annual
meeting of shareholders, the Board may, but shall not be required to, hold
an annual meeting at the same place, or at any other place that has been
designated by the Board, for the purpose of organization, election of
officers or transaction of other business as the Board may determine. Call
and notice of this meeting of the Board shall be in the manner for the
conduct of special meetings as provided in Section 9 unless the Board has
determined by resolution to conduct a regular meeting at such time and
place, in which event call and notice of this meeting of the Board shall
not be required unless some place other than the place of the annual
shareholders' meeting has been designated.
Section 9. SPECIAL MEETINGS. Special meetings of the Board for
any purpose or purposes may be called at any time by the Chairman of the
Board, the President, the Secretary or by any two directors upon four days'
notice by mail or 48 hours' notice given personally or by telephone,
telegraph, telex or other similar means of communication. Any such notice
shall be addressed or delivered to each director at such director's address
as it is shown upon the records of the Corporation or as may have been
given to the Corporation by the director for purposes of notice.
Section 10. QUORUM. A majority of the authorized number of
directors constitutes a quorum of the Board for the transaction of
business, except to adjourn as hereinafter provided. Every act or decision
done or made by a majority of the directors present at a meeting duly held
at which a quorum is present shall be regarded as the act of the Board,
unless a greater number be required by law or by the Articles. A meeting
at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for such meeting.
Section 11. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board may participate in a meeting through use of conference
telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another.
Section 12. WAIVER OF NOTICE. Notice of a meeting need not be
given to any director who signs a waiver of notice or a consent to holding
the meeting or an approval of the minutes thereof, whether before or after
the meeting, or who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such director. All such
waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 13. ADJOURNMENT. A majority of the directors present,
whether or not a quorum is present, may adjourn any directors' meeting to
another time and place. If a meeting is adjourned for more than 24 hours,
notice of any adjournment to another time or place shall be given prior to
the time of the adjourned meeting to the directors that were not present at
the time of adjournment.
Section 14. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and
<PAGE>
such reimbursement for expenses, as may be fixed or determined by the
Board.
Section 15. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the Board may be taken without a meeting if all
members of the Board shall individually or collectively consent in writing
to such action. Such written consent or consents shall be filed with the
minutes of the proceedings of the Board. Such action by written consent
shall have the same effect as a unanimous vote of the members of the Board.
ARTICLE IV. Officers.
Section 1. OFFICERS. The officers of the Corporation shall be
a President, a Secretary and a Chief Financial Officer. The Corporation
may also have, at the discretion of the Board, a Chairman, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant
Financial Officers and such other officers as may be elected or appointed
in accordance with the provisions of Section 3 of this Article.
Section 2. ELECTION. The officers of the Corporation, except
such officers as may be elected or appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be chosen by,
and shall serve at the pleasure of, the Board, and shall hold their
respective offices until their resignation, removal or other
disqualification from service, or until their respective successors shall
be elected and qualified.
Section 3. SUBORDINATE OFFICERS. The Board may elect, and may
empower the President to appoint, such other officers as the business of
the Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in
these Bylaws or as the Board may from time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be
removed, either with or without cause, by the Board at any time. Any
officer may resign at any time upon written notice to the Corporation
without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.
Section 5. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these Bylaws for regular election or
appointment to such office.
Section 6. PRESIDENT. The President is the general manager and
chief executive officer of the Corporation and has, subject to the control
of the Board, general supervision, direction and control of the business
and officers of the Corporation. The President shall preside at all
meetings of the shareholders and at all meetings of the Board. The
President has the general powers and duties of management usually vested in
the office of president and general manager of a corporation and such other
powers and duties as may be prescribed by the Board.
Section 7. VICE PRESIDENTS. In the absence or disability of
the President, unless a Chairman has been elected, the Vice Presidents in
order of their rank as fixed by the Board or, if not ranked, the Vice
President designated by the Board, 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. The Vice Presidents shall have
such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board.
Section 8. SECRETARY. The Secretary shall keep or cause to be
kept, at the principal executive office and such other place as the Board
may order, a book of minutes of all meetings of shareholders and the Board,
with the time and place of holding, whether regular or special, and if
special, how authorized, the notice thereof given, the names of those
present or represented at meetings of shareholders, and the proceedings
thereof. The Secretary shall keep, or cause to be kept, a copy of the
Bylaws of the Corporation at the principal executive office or business
office in accordance with Section 213 of the California General Corporation
Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share
register, showing the names of the shareholders and their addresses, the
number and classes of shares held by each, the number and date of
certificates issued for the same, 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 shareholders and of the Board required by these Bylaws or
by law to be given, 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 the Board.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep and maintain, or cause to be kept and maintained,
adequate and correct accounts of the properties and business transactions
of the Corporation, and shall send or cause to be sent to the shareholders
of the Corporation such financial statements and reports as are by law or
<PAGE>
these Bylaws required to be sent to them. The books of account shall at
all times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. The Chief Financial
Officer shall disburse the funds of the Corporation as may be ordered by
the Board, shall render to the President and directors, upon their request,
an account of all transactions as Chief Financial Officer and of the
financial condition of the Corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board.
Section 10. CHAIRMAN OF THE BOARD. If such an officer be
elected, the Chairman of the Board shall preside at meetings of the board
of directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the board of directors or
prescribed by the Bylaws. In the absence of the President, or if there is
no President, the Chairman of the Board shall, in addition, be the chief
executive officer of the Corporation and shall have the powers and duties
described in Section 6 above.
ARTICLE V. Other Provisions.
Section 1. INSPECTION OF CORPORATE RECORDS. The record of
shareholders shall be open to inspection and copying, and the accounting
books and records and minutes of proceedings of the shareholders and the
Board and committees of the Board, if any, shall be open to inspection,
upon written demand on the Corporation of any shareholder at any reasonable
time during usual business hours, for a purpose reasonably related to such
holder's interests as a shareholder.
Section 2. INSPECTION OF BYLAWS. The Corporation shall keep at
its principal executive office in the State of California, or if its
principal executive office is not in California, at its principal business
office in California, the original or a copy of these Bylaws as amended to
date, which shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of
the Corporation is outside California and the Corporation has no principal
business office in California, it shall upon the written request of any
shareholder furnish to such shareholder a copy of these Bylaws as amended
to date.
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share- certificate, initial transaction statement or written
statement, conveyance or other instrument in writing and any assignment or
endorsement thereof executed or entered into between the Corporation and
any other person shall be valid and binding on the Corporation, when signed
by the Chairman, the President or any Vice President and the Secretary, any
Assistant Secretary, the Chief Financial Officer or any Assistant Financial
Officer of the Corporation unless the other party knew that the signing
officers had no authority to execute the same. Any such instruments may be
signed by any other person or persons and in such manner as from time to
time shall be determined by the Board, and, unless so authorized by the
Board, no officer, agent or employee shall have any power or authority to
bind the Corporation by any contract or engagement or to pledge its credit
or to render it liable for any purpose or amount.
Section 4. CERTIFICATES OF STOCK. Every holder of shares of
the Corporation shall be entitled to have a certificate signed in the name
of the Corporation by the President or a Vice President and by the Chief
Financial Officer or an Assistant Financial Officer or the Secretary or an
Assistant Secretary, certifying the number of shares and the class or
series of shares owned by the shareholder. Any or all of the signatures on
the certificate may be facsimile.
Except as provided in this Section, no new certificate for
shares shall be issued in lieu of an old one unless the latter is
surrendered and cancelled at the same time. The Board may, however, if any
certificate for shares is alleged to have been lost, stolen or destroyed,
authorize the issuance of a new certificate in lieu thereof, and the
Corporation may require that the Corporation be given a bond or other
adequate security sufficient to indemnify it against any claim that may be
made against it (including expense or liability) on account of the alleged
loss, theft or destruction of such certificate or the issuance of such new
certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or by
the President are each authorized to vote, represent and exercise on behalf
of the Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the Corporation. The
authority herein granted may be exercised either by any such officer in
person or by any other person authorized so to do by proxy or power of
attorney duly executed by said officer.
Section 6. ANNUAL REPORT TO SHAREHOLDERS. The requirement of
sending an annual report to shareholders which is set forth in the
California General Corporation Law is expressly waived, but nothing herein
shall be interpreted as prohibiting the Board from issuing annual or other
periodic reports to shareholders.
<PAGE>
Notwithstanding the immediately preceding paragraph, if the
Corporation has 100 or more holders of record of its shares (determined as
provided in the California General Corporation Law), the Board shall cause
an annual report to be sent to the shareholders not later than 120 days
after the close of the fiscal year. Such report, in addition to such
information as may be required by the California General Corporation Law,
shall contain a balance sheet as of the end of that fiscal year and an
income statement and statement of changes in financial position for that
fiscal year, accompanied by any report thereon of independent accountants
or, if there is no such report, the certificate of an authorized officer of
the Corporation that the statements were prepared without audit from the
books and records of the Corporation. The requirement of sending such
report to the shareholders at least 15 (or, if sent by third-class mail,
35) days prior to the annual meeting of shareholders to be held during the
next fiscal year is expressly waived.
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the General Provisions of the California
Corporations Code and in the California General Corporation Law shall
govern the construction of these Bylaws.
Section 8. COMPENSATION. The salaries of all officers and
agents of the Corporation shall be fixed by the Board.
Section 9. INDEMNIFICATION OF AGENTS OF THE CORPORATION;
PURCHASE OF LIABILITY INSURANCE. For purposes of this Section 9, "agent"
means any person who is or was a director, officer, employee or other agent
of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or was
a director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the Corporation or of another
enterprise at the request of such predecessor corporation; "proceeding"
means any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative; and "expenses" includes
without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under this Section 9.
The Corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the Corporation to procure a
judgment in its favor) by reason of the fact that such person is or was an
agent of the Corporation, against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with such
proceeding to the fullest extent permitted under the General Corporation
Law of the State of California, as amended from time to time.
Section 10. CORPORATE LOANS AND GUARANTEES TO DIRECTORS AND
OFFICERS. The Corporation shall not make any loan of money or property to,
or guarantee the obligation of, any director or officer of the Corporation
or of its parent, if any, unless the transaction, or an employee benefit
plan authorizing the loans or guarantees after disclosure of the right
under such a plan to include officers or directors, is approved by a
majority of the shareholders entitled to act thereon.
Notwithstanding the immediately preceding paragraph, if the
Corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the California General
Corporation Law) on the date of approval by the Board, and this paragraph
has been approved by the outstanding shares, the Board alone, by a vote
sufficient without counting the vote of any interested director or
directors, if the Board determines that such a loan or guaranty or plan may
reasonably be expected to benefit the Corporation, may approve the making
of any loan of money or property by the Corporation to, or approve the
Corporation's guaranty of the obligation of, any officer of the Corporation
or its parent or subsidiary, if any, whether or not a director, or approve
an employee benefit plan authorizing such a loan or guaranty to an officer.
The Corporation shall not make any loan of money or property to,
or guarantee the obligation of, any person upon the security of shares of
the Corporation or of its parent, if any, if the Corporation's recourse in
the event of default is limited to the security for the loan or guaranty,
unless the loan or guaranty is adequately secured without considering these
shares, or the loan or guaranty is approved by a majority of the
shareholders entitled to act thereon.
Notwithstanding the first paragraph of this Section 10, the
Corporation may advance money to a director or officer of the Corporation
or of its parent, if any, for any expenses reasonably anticipated to be
incurred in the performance of the duties of the director or officer,
provided that in the absence of the advance the director or officer would
be entitled to be reimbursed for the expenses by the Corporation, its
parent, or subsidiary, if any.
The provisions of the first paragraph of this Section 10 do not
apply to the payment of premiums in whole or in part by the Corporation on
a life insurance policy on the life of a director or officer so long as
repayment to the Corporation of the amount paid by it is secured by the
proceeds of the policy and its cash surrender value.
The provisions of this Section 10 do not apply to any
<PAGE>
transaction, plan or agreement permitted under Section 408 of the
California General Corporation Law relating to employee stock purchase
plans.
For the purposes of this Section, "approval by a majority of the
shareholders entitled to act" means either (1) written consent of a
majority of the outstanding shares without counting as outstanding or as
consenting any shares owned by any officer or director eligible to
participate in the plan or transaction that is subject to this approval,
(2) the affirmative vote of a majority of the shares present and voting at
a duly held meeting at which a quorum is otherwise present, without
counting for purposes of the vote as either present or voting any shares
owned by any officer or director eligible to participate in the plan or
transaction that is subject to the approval, or (3) the unanimous vote or
written consent of the shareholders. If the Corporation has more than one
class or series of shares outstanding, the "shareholders entitled to act"
within the meaning of this Section includes only holders of those classes
or series entitled under the articles to vote on all matters before the
shareholders or to vote on the subject matter of this Section, and includes
a requirement for separate class or series voting, or for more or less than
one vote per share, only to the extent required by the Articles.
ARTICLE VI. Amendments.
These Bylaws may be amended or repealed either by approval of
the outstanding shares (as defined in Section 152 of the California General
Corporation Law) or by the approval of the Board; provided, however, that
after the issuance of shares, a Bylaw specifying or changing a fixed number
of directors or the maximum or minimum number or changing from a fixed to a
variable number of directors or vice versa may be adopted only by approval
of the outstanding shares.
CERTIFICATE OF SECRETARY
OF
ACS MERGER CORP.
(a California corporation)
I hereby certify that I am the duly elected and acting Secretary
of said corporation and that the foregoing Bylaws, comprising 25 pages,
constitute the Bylaws of said corporation as duly adopted by the Board of
Directors thereof by action taken without a meeting.
DATE: December 30, 1993
----------------------------
Drew Adams
Secretary
AMENDMENT NO. 1 TO BYLAWS
Pursuant to the Action by Written Consent of Sole Shareholder of
Aerosol Services Company, Inc., a California corporation (the "Company"),
dated as of June 25, 1997, Article III, Section 2 to the Company's Bylaws
is amended and restated in its entirety, effective upon the filing of the
Certificate of Merger relating to the merger between Aerosol Services
Holding Corporation and Aerosol Companies Holding Corporation, as follows:
Section 3. NUMBER OF DIRECTORS. The authorized
number of directors shall be established from time to
time by resolution of the Board of Directors. Until
such resolution, the authorized number of directors
of the Corporation shall be eight (8). However, any
reduction of the authorized number of directors does
not remove any director prior to the expiration of
such director's term of office.
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
KOLMAR LABORATORIES, INC.
-------------
FIRST. The name of this corporation is KOLMAR LABORATORIES, INC.
SECOND. Its principal office in the State of Delaware is to be
located at 317-325 South State Street, in the City of Dover, County of Kent.
The agent in charge thereof is Prentice-Hall, Inc., 317-325 State Street,
Dover, Delaware.
THIRD. The nature of the business and the objects and purposes to
be transacted, promoted and carried on, are to do any or all of the things
herein mentioned, as fully and to the same extent a natural persons might or
could do, and in any part of the world, vis.
To manufacture, buy, sell and deal in cosmetics, toilet goods,
drugs, chemicals, and other preparations.
To take, own, hold, deal in, mortgage or otherwise give liens
against, and to lease, sell, exchange, transfer, or in any manner whatever to
dispose of real property, within or without the State of Delaware, wherever
situated.
<PAGE>
To manufacture, purchase or otherwise acquire in any lawful manner
and to hold, own, mortgage, pledge or otherwise to give liens against, and to
lease, sell, assign, exchange, transfer, or in any manner dispose of, to deal
and trade in and with, and to invest in goods, wares, merchandise, and
property of any and every class and description, both within Delaware and out
of Delaware and in any part of the world.
To enter into, make and perform contacts of every kind for any
lawful purpose with any person, firm, association or corporation,
municipality, body politic, country, territory, state, government or colony
or dependency thereof.
To acquire the goodwill, rights and property, and the whole or any
part of the assets, tangible or intangible, and to undertake or in any way
assume the liabilities of any person, firm, association or corporation; to
pay for the said goodwill, rights, property, and assets in cash, the stock of
this company, bonds or otherwise, or by undertaking the whole or any part of
the liabilities of the transferor; to hold or in any manner to dispose of the
whole or any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to exercise all
the powers necessary or convenient in and about the conduct and management of
such business.
To apply for, purchase, register, or in any manner to acquire, and
to hold, own, use, operate and introduce, and to sell, lease, assign, pledge,
or in any
2
<PAGE>
manner dispose of, and in any manner deal with patents, patent rights,
licenses, copyrights, trademarks, trade names, and to acquire, own, use or in
any manner dispose of any an all inventions, improvements and processes,
labels, designs, brands, or other rights, and to work, operate, or develop
the same, and to carry on any business, manufacturing or otherwise, which may
directly or indirectly effectuate these objects or any of them.
To purchase, hold, sell, assign, transfer, mortgage, pledge, or
otherwise dispose of and to guarantee the shares of the capital stock of, or
any bonds, securities or evidences of indebtedness created by any other
corporation or corporations organized under the laws of this State or of any
other State, country, nation or government, and while owner thereof to
exercise all of the rights, powers and privileges of ownership to the same
extent as natural persons might or could do; to aid in any manner any
corporation, association, or entity whose stocks, bonds or other obligations
are held, or in any manner guaranteed, by this corporation, or in which this
corporation is in any way interested, and to do any and all acts or things
necessary or expedient for the preservation, protection, or improvement of
the value of any such stocks, bonds, or other obligations.
For any of the purposes of the corporation, without limit as to
amount, to borrow or raise moneys, to draw, make, accept, endorse, discount,
execute, pledge, issue, sell, or otherwise dispose of promissory notes,
drafts, bills of
4
<PAGE>
exchange, warrants, bonds, debentures, and other instruments whether
negotiable or non-negotiable transferable or non-transferable, and evidence
of indebtedness whether secured by mortgage or otherwise, as well as to
secure the same, and all obligations arising therefrom, by mortgage or
otherwise, either alone or jointly with any other person or corporation of
the whole or any part of the property of the corporation presently owned or
to be acquired; to confer upon the holders of any of its obligations such
powers, rights and privileges as from time to time may be deemed advisable by
the board of directors; except as may be specifically prohibited by law, to
loan money with or without collateral or other security.
To purchase, in so far as the same may be done without impairing
the capital of the corporation, except as otherwise permitted by law, and to
hold, pledge and reissue shares of its own capital stock; but such stock, so
acquired and held, shall not be entitled to vote nor to receive dividends.
To have one or more offices, to conduct its business, carry on its
operations, and promote its objects within and without the State of Delaware,
in other States, the District of Columbia, the territories, colonies and
dependencies of the United States, and in foreign countries, without
restriction as to place or amount, but subject to the laws of such State,
District, territory, colony, dependency or country.
4
<PAGE>
To do any or all of the things herein set forth to the some extent
as natural persons might or could do and in any part of the world, as
principals, agents, contractors, trustees, or otherwise, and either alone or
in company with others.
IN GENERAL, to carry on any other business in connection therewith,
whether manufacturing or otherwise, and to do all things not forbidden by the
laws of the State of Delaware, and with all the powers conferred upon
corporations by the laws of the State of Delaware.
But if this corporation shall undertake to do any of the things
hereinabove set forth in any State other than Delaware, in the District of
Columbia, in any territory, colony, or dependency of the United States, or in
any foreign country or in any colony or dependency thereof, then, as to such
jurisdictions and each of them this corporation shall be deemed to have such
powers in so far only as such jurisdictions respectively permit corporations
within their several respective jurisdictions to be organized for or to
execute such powers.
It is the intention that each of the objects, purposes and powers
specified in each of the paragraphs of this third article of this Certificate
of Incorporation shall, except where otherwise specified be nowise limited or
restricted by reference to or inference from the terms of any other paragraph
or of any other article in this Certificate of Incorporation, but that the
objects, purposes and powers specified in this article and in each of the
articles or paragraphs of this Certificate
5
<PAGE>
shall be regarded as independent objects, purposes and powers, and the
enumeration of specific purposes and powers shall not be construed to
restrict in any manner the general terms and powers of this corporation, nor
shall the expression of one thing be deemed to exclude or in any way limited
by inference any powers, objects, or purposes which this corporation is
empowered to exercise, whether expressly by force of the laws of the State of
Delaware, now or hereafter in effect, or impliedly by any reasonable
construction of said law.
FOURTH. The amount of the total authorized capital stock of this
corporation is one hundred fifty (150) shares of preferred stock of the par
value of One Hundred Dollars ($100.00) per share, amounting in the aggregate
to Fifteen Thousand Dollars ($15,000.00) and five thousand (5000) shares of
common stock without nominal or par value. Any and all such shares without
nominal or par value issued, and for which the full consideration has been
paid or delivered, shall be deemed full paid stock, and the holder of such
shares shall not be liable for any further payment thereon.
The holders of the preferred stock shall be entitled to receive
cumulative dividends, as and when declared by the Board of Directors, out of
the annual net profits of the corporation or out of its net assets in excess
of its capital, as determined pursuant and subject to the provisions of the
General Corporation Law of the
6
<PAGE>
State of Delaware, at the rate of six percentum (6%), and payable before any
dividends shall be declared or paid upon or set apart for the common stock.
In any year after preferred stock has received its stipulated
dividends, and any arrearages thereof that may be due and unpaid, if the
directors elect to make to make any further distribution or dividends, such
distribution shall be made exclusively to the holders of common stock.
The corporation, through its Board of Directors, and conformable
with Section 27 of the General Corporation Law of Delaware, may from time to
time redeem the whole or any part of the preferred stock at the price of One
Hundred Dollars ($100.00) per share plus any arrearages thereon that may be
due and unpaid. The notice of such redemption shall be mailed not less than
thirty (30) days prior to the date upon which the stock is to be redeemed to
each holder of stock so to be redeemed, at his address as it appears on the
books of the corporation. In the event that less than all of the outstanding
preferred stock of the corporation is to be redeemed, the amount to be
redeemed and the method of effecting such redemption, whether by lot or pro
rata or otherwise, may be determined by the Board of Directors. On and after
the date fixed for such redemption, the holders of shares so called for
redemption shall cease to be entitled to any further dividends and the
respective holders thereof shall have no right or interest thereon or
therein, by reason of the
7
<PAGE>
ownership of such shares, except to receive the said redemption price, as a
debt without interest, upon presentation and surrender of their certificates
therefor.
In case of any liquidation, dissolution or winding up of the
affairs of the corporation, whether voluntary or involuntary, and after
payment of all the debts of the corporation the assets shall first be applied
to the payment of the preferred stock at par, and no more, and the remainder
shall be distributed among the holders of the common stock, share and share
alike.
Subject to the General Corporation Laws of Delaware, the voting
power shall vest exclusively in the holders of the common stock.
The corporation shall have power to create and issue, whether or
not in connection with the issue and sale of any shares of stock or other
securities of the corporation, rights or options entitling the holders
thereof to purchase from the corporation any shares of its capital stock of
any class or classes, conformable with the provisions of Section 14 of the
General Corporation Law of Delaware. The Board of Directors may from time to
time provide for the creation and issuance of such rights or options in a
resolution or resolutions setting forth the terms upon which, the time or
times, which may be limited or unlimited in duration, at or within which and
the price or prices at which any such shares may be purchased from the
corporation upon the exercise of any such right or option, provided that such
8
<PAGE>
resolution shall be conformable to the General Corporation Law, especially
Section 14.
FIFTH. The amount of capital with which this corporation will
commence business is One Thousand Dollars ($1000.00)
SIXTH. The names and places of residence of each of the
incorporators are as follows:
Name Residences
Lessing L. Kole 2245 - N. 67th St., Milwaukee, Wis.
James E. McNally 2462 - N. Grant Blvd., Milwaukee, Wis.
W. J. Wick 911 - N. 14th St., Milwaukee, Wis.
SEVENTH. The existence of this corporation is to be perpetual.
EIGHTH. The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
NINTH. (a) Subject to the provisions of the General Corporation
Law of the State of Delaware, the number of directors of the corporation
shall be determined as provided in the by-laws.
(b) If the by-laws so provide, election of directors
need not be by ballot.
9
<PAGE>
TENTH. In furtherance and not in limitation of the general powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized:
(a) To make, to alter, or to repeal the By-Laws of this
corporation; to fix the amount to be reserved as or for working capital, or
for any other proper purpose, to fund such reserve or reserves, and to
abolish any such reserve or reserves, fund or funds; to authorize and cause
to be executed mortgages and liens upon the real and personal property of
this corporation.
(b) From time to time to determine pursuant to the provisions
of the By-Laws, whether and to what extent, and at what times and places, and
under what conditions and regulations, the accounts and books of this
corporation (other than the stock ledger), of any of them, shall be open to
inspection of stockholders; and no stockholder shall have any right of
inspecting any account, book or document of this corporation except as
conferred by statute, unless duly authorized so to do by a resolution of the
stockholders or directors.
(c) The directors, by a suitable by-law or by resolution
passed by a majority of the whole membership of the Board may designate two
or more of their number to constitute a committee or committees, with such
name or names as may be stated in the By-Laws, or as may be determined from
time to time by resolution of the Board of Directors, which committee or
committees, to the extent
10
<PAGE>
provided in such resolution or resolutions or in the By-Laws of the
corporation, shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the corporation, and may
have power to authorize the seal of the corporation to be affixed to all
papers which may require it.
(d) When and as authorized by the affirmative vote of the
holders of a majority of the stock issued and outstanding having voting
power, given at a stockholders' meeting called for that purpose, or when
authorized by the written consent of the holders of a majority of the voting
stock issued and outstanding, directors may at any meeting sell, lease or
exchange all of its property and assets, including its goodwill and its
corporate franchises, upon such terms and conditions and for such
consideration, which may be in whole or in part shares of stock, and /or
other securities of, any other corporation or corporations, as the Board of
Directors shall deem expedient and for the best interest of the corporation.
(e) Subject to the provisions of the statutes of Delaware, to
exercise any and all other powers, in addition to the powers expressly
conferred by law and by this Certificate of Incorporation, which may be
conferred upon it by the corporation through appropriate by-law provisions.
ELEVENTH. Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdic-
11
<PAGE>
tion within the State of Delaware may on the application in a summary way of
this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 3883 of the Revised Code of 1915 of said State, or
on the application of trustees in dissolution or of any receiver or receiver
appointed for this corporation under the provisions of Section 43 of the
General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said Court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, and the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the Court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of this corporation, as the case may be, and also on this
corporation.
TWELFTH. The stockholders and directors shall have power to hold
their meetings if the By-Laws so provide, and keep the books except the
original or duplicate stock ledger, documents and papers of the corporation,
outside of the State
12
<PAGE>
of Delaware, and to have one or more offices within or without the State of
Delaware, at such places as may be from time to time designed by the By-Laws
or by resolution of the stockholders or directors, except as otherwise
required by the laws of Delaware.
THIRTEENTH. The corporation reserves the right to amend, alter or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the statutes of Delaware, and all
rights and powers conferred on directors and stockholders herein are granted
subject to this reservation.
WE THE UNDERSIGNED, the purpose of forming a corporation under the
laws of the State of Delaware, do make, file and record this Certificate,
and do certify that the facts herein stated are true, and we have accordingly
hereunto set our respective hands and seals.
Dated, at Milwaukee, Wis., June 23rd, 1937.
/s/ LESSING L. KOLE (Seal)
-------------------------------------
/s/ JAMES E. MCNALLY (Seal)
-------------------------------------
/s/ W. J. WICK (Seal)
-------------------------------------
13
<PAGE>
STATE OF WISCONSIN )
) ss.
COUNTY OF MILWAUKEE )
BE IT REMEMBERED, that on this 23rd day of June, A.D. 1937
personally appeared before me Meta Curschmann a Notary Public, Lessing L.
Kole, James E. McNally and W. J. Wick, parties to the foregoing Certificate
of Incorporation, known to me personally to be such, and I having first made
known to them and each of them the contents of said Certificate, they did
each severally acknowledge that they signed, sealed and delivered the same as
their voluntary act and deed, and each deposed that the facts therein stated
were truly set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ META CURSCHMANN
--------------------------------
Notary Public
14
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
---------------
KOLMAR LABORATORIES, INC. a corporation organized and existing
under and by virtue of the provisions of an Act of the General Assembly of
the State of Delaware entitled "An Act Providing a General Corporation Law",
approved March 10, 1899, and the acts amendatory thereof and supplemental
thereto, the Certificate of Incorporation of which was filed in the office of
the Secretary of State of Delaware on July 3, 1937, and recorded in the
office of the Recorder of Deeds for New Castle County, State of Delaware, on
July 3, 1937, DOES HEREBY CERTIFY:
That, it appearing by the Certificate of the Judges appointed
for the purpose of conducting, the special meeting of the stockholders of the
above corporation held on the 4th day of February, 1949, in the City of
Milwaukee, State of Wisconsin, at two o'clock in the afternoon, for the
consideration of the amendment hereinafter set forth, and the vote of the
stockholders for and against the adoption of said amendment, that the persons
or bodies corporate holding the majority of the issued and outstanding voting
stock of said corporation have voted in favor thereof, the following
amendment to the Certificate of Incorporation of the above was duly
15
<PAGE>
adopted in accordance with the provisions of Section 25 of the General
Corporation Law of the State of Delaware as amended:
That the first paragraph of paragraph FOURTH of the
Certificate of Incorporation of this company be amended to read as follows:
The amount of the total authorized capital stock of this
corporation is five hundred (500) shares of preferred stock of the par value
of One Hundred Dollars ($100.00) per share, amounting in the aggregate to
Fifty Thousand Dollars ($50,000.00), and five thousand (5000) shares of
common stock without nominal or par value. Any and all such shares without
nominal or par value issued, and for which the full consideration has been
paid or delivered, shall be deemed full paid stock, and the holder of such
shares shall not be liable for any further payment thereon.
The capital of said corporation will not be reduced under or
by reason of said proposed amendment.
16
<PAGE>
IN WITNESS WHEREOF, the said Kolmar Laboratories, Inc. has
caused its corporate seal to be hereunto affixed and this Certificate to be
signed by Lessing L. Kole, its President, and John B. Rix, its Secretary,
this 1st day of August, A.D. 1949.
KOLMAR LABORATORIES, INC.
By /s/ LESSING L. KOLE
---------------------------
President
/s/ JOHN B. RIX
---------------------------
Secretary
STATE OF WISCONSIN, )
) ss.
MILWAUKEE COUNTY. )
BE IT REMEMBERED that on this 1st day of August, A.D. 1949,
personally came before me, Meta Curschmann, a Notary Public in and for the
County and State aforesaid, Lessing L. Kole, President of Kolar Laboratories,
Inc., a corporation of the State of Delaware, the corporation described in
and which executed the foregoing certificate, known to be personally to be
such and he, the said Lessing L. Kole, as such President, duly executed said
certificate before as and acknowledged the said certificate to be his act and
deed and the act and deed of said corporation; that the
17
<PAGE>
signatures of the said President and Secretary of said company respectively,
and that the seal affixed to said Certificate is the common or corporate seal
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of
office the day and year aforesaid.
/s/ META CURSCHMANN
---------------------------------
Notary Public
18
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
Kolmar Laboratories, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Kolmar
Laboratories, Inc., resolutions were duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and calling a meeting of the stockholders of
said corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the Article thereof numbered "Fourth"
so that, as amended said Article shall be and read as follows:
"FOURTH: The amount of the total authorized capital stock of this
corporation is five hundred (500) shares of preferred stock of the par
value of One Hundred Dollars ($100.00) per share, amounting in the
aggregate to Fifty Thousand ($50,000.00), and fifty-two thousand
(52,000) shares of common stock without nominal or par value. Any and
all such shares without nominal or par value issued, and for which the
full consideration has been paid or delivered, shall be deemed full paid
stock, and the holder of such shares shall not be liable for any further
payment thereon.
19
<PAGE>
"The holders of the preferred stock shall be entitled to receive
cumulative dividends, as and when declared by the Board of Directors,
out of the annual net profits of the corporation or out of its net
assets in excess of its capital, as determined pursuant and subject to
the provisions of the General Corporation Law of the State of Delaware,
at the rate of six percentum (6%), and payable before any dividends
shall be declared or paid upon or set apart for the common stock.
"In any year after preferred stock has received its stipulated
dividends, and any arrearages thereof that may be due and unpaid, if the
directors elect to make any further distribution of dividends, such
distribution shall be made exclusively to the holders of common stock.
"The corporation, through its Board of Directors, and conformable
with Section 27 of the General Corporation Law of Delaware, may from
time to time redeem the whole or any part of the preferred stock at the
price of One Hundred Dollars ($100.00) per share plus any arrearages
thereon that may be due and unpaid. The notice of such redemption shall
be mailed not less than thirty (30) days prior to the date upon which
the stock is to be redeemed and each holder of stock so to be redeemed,
at his address as it appears on the books of the corporation. In the
event that less than all of the outstanding preferred stock of the
corporation is to be redeemed, in the amount to be redeemed and the
method of effecting such redemption, whether by lot or pro rata or
otherwise, may be determined by the Board of Directors. On and after
the date fixed for such redemption, the holders of shares so called for
redemption shall cease to be entitled to any further dividends and the
respective holders thereof shall have no right or interest thereon or
therein, by reason of the ownership of such shares, except to receive
the said redemption price, as a debt without interest, upon presentation
and surrender of their certificates therefor.
"In case of any liquidation, dissolution or wiring up of the
affairs of the corporation, whether voluntary or involuntary, and after
payment of all the debts of the corporation the assets shall first be
applied to the payment of the preferred stock at par, and no more, and
the remainder shall be distributed among the holders of the common
stock, share and share alike.
20
<PAGE>
"Subject to the General Corporation Laws of the Delaware, the
voting power shall vest exclusively in the holders of the common stock.
"The corporation shall have power to create and issue, whether or
not in connection with the issue and sale of any shares of stock or
other securities of the corporation, rights or options entitling the
holders thereof to purchase from the corporation any shares of its
capital stock of any class or classes, conformable with the provisions
of Section 14 of the General Corporation Law of Delaware. The Board of
Directors may from time to time provide for the creation and issuance of
such rights or options in a resolution or resolutions setting forth the
terms upon which, the time or times, which may be limited or unlimited
in duration, at or within which and the price or prices at which any
such shares may be purchased from the corporation upon the exercise of
any such right or option, provided that such resolution shall be
conformable to the General Corporation Law, especially Section 14."
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, a meeting of the stockholders of said corporation was duly
called and held, at which meeting the necessary number of shares as required
by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
FOURTH: That the capital of said corporation will not be
reduced under or by reason of said amendment.
IN WITNESS WHEREOF, said Kolmar Laboratories, Inc., has caused
its corporate seal to be hereunto affixed and this certificate to be signed
by Lessing L. Kole, its President, and John B. Rix, its Secretary, this 2nd
day of August, 1962.
21
<PAGE>
KOLMAR LABORATORIES, INC.
By /s/ LESSING L. KOLE
----------------------------------
President.
/s/ JOHN B. RIX
----------------------------------
Secretary.
STATE OF WISCONSIN )
) ss.
COUNTY OF MILWAUKEE )
BE IT REMEMBERED that on this 2nd day of August, A.D. 1962,
personally came before me a Notary Public in and for the County and State
aforesaid, Lessing L. Kole, President of Kolmar Laboratories, Inc., a
corporation of the State of Delaware, the corporation described in and which
executed the foregoing certificate, known to me personally to be such, and
he, the said Lessing L. Kole as such President, duly executed said
certificate before me and acknowledged the said certificate to be his act and
deed and the act and deed of said corporation; that the signatures of the
said President and of the Secretary of said corporation to said foregoing
certificate are in the handwriting of the said President and Secretary of
said corporation respectively, and that the seal affixed to said certificate
is the common or corporate seal of said corporation.
22
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and seal of
office the day and year aforesaid.
/s/ NOTARY PUBLIC
----------------------------------
Notary Public, Milwaukee Co., Wis.
My commission expires (Permanent)
23
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
________________
Kolmar Laboratories, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Kolmar
Laboratories, Inc., resolutions were duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and calling a meeting of the stockholders of
said corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED that the Certificate of Incorporation of this
corporation be amended by changing subparagraph (d) of Article numbered
Tenth so that, as amended, said paragraph of said Article shall be and
read as follows:
"(d) When and as authorized by the affirmative vote of the
holders of two-thirds of the stock issued and outstanding having voting
power, given at a stockholders' meeting called for that purpose, or when
authorized by the written consent of the holders of two-thirds of the
voting stock issued and outstanding, directors may at any meeting sell,
lease or exchange all, or substantially all, of its property and assets,
including its goodwill and its corporation franchises, upon such terms
and conditions and for such consideration, which may be in whole or in
24
<PAGE>
part shares of stock in, and/or other securities of, any other
corporation or corporations, as the Board of Directors shall deem
expedient and for the best interests of the corporation."
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, a meeting of the stockholders of said corporation was duly
called and held, at which meeting the necessary number of shares as required
by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
FOURTH: That said amendment does not effect any change in the
issued shares of said corporation.
25
<PAGE>
IN WITNESS WHEREOF, said Kolmar Laboratories, Inc. has caused
its corporate seal to be hereunto affixed and this certificate to be signed
by Lessing L. Kole, its President, and John B. Rix, its Secretary, this 15th
day of October, 1963.
KOLMAR LABORATORIES, INC.
By /s/ LESSING L. KOLE
--------------------------------
President
/s/ JOHN B. RIX
--------------------------------
Secretary
STATE OF WISCONSIN )
) ss.
MILWAUKEE COUNTY. )
BE IT REMEMBERED that on this 15th day of October, A.D. 1963,
personally came before me a Notary Public in and for the County and State
aforesaid, Lessing L. Kole, President of Kolmar Laboratories, Inc., a
corporation of the State of Delaware, the corporation described in and which
executed the foregoing certificate, known to me personally to be such, and
he, the said Lessing L. Kole as such President, duly executed said
certificate before me and acknowledged the said certificate to be his act and
deed and the act and deed of said corporation; that the signatures of the
said President and of the Secretary of said corporation to said foregoing
certificate are in the handwriting of the said President and Secretary of
said corporation respectively, and that the seal affixed to said certificate
is the common or corporate seal of corporation.
26
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and seal of
office the day and year aforesaid.
/s/ NOTARY PUBLIC
---------------------------------
Notary Public, Milwaukee Co., Wis.
My commission is permanent
27
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
KOLMAR INTERNATIONAL, INC.
INTO
KOLMAR LABORATORIES, INC.
-------
Kolmar Laboratories, Inc., a corporation organized and existing
under the laws of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 3rd day of
July, 1937, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That this corporation owns all of the outstanding shares
of the stock of Kolmar International, Inc., a corporation incorporated on the
9th day of May, 1945, pursuant to the General Corporation Law of the State of
Delaware.
THIRD: That this corporation, by the following resolutions of its
Board of Directors, duly adopted at a meeting held on the 20th day of
November, 1964, determined to and did merge into itself said Kolmar
International, Inc.
RESOLVED, that Kolmar Laboratories, Inc. merge, and it hereby does
merge into itself said Kolmar International, Inc., and assumes all of its
obligations; and
<PAGE>
FURTHER RESOLVED, that the merger shall become effective on the 1st
day of February, 1965; and
FURTHER RESOLVED, that the proper officers of this corporation be
and they hereby are directed to make and execute, under the corporate seal of
this corporation, a Certificate of Ownership and Merger setting forth a copy
of the resolutions to merge said Kolmar International, Inc. and assume its
liabilities and obligations, and the date of adoption thereof, and to cause
the same to be filed, in the manner provided by law, and to do all acts and
things whatsoever, whether within or without the State of Delaware, which may
be in anywise necessary or proper to effect said merger.
IN WITNESS WHEREOF, said Kolmar Laboratories, Inc. has caused its
corporate seal to be affixed and this certificate to be signed by Erwin J.
Maruszewski, its Vice-President, and Robert E. Kuelthau, its Assistant
Secretary, this 7th day of January, A.D. 1965.
KOLMAR LABORATORIES, INC.
By: /s/ ERWIN J. MARUSZEWSKI
---------------------------------
Vice President
/s/ ROBERT E. KUELTHAU
---------------------------------
Assistant Secretary
<PAGE>
STATE OF WISCONSIN, )
) ss.
MILWAUKEE COUNTY )
BE IT REMEMBERED that on this 7th day of January, A.D. 1965,
personally came before me, Meta Curschmann, a Notary Public in and for the
County and State aforesaid, Erwin J. Maruszewski, Vice President of Kolmar
Laboratories, Inc., a corporation of the Sate of Delaware, the corporation
described in and which executed the foregoing certificate, known to me
personally to be such, and he, the said Erwin J. Maruszewski, as such Vice
President duly executed said certificate before me and acknowledged the said
certificate to be his act and deed and the act and deed of said corporation;
that the signatures of the said Vice President and of the Assistant Secretary
of said corporation to said foregoing certificate are in the handwriting of
the Vice-President and Assistant Secretary of said corporation respectively,
and that the seal affixed to said certificate is the common or corporate seal
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office
the day and year aforesaid.
/s/ NOTARY PUBLIC
-------------------------
Notary Public
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
KOLMAR COSMETICS SPECIALITIES, INC.
INTO
KOLMAR LABORATORIES, INC.
------
Kolmar Laboratories, Inc., a corporation organized and existing
under the laws of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 3rd day of
July, 1937, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That this corporation owns all of the outstanding shares
of the stock of Kolmar Cosmetic Specialities, Inc., a corporation
incorporated on the 2nd day of January, 1946, pursuant to the Wisconsin
Business Corporation Law of the State of Wisconsin.
THIRD: That this corporation, by the following resolutions of its
Board of Directors, duly adopted at a meeting held on the 20th day of August,
1965, determined to and did merge into itself said Kolmar Cosmetic
Specialities, Inc.:
RESOLVED, that Kolmar Laboratories, Inc. merge, and it hereby does
merge into itself said Kolmar Cosmetic Specialities, Inc., and assumes all of
its obligations; and
<PAGE>
FURTHER RESOLVED, that the merger shall become effective on the
31st day of December, 1965; and
FURTHER RESOLVED, that the proper officers of this corporation be
and they hereby are directed to make and execute, under the corporate seal of
this corporation, a Certificate of Ownership and Merger setting forth a copy
of the resolutions to merger said Kolmar Cosmetic Specialities, Inc., and
assume its liabilities and obligations, and the date of adoption thereof, and
to cause the same to be filed, in the manner provided by law, and to do all
acts and things whatsoever, whether within or without the State of Delaware,
which may be in anywise necessary or proper to effect said merger.
IN WITNESS WHEREOF, said Kolmar Laboratories, Inc. has caused its
corporate seal to be affixed and this certificate to be signed by Richard L.
Kole, its President, and John B. Rix, its Secretary, this 24th day of
November, A.D. 1965.
KOLMAR INDUSTRIES, INC.
By /s/ RICHARD L. KOLE
---------------------------
President
/s/ JOHN B. RIX
---------------------------
Secretary
<PAGE>
STATE OF NEW YORK, )
) ss.
NEW YORK COUNTY, )
BE IT REMEMBERED that on this 24th day of November, A.D. 1965,
personally came before me, Gertrude E. Campbell, a Notary Public in and for
the County and State aforesaid, Richard L. Kole, President of Kolmar
Laboratories, Inc., a corporation of the State of Delaware, the corporation
described in and which executed the foregoing certificate, known to me
personally to be such, and he, the said Richard L. Kole, as such President
duly executed said certificate before me and acknowledged the said
certificate before me and acknowledged the said certificate to be his act and
deed and the act and deed of said corporation; that the signature of the said
President, and of the Secretary of said corporation to said foregoing
certificate are in the handwriting of the President and Secretary of said
corporation respectively, and that the seal affixed to said certificate is
the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office
the day and year aforesaid.
/s/ NOTARY PUBLIC
------------------------------
Notary Public
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
KOLMAR INDUSTRIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
("corporation") is Kolmar Laboratories, Inc.
2. The certificate of incorporation of the corporation is hereby
amended by striking out Article TENTH (d) thereof and by substituting in lieu
of said Article the following new Article TENTH (d) and by adding the
following new Article TENTH (f):
"TENTH (d): When and as authorized by the affirmative vote of
the holders of two-thirds of the stock issued and outstanding having voting
power, given at a stockholders meeting called for that purpose, or when
authorized by the written consent of the holders of two-thirds of the voting
stock issued and outstanding, directors may at any meeting (i) sell, lease or
exchange all, or substantially all, of its property and assets, including its
goodwill and its corporate franchises, upon such terms and conditions and for
such consideration, which may be in whole or in part shares of stock in,
and/or other securities of, any other corporation or corporations, as the
Board of Directors shall deem expedient and for the best interests of the
corporation, and/or (ii) enter into an agreement of merger or consolidation
of the corporation into or with any other corporation or entity."
"TENTH (f): When evaluating any offer of any party to make a
tender or exchange offer for a controlling equity interest in the
corporation, or any merger or consolidation of the corporation into or with
any other corporation or entity, or any sale, lease, exchange, transfer or
other disposition, including, without limitation, a mortgage or any other
security device, of all or substantially all of the assets of the
corporation, and in connection with the exercise of its judgment in
determining what is in the best interests of the corporation and its
stockholders, to give due consideration to such factors as the Board of
Directors in its discretion determines to be relevant, including, without
limitation, the social, legal, and economic effects of the proposed
transaction upon employees, customers, suppliers, and other affected persons,
firms and corporations, on the communities in which the corporation operates
or is located, and on the corporation's business philosophy."
<PAGE>
3. The amendments of the certificate of incorporation herein have
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
Signed and attested to on June 26th, 1985.
/s/ ADOLPH A. MARUSZEWSKI
- -------------------------------
Adolph A. Maruszewski
President
/s/ JEROME MALBIN
- -------------------------------
Jerome Malbin
Secretary
<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF ORANGE )
BE IT REMEMBERED that, on June 26th, 1985, before me, a Notary
Public duly authorized by law to take acknowledgment of deeds, personally
came Adolph A. Marcszewski, President of Kolmar Laboratories, Inc, who duly
signed the foregoing instrument before me and acknowledged that such signing
is his act and deed, that such instrument as executed is the act and deed of
said corporation, and that the facts stated therein are true.
GIVEN under my hand on June 26, 1985.
/s/ NOTARY PUBLIC
------------------------------
Notary Public
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
KOLMAR LABORATORIES, INC.
It is hereby certified that:
l. The name of the corporation (herein called the "Corporation")
is Kolmar Laboratories, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by adding thereto a new Article FOURTEENTH as follows:
"FOURTEENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director. Notwithstanding the foregoing
sentence, a director shall be liable to the extent provided by applicable law
(i) for breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for paying a
dividend or approving a stock repurchase in violation of Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of
this Article Fourteenth shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment. If
the Delaware General Corporation Law is amended after approval by the
stockholders of this Article Fourteenth to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended from time to time."
3. The amendment of the Certificate of Incorporation herein has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
Signed and attested to on July 5, 1989.
Attest:
/s/ JEROME K. MALBIN /s/ RICHARD L. KOLE
- ----------------------------- --------------------------
Jerome K. Malbin Richard L. Kole
Secretary Chairman of the Board and
Chief Executive Officer
<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF ORANGE )
BE IT REMEMBERED that, on July 5, 1989, before me, a Notary Public
duly authorized by law to take acknowledgment of deeds, personally came
Richard L. Kole, Chairman of the Board and Chief Executive Officer of Kolmar
Laboratories, Inc., who duly signed the foregoing instrument before me and
acknowledged that such signing is his act and deed, that such instrument as
executed in the act and deed of said corporation, and that the facts stated
therein are true.
GIVEN under my hand on July 7, 1989.
/s/ NOTARY PUBLIC
----------------------------------
Notary Public
<PAGE>
CERTIFICATE OF MERGER
MERGING
CCL 1990 ACQUISITION CORP.
INTO
KOLMAR LABORATORIES, INC.
Pursuant to Section 251 of the
Delaware General Corporation Law
The undersigned corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
FIRST: The name and state of incorporation of each of the
Constituent Corporations in the merger are as follows:
STATE OF
NAME INCORPORATION
---- -------------
CCL 1990 Acquisition Corp. Delaware
Kolmar Laboratories, Inc. Delaware
SECOND: An Agreement and Plan of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with Section 251 of the
General Corporation Law of the State of Delaware;
THIRD: Kolmar Laboratories, Inc., shall be the surviving
Corporation;
FOURTH: The certificate of incorporation of Kolmar Laboratories,
Inc., shall be the certificate of incorporation of the surviving corporation;
<PAGE>
FIFTH: The executed Agreement and Plan of Merger is on file at
the principal place of business of the surviving corporation. The address of
the principal place of business of the surviving corporation is 123 Pike
Street, Port Jervis, New York 12771 U.S.A.; and
SIXTH: A copy of this Agreement and Plan of Merger will be
furnished by the surviving corporation, on request and without cost, to any
stockholder of any constituent corporation.
Dated: April 4, 1991 KOLMAR LABORATORIES, INC.
By: /s/ W. M. GODFREY
----------------------------
President
ATTEST:
By: /s/ ALBERT GNAT
----------------------------
Assistant Secretary
<PAGE>
EXHIBIT 3.6
KOLMAR LABORATORIES, INC.
BY-LAWS
(As amended April 15, 1953)
ARTICLE I
Stock
1. Certificates of stock shall be issued in numerical order from the stock
certificate book, shall be signed by the president and secretary, and sealed
by the secretary with the corporate seal. A record of each certificate
issued shall be kept on the stub thereof.
2. Transfers of stock shall be made only on the books of the company, and
before a new certificate is issued the old certificate shall be surrendered
for cancellation.
ARTICLE II
Stockholders
1. The Annual Meeting of the stockholders of this Corporation shall be held
at the office of the Corporation in the City of Port Jervis, State of New
York, on such date during the months of May and June of each year as the
President may designate upon thirty days notice to the stockholders.
2. Special meetings of stockholders may be called at the office of the
company at any time by resolution of the board of directors, or upon written
request of the stockholders holding one-third of the outstanding stock.
3. Notice of special meetings of the stockholders shall be given in writing
to each stockholder at least five days before such meeting.
4. A quorum at any meeting of the stockholders shall constitute a majority
of the voting stock of the company, represented in person or by proxy.
<PAGE>
5. The election of directors after the first election shall be held at the
annual meeting of the stockholders. The election shall be by ballot, and
each stockholder of record shall be entitled to cast one vote for each share
of stock held by him.
6. The order of business at the annual meeting, and as nearly as possible
at all other meetings of stockholders, shall be:
1. Calling of roll.
2. Proof of notice of meeting.
3. Reading and disposal of all unapproved minutes.
4. Annual reports of officers and committees.
5. Election of directors.
6. Unfinished business.
7. New business.
8. Adjournment.
ARTICLE III
Directors
1. Directors up to eleven in number shall be elected at the annual meting
of shareholders to serve until the next succeeding annual meeting and until
their successors shall have been elected and qualified. Directors need not
be shareholders of the corporation. The Board of Directors may at any time
that its total membership is less than eleven elect one or more persons to
fill such vacancies which persons shall serve until the next succeeding
annual shareholders' meeting and until his or their successors shall have
been elected and qualified.
2. Stated meetings of the Board of Directors shall be held after reasonable
notice to the members quarterly on such dates and at such times and places as
may be directed by the President.
2
<PAGE>
3. A majority of the directors in office shall constitute a quorum for the
transaction of business.
4. Special meetings of the board may be called by the president on one
day's notice by mail, or personally, to each director.
5. The board of directors shall have the management of the business of the
company, and can, subject to the provisions of the statutes, of the articles
of incorporation, and of these by-laws, exercise all such powers and do all
such things as may be exercised or done by the corporation.
6. Officers of the company shall be elected by the board of directors each
year. If any office becomes vacant during the year the board of directors
shall fill the same for the unexpired term. The board of directors shall fix
the compensation of all officers and agents of the company.
7. The order of business at any regular or special meeting of the directors
shall be:
1. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
8. Every director and officer of the Corporation shall be indemnified by
the Corporation against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by any
of them in connection with any civil or criminal suit or proceedings to which
any of them may be made a party, or in which any of them may become involved,
by reason of being or having been a director or officer of this corporation
or any other corporation at the request of this corporation, to the extent
that this corporation is permitted to so indemnify them by and subject to any
limitations provided for in the corporation laws of the State of Delaware as
constituted at the time of the commission or alleged commission of the act,
acts, course of conduct or dealings by the director or officer
3
<PAGE>
which forms the basis of such suit or proceeding. The foregoing right of
indemnification shall be in addition to and not exclusive of all other rights
to which such director or officer may be entitled.
ARTICLE IV
Officers
1. The Officers of the Corporation shall be chosen by the Board of
Directors and shall be a Chief Executive Officer; a President; one or more
Vice-President; a Secretary; one or more Assistant Secretaries; a Treasurer;
and one or more Assistant Treasurers none of whom need be a member of the
Board of Directors. In addition, the Board may elect from among its members
a Chairman of the Board and one or more Vice-Chairman.
2. The Chief Executive Officer shall be chief executive officer of the
Corporation. If he is a member of the Board of Directors, he shall preside
at all meetings of the Shareholders and Board of Directors in the absence of
the Chairman of the Board. He shall be responsible for conducting the
business with the objective of providing maximum profit and return on
invested capital; establishing current and long-range objectives, plans, and
policies subject to the approval of the Board of Directors; and representing
the company with its major customers, the financial community and the public.
3. The President shall, if he is a member of the Board of Directors,
preside at all meetings of the Shareholders and Board of Directors in the
absence of the Chairman of the Board and Chief Executive Officer. He shall
direct, administer and coordinate the activities of the Corporation in
accordance with policies, goals and objectives established by the Chief
Executive Officer and the Board of Directors. He shall assist the Chief
Executive Officer in the development of corporate operations, personnel,
financial performance and growth. He shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation, except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
4. The secretary shall countersign all deeds, leases and conveyances
executed by the corporation, affix the seal of the corporation thereto and to
such other papers as shall be required or directed to be sealed, shall keep a
record of the proceedings of
4
<PAGE>
all meetings of the board of directors, and shall safely and systematically
keep all books, papers, records and documents belonging to the corporation or
in any ways pertaining to the business thereof, and shall make such reports
and perform such other duties as are incident to his office or are properly
required of him by the board of directors. In the absence or disability of
the secretary the assistant secretary shall exercise all his functions.
5. The treasurer shall keep and account for all moneys, credit and property
of any and every nature of the corporation which shall come into his hands,
and keep a correct account of all moneys received and disbursed, and proper
vouchers for moneys disbursed, and shall render such accounts, statements and
inventories of moneys received and disbursed, and all money and property on
hand, and generally of all matters pertaining to his office as shall be
required by the board of directors. In the absence or disability of the
treasurer, the assistant treasurer shall exercise all his functions.
6. In case of the absence of an officer of the company, or for any other
reason that may seem sufficient to the board of directors, the board may
delegate his powers and duties for the time being to any other officer or to
any other director.
ARTICLE V
Dividends and Finance
1. Dividends shall be declared out of the annual net profits of the
corporation or out of its net assets in excess of its capital as determined
pursuant and subject to the provisions of the General Corporation Law of the
State of Delaware, at such times as the board of directors shall direct.
2. The moneys of the company shall be deposited in the name of the company,
and at such banks as the board of directors shall designate, and shall be
drawn in the manner provided by the board of directors.
ARTICLE VI
Seal
5
<PAGE>
The board of directors shall provide a suitable seal containing the name
of the company and the words "corporate seal," "Delaware," or other
appropriate words, which seal shall be in charge of the secretary.
ARTICLE VII
Waiver of Notice
Any stockholder, director or officer, may waive any notice required to
be given by these by-laws.
Amendments made:
5/6/60 March 20, 1974
April 20, 1964 September 18, 1974
March 7, 1968 June 18, 1975
May 21, 1970 December 16, 1975
November 12, 1970
Retyped October 5, 1993 /ket
6
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
PIEDMONT LABORATORIES, INC.
Piedmont Laboratories, Inc., a corporation organized and existing
under and by virtue of the Georgia Business Corporation Codes, DOES HEREBY
CERTIFY:
That the Restated Articles of Incorporation amend certain provisions
of the Articles of Incorporation and restates all those provisions then in
effect not being amended by these Restated Articles of Incorporation;
That the Restated Articles of Incorporation were authorized by the
unanimous written consent of the shareholders and the Board of Directors of
the corporation as of the 1st day of July 1988;
That the Restated Articles of Incorporation supersede the original
Articles of Incorporation as theretofore amended; and
That the adopted Restated Articles of Incorporation are as follows:
I.
The name of the corporation shall be: Piedmont Laboratories, Inc.
II.
The corporation shall have perpetual duration.
III.
The corporation is organized for profit and is organized pursuant to
the provisions of the Georgia Business Corporation Code.
IV.
The corporation shall be organized for the following purposes:
(1) To engage in the aerosol and liquid filling and contract
filling businesses.
(2) To engage in any lawful activity for which a corporation may
be organized under the Georgia Business Corporation Code.
V.
The corporation shall have the authority to issue an aggregate number
of one million (1,000,000) shares of common stock. The stock shall be
without par value.
VI.
The address of the registered office of the corporation in the State
of Georgia is 2030 Old Candler Road, Gainesville, Georgia 30501. The name
of the registered agent at such address is Samuel D. Garretson.
VII.
The number of Directors of the corporation shall be fixed from time to
time in the by-laws of the corporation, and may be increased or decreased
as therein provided.
VIII.
The Board of Directors of the corporation may authorize the issuance
of bonds, debentures and other evidences of indebtedness of the corporation
and may fix all the terms thereof, including, without limitation, the
convertibility thereof into shares of stock of the corporation of any
class, or any series of the same class.
IX.
The Board of Directors of the corporation may from time to time, by
resolution, establish one or more series of stock in the corporation,
establish the number of shares in such series, set forth the designation of
the series, and fix and determine the relative rights and preferences
thereof.
X.
The corporation shall have the power, acting through its Board of
Directors, to make distributions to its shareholders out of its capital
surplus and to purchase its own shares out of its unreserved and
unrestricted capital surplus available therefor.
XI.
No shareholder of the corporation shall have any pre-emptive right to
acquire unissued shares of the corporation's capital stock.
<PAGE>
XII.
No Director shall be liable to the corporation of its shareholders for
monetary damages for breach of duty of care or other fiduciary duty as a
Director, except (i) any appropriation, by a Director in violation of his
fiduciary duties, of any business opportunity of the corporation; (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) for the types of liability set forth
in Section 14-2-154 of the Georgia Business Corporation Code; and (iv) for
any transaction from which a Director derived an improper personal benefit.
IN WITNESS WHEREOF, Piedmont Laboratories, Inc. has caused this
Restated Articles of Incorporation to be signed and attested by its duly
authorized officers, this 1st day of July, 1988.
PIEDMONT LABORATORIES, INC.
By: /s/ Samuel D. Garretson
-------------------------------
Samuel D. Garretson
President
The undersigned, the Secretary of the corporation does hereby attest
that Samuel D. Garretson is the duly elected, qualified and acting
President of the corporation and that as President, he is authorized to
execute the Restated Articles of Incorporation on behalf of the
corporation, that the execution of the Restated Articles of Incorporation,
on behalf of the corporation, has been duly authorized by the unanimous
written consent of the shareholders and the Board of Directors of the
corporation, and that the signature set forth above is his genuine
signature.
By: /s/ Carl H. Trieshmann
-----------------------------
Carl H. Trieshmann
Secretary
<PAGE>
BY-LAWS OF PIEDMONT LABORATORIES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
REGISTERED AGENT: SAMUEL D. GARRETSON
REGISTERED ADDRESS: 1665 CHEVRON WAY
DUNWOODY, GEORGIA 30338
ANNUAL MEETING TIME: MONTH: MAY DAY: 15 HOUR: 10:00 A.M.
FISCAL YEAR BEGINS: MONTH: OCTOBER DAY: 1
ARTICLE I - REGISTERED AGENT AND REGISTERED OFFICE
The name and address of the registered agent, which is the same
address as the registered office, is stated at the beginning of these by-
laws. The corporation may have other offices or branches as determined by
the Board of Directors.
ARTICLE II - FISCAL YEAR
The date on which the fiscal year of the corporation begins each year
is stated at the beginning of these by-laws.
ARTICLE III - MEETING OF SHAREHOLDERS
1. PLACE
Shareholders' meetings shall be held at the registered office of the
corporation or at another location determined by the Board of Directors and
stated in the notice of the meeting.
2. TIME
The time of the annual meeting of shareholders is stated at the
beginning of these bylaws. If this date falls on a legal holiday then the
annual meeting shall be held on the next business day.
3. PURPOSE
The purpose of the annual meeting shall be to elect a Board of
Directors and transact other business as may come before the meeting.
Matters required by statute to be stated in the notice of the meeting which
are not so stated, may not be transacted.
4. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the president,
two directors or by the holders of at least 25 percent of the shares
entitled to vote at a meeting. A special meeting may be called anytime for
any business purpose, unless otherwise prohibited by statute. They shall
beheld at the registered office of the corporation.
5. NOTICE
Written notice stating the place, day and time of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting is
called shall be delivered not less than 10 nor more than 50 days before the
date of the meeting. If mailed, such notice shall be considered to be
delivered when deposited in the United States Postal Service, addressed to
the shareholder at his/her address at it appears on the stock transfer
books of the corporation, with the correct amount of first class postage on
it.
6. FIXING RECORD DATE
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or for the purpose of an other
action, the Board of Directors shall fix in advance a date as a record
date. The date shall not be more than 50 or less than 10 days before the
meeting, nor more than 50 days prior to any other action.
7. QUORUM
At any meeting of shareholders, a majority of the outstanding shares
of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum. If a quorum is not present at any time, the
shareholders present in person or by proxy may adjourn to a date they agree
upon.
8. PROXIES
At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or his/her duly authorized attorney
in fact. A proxy is not valid after the expiration of 11 months from its
date unless otherwise provided in the proxy. A proxy is not invalidated by
the death or incompetency of the shareholder, unless, before the authority
is exercised, written notice of such an adjudication is received by the
<PAGE>
corporate office responsible for maintaining the list of shareholders.
9. VOTING
Each outstanding share is entitled to 1 vote on each matter submitted
to a vote. A vote may be case either orally or in writing, in person or by
proxy. All matters, except the election of directors, shall be decided by
two-thirds majority vote of all the shares issued and outstanding.
10. WAIVER OF NOTICE
Notice of meeting need not be given to any shareholder who signs a
waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by the
shareholder.
11. WRITTEN CONSENT OF SHAREHOLDERS
Any action may be taken without a meeting, without prior notice and
without a vote if a consent in writing, setting for the action taken, is
signed by the holders of all the outstanding shares entitled to vote on the
matter.
12. PARTICIPATION BY TELECOMMUNICATIONS
Participation in a shareholders' meeting may be by means of conference
telephone, or similar communications equipment. All persons participating
in the meeting must be able to hear each other, be advised of the use of
such equipment, and be provided with the names of the individual using such
equipment.
13. ORDER OF BUSINESS
The order of business at all meetings of the shareholders, shall be as
follows:
a. Roll call.
b. Proof of notice of meeting or waiver of notice.
c. Reading of minutes of the preceding meeting.
d. Reports of officers.
e. Reports of committees.
f. Election of directors.
g. Unfinished business.
h. New business.
ARTICLE IV - DIRECTORS
1. GENERAL POWERS
The corporation shall be managed by the Board of Directors.
2. NUMBER, ELECTION AND TENURE OF DIRECTORS
The number of directors of the corporation shall be two (2). Each
director shall hold office until the next annual meeting of shareholders
and until his/her successor shall have been elected and of the two
directors, qualified.
3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES
A vacancy occurring on the Board of Directors shall be filled by the
majority vote of the shareholders. The Director so chosen shall hold
office until the next annual election of the Board of Directors by the
shareholders. The number of directors may be increased or decreased by
two-thirds majority vote of the shares issued and outstanding.
4. REGULAR AND SPECIAL MEETINGS
a. Regular meetings may be held without notice as determined by the
Board of Directors and must be held at least annually.
b. Special meetings may be called by the president or at least two
(2) directors on two days's notice by mail or 24 hours notice by a
telecommunication device. A brief indication of the nature of the business
to be transacted shall be made part of the notice. If mailed, the notice
shall be considered delivered when deposited in the United States mail.
The notice must be properly addressed and have the correct amount of
postage on it. If the notice is by telecommunication device, it shall be
considered delivered when delivered to the telecommunications company.
c. Participation in a regular or special meeting may be by means of
conference telephone, or similar telecommunications equipment. All persons
participating in the meeting must be able to hear each other, be advised of
the use of such equipment, and be provided with the names of individuals
using the equipment.
5. QUORUM
A quorum shall consist of a two-thirds majority of the Board of
Directors.
<PAGE>
6. ACTION BY BOARD WITHOUT A MEETING
Any action required or permitted to be taken pursuant to authorization
voted at a meeting of the board of Directors or a committee of the board,
may be taken without a meeting if before or after the action all members of
the Board of Directors or committee consent to it in writing. The written
consents shall be filled with the minutes of the proceedings of the Board
of Directors or committee.
7. WAIVER OF NOTICE
Attendance of a director at a meeting constitutes a wavier of notice
of the meeting except where the director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting
is not lawfully called or convened.
8. REMOVAL
Any director may be removed with or without cause by a two-thirds
majority vote of the shares issued and outstanding.
9. EXECUTIVE AND OTHER COMMITTEES
The Board of Directors, by resolution, may designate from among its
members, to the extent allowable by statute, an executive committee and
other committees, each consisting of one or more directors. Each committee
shall serve at the pleasure of the Board of Directors.
10. VOTING BY DIRECTORS
No resolution, authorization, agreement or other action of the Board
of Directors is valid or within the power of the Board of Directors unless
approved by two (2) directors.
ARTICLE V - OFFICERS
1. NUMBER
The officers of the corporation shall be a president, a vice-president,
a secretary, an assistant secretary, and a treasurer and other officers as
shall from time to time be elected or appointed by the Board of Directors.
2. SALARIES
The salaries of the officers shall be established by the Board of
Directors.
3. REMOVAL
a. Any officer or agent elected or appointed by the Board of
Directors may be removed by the board whenever in its judgment the best
interests of the corporation will be served.
b. An officer or agent elected by the shareholders may be removed only
by vote of the shareholders, unless the shareholders shall have authorized
the board to remove such officer or agent, but the authority of such
officer or agent to act for the corporation may be suspended by the board
for cause.
4. PRESIDENT
The president shall be the chief executive officer of the corporation
and subject to the control of the board of directors, supervise and control
all of the business of the corporation. The president shall when present,
preside at all meetings of the shareholders and of the Board of Directors.
The president shall have authority to institute or defend legal proceedings
when the directors are deadlocked.
5. VICE-PRESIDENT
In the absence of the president or in the event of the president's
death, inability, or refusal to act, the vice-president shall have all the
powers and functions of the president and shall perform such other duties
as the Board of Directors shall determine. If there is more than one vice-
president, then the executive vice-president in the event of the above
listed disabilities shall have all the powers and functions of the
president and shall perform such other duties as the Board of Directors
shall determine.
6. SECRETARY
The Secretary shall:
a. Attend all meetings of the Board of Directors and of the
shareholders.
b. Record all votes and minutes of all proceedings in a book to be
kept for that purpose.
c. Give notice of all meetings of shareholders and of special meetings
<PAGE>
of the Board of Directors.
d. Keep in safe custody, the seal of the corporation and affix it to
any instrument when authorized by the Board of Directors.
e. When required, prepare and make available at each meeting of
shareholders a certified list in alphabetical order of the names of
shareholders entitled to vote, indicating the number of shares of each
respective class held by each.
f. Keep all the documents and records of the corporation as required
by law or otherwise in a proper and safe manner.
g. Perform such other duties as may be assigned by the board.
7. TREASURER
The treasurer shall:
a. Have the custody of the corporate funds and securities.
b. Keep full and accurate accounts of receipts and disbursements in
the corporate books.
c. Deposit all money and other valuables in the name and to the credit
of the corporation in such depositories as may be designated by the Board
of Directors.
d. Disburse the funds of the corporation as may be ordered or
authorized by the Board of Directors and keep vouchers for such
disbursements.
e. Give to the president and Board of Directors at the regular
meetings of the Board of Directors, or whenever they require it, an account
of all his/her transactions as treasurer and of the financial condition of
the corporation.
f. Give a full financial report at the annual meeting of the
shareholders, if so requested.
g. Perform other duties assigned by the board or president.
h. If required by the Board of Directors, give a bond for the faithful
discharge of his/her duties in an amount and with such surety and sureties
as the Board of Directors shall determine.
ARTICLE VI - CERTIFICATES OF SHARES
1. CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be in the form
determined by the Board of Directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by
law and by the Board of Directors. All certificates for shares and date of
issue shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for a
like number of shares is surrendered and cancelled, except that in the case
of a lost, destroyed or mutilated certificate a new one may be issued upon
such terms and indemnity to the corporation as the Board of Directors may
determine.
2. TRANSFER OF SHARES
a. Upon surrender to the corporation or the transfer agent of the
corporation for a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled to it, and cancel the old certificate; every transfer shall
be entered on the transfer books of the corporation which shall be kept at
its principal office.
b. The corporation shall be entitled to treat the holder of record of
any share as the holder in fact of it, shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any
other persons whether or not it shall have express or other notice thereof,
except as expressly provided by the laws of this state.
ARTICLE VII - INDEMNIFICATION
The corporation shall indemnify to the extent allowed by the corporation
statutes of this state any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that the person is or was a director, officer, employee
or agent of the corporation or served any other enterprise at the request
of the corporation. The person to be indemnified must have acted in good
faith and in a manner he/she reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholder, and with respect
to any criminal action or proceeding, had not reasonable cause to believe
his/her conduct was unlawful.
<PAGE>
ARTICLE VIII - DIVIDENDS
The Board of Directors may declare and pay dividends or make other
distributions in case, its bond or its property, including the shares or
bonds of other corporations, on its outstanding shares.
ARTICLE IX - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the shareholders representing a two-thirds majority of
all the shares issued and outstanding at any annual shareholders' meeting
or at any special shareholders meeting when the proposed amendment has been
stated in the notice of such meeting.
<PAGE>
2ND AMENDED
BY-LAWS OF PIEDMONT LABORATORIES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
REGISTERED AGENT: SAMUEL D. GARRETSON
REGISTERED ADDRESS: 1665 CHEVRON WAY
DUNWOODY, GEORGIA 30338
ANNUAL MEETING TIME: MONTH: MAY DAY: 15 HOUR: 10:00 A.M.
FISCAL YEAR BEGINS: MONTH: OCTOBER DAY: 1
ARTICLE I - REGISTERED AGENT AND REGISTERED OFFICE
The name and address of the registered agent, which is the same
address as the registered office, is stated at the beginning of these by-
laws. The corporation may have other offices or branches as determined by
the Board of Directors.
ARTICLE II - FISCAL YEAR
The date on which the fiscal year of the corporation begins each year
is stated at the beginning of these by-laws.
ARTICLE III - MEETINGS OF SHAREHOLDERS
1. PLACE
Shareholders' meetings shall be held at the registered office of the
corporation or at another location determined by the Board of Directors and
stated in the notice of the meeting.
2. TIME
The time of the annual meeting of shareholders is stated at the
beginning of these bylaws. If this date falls on a legal holiday then the
annual meeting shall be held on the next business day.
3. PURPOSE
The purpose of the annual meeting shall be to elect a Board of
Directors and transact other business as may come before the meeting.
Matters required by statute to be stated in the notice of the meeting which
are not so stated, may not be transacted.
4. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the president,
two directors or by the holders of at least 25 percent of the shares
entitled to vote at a meeting. A special meeting
<PAGE>
Piedmont Laboratories, Inc.
By-Laws
Page 2
may be called anytime for any business purpose, unless otherwise prohibited by
statute. They shall be held at the registered office of the corporation.
5. NOTICE
Written notice stating the place, day and time of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting is
called shall be delivered not less than 10 nor more than 50 days before the
date of the meeting. If mailed, such notice shall be considered to be
delivered when deposited in the United States Postal Service, addressed to
the shareholder at his/her address at it appears on the stock transfer
books of the corporation, with the correct amount of first class postage on
it.
6. FIXING RECORD DATE
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or for the purpose of any other
action, the Board of Directors shall fix in advance a date as a record
date. The date shall not be more than 50 or less than 10 days before the
meeting, nor more than 50 days prior to any other action.
7. QUORUM
At any meeting of shareholders, a majority of the outstanding shares
of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum. If a quorum is not present at any time, the
shareholders present in person or by proxy may adjourn to a date they agree
upon.
8. PROXIES
At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or his/her duly authorized attorney
in fact. A proxy is not valid after the expiration of 11 months from its
date unless otherwise provided in the proxy. A proxy is not invalidated by
the death or incompetency of the shareholder, unless, before the authority
is exercised, written notice of such an adjudication is received by the
corporate office responsible for maintaining the list of shareholders.
9. VOTING
Each outstanding share is entitled to 1 vote on each matter submitted
to a vote. A vote may be cast either orally or in writing, in person or by
proxy. All matters, except the election
<PAGE>
Piedmont Laboratories, Inc.
By-Laws
Page 3
of directors, shall be decided by two-thirds majority vote of all the shares
issued and outstanding.
10. WAIVER OF NOTICE
Notice of meeting need not be given to any shareholder who signs a
waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by the
shareholder.
11. WRITTEN CONSENT OF SHAREHOLDERS
Any action may be taken without a meeting, without prior notice and
without a vote if a consent in writing, setting for the action taken, is
signed by the holders of all the outstanding shares entitled to vote on the
matter.
12. PARTICIPATION BY TELECOMMUNICATIONS
Participation in a shareholders meeting may be by means of conference
telephone, or similar communications equipment. All persons participating
in the meeting must be able to hear each other, be advised of the use of
such equipment, and be provided with the names of the individuals using such
equipment.
13. ORDER OF BUSINESS
The order of business at all meetings of the shareholders, shall be as
follows:
a. Roll call.
b. Proof of notice of meeting or waiver of notice.
c. Reading of minutes of the preceding meeting.
d. Reports of officers.
e. Reports of committees.
f. Election of directors.
g. Unfinished business.
h. New business.
ARTICLE IV - DIRECTORS
1. GENERAL POWERS
The corporation shall be managed by the Board of Directors.
<PAGE>
Piedmont Laboratories, Inc.
By-Laws
Page 4
2. NUMBER, ELECTION AND TENURE OF DIRECTORS
The number of directors of the corporation shall be two (2). Each
director shall hold office until the next annual meeting of shareholders
and until his/her successor shall have been elected and of the two
directors, qualified.
3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES
A vacancy occurring on the Board of Directors shall be filled by the
majority vote of the shareholders. The Director so chosen shall hold
office until the next annual election of the Board of Directors by the
shareholders. The number of directors may be increased or decreased by
two-thirds majority vote of the shares issued and outstanding.
4. REGULAR AND SPECIAL MEETINGS
a. Regular meetings may be held without notice as determined by the
Board of Directors and must be held at least annually.
b. Special meetings may be called by the president or at least two
(2) directors on two days's notice by mail or 24 hours notice by a
telecommunication device. A brief indication of the nature of the business
to be transacted shall be made part of the notice. If mailed, the notice
shall be considered delivered when deposited in the United States mail.
The notice must be properly addressed and have the correct amount of
postage on it. If the notice is by telecommunication device, it shall be
considered delivered when delivered to the telecommunications company.
c. Participation in a regular or special meeting may be by means of
conference telephone, or similar telecommunications equipment. All persons
participating in the meeting must be able to hear each other, be advised of
the use of such equipment, and be provided with the names of individuals
using the equipment.
5. QUORUM
A quorum shall consist of a two-thirds majority of the Board of
Directors.
6. ACTION BY BOARD WITHOUT A MEETING
Any action required or permitted to be taken pursuant to authorization
voted at a meeting of the Board of Directors or a committee of the board,
may be taken without a meeting if before or after the action all members of
the Board of Directors or committee consent to it in writing. The written
consents shall
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Piedmont Laboratories, Inc.
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Page 5
be filed with the minutes of the proceedings of the Board of Directors or
committee.
7. WAIVER OF NOTICE
Attendance of a director at a meeting constitutes a waiver of notice
of the meeting except where the director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting
is not lawfully called or convened.
8. REMOVAL
Any director may be removed with or without cause by a two-thirds
majority vote of the shares issued and outstanding.
9. EXECUTIVE AND OTHER COMMITTEES
The Board of Directors, by resolution, may designate from among its
members, to the extent allowable by statute, an executive committee and
other committees, each consisting of one or more directors. Each committee
shall serve at the pleasure of the Board of Directors.
10. VOTING BY DIRECTORS
No resolution, authorization, agreement or other action of the Board
of Directors is valid or within the power of the Board of Directors unless
approved by two (2) directors.
ARTICLE V - OFFICERS
1. NUMBER
The officers of the corporation shall be a president, a vice-president,
a secretary, an assistant secretary, and a treasurer and other officers as
shall from time to time be elected or appointed by the Board of Directors.
2. SALARIES
The salaries of the officers shall be established by the Board of
Directors.
3. REMOVAL
a. Any officer or agent elected or appointed by the Board of
Directors may be removed by the board whenever in its judgment the best
interests of the corporation will be served.
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b. An officer or agent elected by the shareholders may be removed only
by vote of the shareholders, unless the shareholders shall have authorized
the board to remove such officer or agent, but the authority of such
officer or agent to act for the corporation may be suspended by the board
for cause.
4. PRESIDENT
The president shall be the chief executive officer of the corporation
and subject to the control of the board of directors, supervise and control
all of the business of the corporation. The president shall when present,
preside at all meetings of the shareholders and of the Board of Directors.
The president shall have authority to institute or defend legal proceedings
when the directors are deadlocked.
5. VICE-PRESIDENT
In the absence of the president or in the event of the president's
death, inability, or refusal to act, the vice-president shall have all the
powers and functions of the president and shall perform such other duties
as the Board of Directors shall determine. If there is more than one vice-
president, then the executive vice-president in the event of the above
listed disabilities shall have all the powers and functions of the
president and shall perform such other duties as the Board of Directors
shall determine.
6. SECRETARY
The Secretary shall:
a. Attend all meeting of the Board of Directors and of the
shareholders.
b. Record all votes and minutes of all proceedings in a book to be
kept for that purpose.
c. Give notice of all meetings of shareholders and of special meetings
of the Board of Directors.
d. Keep in safe custody, the seal of the corporation and affix it to
any instrument when authorized by the Board of Directors.
e. When required, prepare and make available at each meeting of
shareholders a certified list in alphabetical order of the names of
shareholders entitled to vote, indicating the number of shares of each
respective class held by each.
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f. Keep all the documents and records of the corporation as required
by law or otherwise in a proper and safe manner.
g. Perform such other duties as may be assigned by the board.
7. TREASURER
The treasurer shall:
a. Have the custody of the corporate funds and securities.
b. Keep full and accurate accounts of receipts and disbursements in
the corporate books.
c. Deposit all money and other valuables in the name and to the credit
of the corporation in such depositories as may be designated by the Board
of Directors.
d. Disburse the funds of the corporation as may be ordered or
authorized by the Board of Directors and keep vouchers for such
disbursements.
e. Give to the president and Board of Directors at the regular
meetings of the Board of Directors, or whenever they require it, an account
of all his/her transactions as treasurer and of the financial condition of
the corporation.
f. Give a full financial report at the annual meeting of the
shareholders, if so requested.
g. Perform other duties assigned by the board or president.
h. If required by the Board of Directors, give a bond for the faithful
discharge of his/her duties in an amount and with such surety and sureties
as the Board of Directors shall determine.
ARTICLE VI - CERTIFICATES OF SHARES
1. CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be in the form
determined by the Board of Directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by
law and by the Board of Directors. All certificates for shares and date of
issue shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for
<PAGE>
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transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares is surrendered and cancelled,
except that in the case of a lost, destroyed or mutilated certificate a new one
may be issued upon such terms and indemnity to the corporation as the Board of
Directors may determine.
2. TRANSFER OF SHARES
a. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled to it, and cancel the old certificate; every transfer shall
be entered on the transfer books of the corporation which shall be kept at
its principal office.
b. The corporation shall be entitled to treat the holder of record of
any share as the holder in fact of it, shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any
other person whether or not it shall have express or other notice thereof,
except as expressly provided by the laws of this state.
ARTICLE VII - INDEMNIFICATION
The corporation shall indemnify to the extent allowed by the corporation
statutes of this state any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that the person is or was a director, officer, employee
or agent of the corporation or served any other enterprise at the request
of the corporation. The person to be indemnified must have acted in good
faith and in a manner he/she reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholders, and with respect
to any criminal action or proceeding, had not reasonable cause to believe
his/her conduct was unlawful.
ARTICLE VIII - DIVIDENDS
The Board of Directors may declare and pay dividends or make other
distributions in case, its bond or its property, including the shares or
bonds of other corporations, on its outstanding shares.
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Piedmont Laboratories, Inc.
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ARTICLE IX - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may
be adopted by a vote of the shareholders representing a two-thirds majority
of all the shares issued and outstanding at any annual shareholders meeting
or at any special shareholders meeting when the proposed amendment has been
stated in the notice of such meeting.
<PAGE>
OUTSOURCING SERVICES GROUP, INC.,
AS ISSUER,
-------------------------
and
THE GUARANTORS
(DEFINED HEREIN)
-------------------------
and
FIRST TRUST NATIONAL ASSOCIATION,
AS TRUSTEE
INDENTURE
Dated as of March 3, 1998
up to $130,000,000
10 7/8% Senior Subordinated Notes due 2006
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- ---------
<S> <C>
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1). . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . 4.06; 4.08; 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2). . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3). . . . . . . . . . . . . . . . . . . . . . . 12.04
(d) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence). . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . 9.05
317(a)(1). . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . 12.01
</TABLE>
______________________
N.A. means Not Applicable
<PAGE>
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
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<S> <C>
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA. . . . . . . . . . . . . 30
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . 31
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.02. Execution and Authentication; Aggregate
Principal Amount. . . . . . . . . . . . . . . . . . . . 33
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . 34
SECTION 2.04. Paying Agent To Hold Assets in Trust . . . . . . . . . . . 35
SECTION 2.05. Noteholder Lists . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . 36
SECTION 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.13. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.14. Deposit of Moneys. . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.15. Book-Entry Provisions for Global Note. . . . . . . . . . . 40
SECTION 2.16. Special Transfer Provisions. . . . . . . . . . . . . . . . 41
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.02. Selection of Notes To Be Redeemed. . . . . . . . . . . . . 44
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . 44
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . 45
SECTION 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . 46
SECTION 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . 46
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . 47
SECTION 4.03. Corporate Existence. . . . . . . . . . . . . . . . . . . . 47
SECTION 4.04. Payment of Taxes and Other Claims. . . . . . . . . . . . . 48
SECTION 4.05. Maintenance of Properties and Insurance. . . . . . . . . . 48
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SECTION 4.06. Compliance Certificate; Notice of Default. . . . . . . . . 49
SECTION 4.07. Compliance with Laws . . . . . . . . . . . . . . . . . . . 50
SECTION 4.08. Reports to Holders . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.09. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . 51
SECTION 4.10. Limitation on Restricted Payments. . . . . . . . . . . . . 51
SECTION 4.11. Limitation on Transactions with Affiliates . . . . . . . . 54
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. . . . 55
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. . . . . . . . . . . . 56
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated Debt. . . 57
SECTION 4.15. Limitation on Change of Control. . . . . . . . . . . . . . 57
SECTION 4.16. Limitation on Asset Sales. . . . . . . . . . . . . . . . . 59
SECTION 4.17. Limitation on Preferred Stock of Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 63
SECTION 4.18. Limitation on Liens. . . . . . . . . . . . . . . . . . . . 63
SECTION 4.19. Conduct of Business. . . . . . . . . . . . . . . . . . . . 64
SECTION 4.20. Additional Subsidiary Guarantees . . . . . . . . . . . . . 64
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. . . . . . . . . . . . . . . . 65
SECTION 5.02. Successor Corporation Substituted. . . . . . . . . . . . . 66
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 70
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . 70
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . 70
SECTION 6.07. Rights of Holders To Receive Payment . . . . . . . . . . . 71
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . 71
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . 72
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 73
SECTION 6.12. Restoration of Rights and Remedies . . . . . . . . . . . . 73
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . 76
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . 77
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SECTION 7.05. Notice of Default. . . . . . . . . . . . . . . . . . . . . 77
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . . 77
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . 77
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . 79
SECTION 7.09. Successor Trustee by Merger, Etc.. . . . . . . . . . . . . 80
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . 80
SECTION 7.11. Preferential Collection of Claims Against Company. . . . . 80
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations . . . . . . . . . 81
SECTION 8.02. Legal Defeasance and Covenant Defeasance . . . . . . . . . 82
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance. . . 84
SECTION 8.04. Application of Trust Money . . . . . . . . . . . . . . . . 86
SECTION 8.05. Repayment to the Company or the Guarantors . . . . . . . . 86
SECTION 8.06. Satisfaction and Discharge . . . . . . . . . . . . . . . . 87
SECTION 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . 87
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . 88
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . 89
SECTION 9.03. Compliance with TIA. . . . . . . . . . . . . . . . . . . . 90
SECTION 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . 90
SECTION 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . . 91
SECTION 9.06. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . 91
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt of the Company . . . . . 92
SECTION 10.02. No Payment on Notes in Certain Circumstances . . . . . . . 92
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc.. . . . . . 94
SECTION 10.04. Payments May Be Paid Prior to Dissolution. . . . . . . . . 96
SECTION 10.05. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 10.06. Obligations of the Company Unconditional . . . . . . . . . 97
SECTION 10.07. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . 97
SECTION 10.08. Reliance on Judicial Order or Certificate of
Liquidating Agent . . . . . . . . . . . . . . . . . . . 98
SECTION 10.09. Trustee's Relation to Senior Debt. . . . . . . . . . . . . 98
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Debt. . . . . . . . 99
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SECTION 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes. . . . . . . . . . . . . . . . . 99
SECTION 10.12. This Article Ten Not To Prevent Events of Default. . . . . 100
SECTION 10.13. Trustee's Compensation Not Prejudiced. . . . . . . . . . . 100
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee. . . . . . . . . . . . . . . . . . 101
SECTION 11.02. Subordination of Guarantee . . . . . . . . . . . . . . . . 102
SECTION 11.03. Severability . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 11.04. Release of a Guarantor . . . . . . . . . . . . . . . . . . 102
SECTION 11.05. Limitation of Guarantor's Liability. . . . . . . . . . . . 103
SECTION 11.06. Guarantors May Consolidate, Etc., on Certain Terms . . . . 103
SECTION 11.07. Contribution . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 11.08. Waiver of Subrogation. . . . . . . . . . . . . . . . . . . 104
SECTION 11.09. Execution of Guarantee . . . . . . . . . . . . . . . . . . 105
SECTION 11.10. No Payment on Guarantees in Certain Circumstances. . . . . 105
SECTION 11.11. Payment Over of Proceeds upon Dissolution, Etc.. . . . . . 107
SECTION 11.12. Payments May Be Paid Prior to Dissolution. . . . . . . . . 109
SECTION 11.13. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.14. Obligations of Each Guarantor Unconditional. . . . . . . . 110
SECTION 11.15. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . 111
SECTION 11.16. Reliance on Judicial Order or Certificate of
Liquidating Agent . . . . . . . . . . . . . . . . . . . 111
SECTION 11.17. Trustee's Relation to Guarantor Senior Debt. . . . . . . . 112
SECTION 11.18. Subordination Rights Not Impaired by Acts or Omissions
of a Guarantor or Holders of Guarantor Senior Debt. . . 112
SECTION 11.19. Noteholders Authorize Trustee To Effectuate
Subordination of Guarantees . . . . . . . . . . . . . . 113
SECTION 11.20. This Article Eleven Not To Prevent Events of Default . . . 114
SECTION 11.21. Trustee's Compensation Not Prejudiced. . . . . . . . . . . 114
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 12.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 12.03. Communications by Holders with Other Holders . . . . . . . 116
SECTION 12.04. Certificate and Opinion as to Conditions Precedent . . . . 116
SECTION 12.05. Statements Required in Certificate or Opinion. . . . . . . 116
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<PAGE>
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . . . 117
SECTION 12.07. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 12.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 12.09. No Adverse Interpretation of Other Agreements. . . . . . . 117
SECTION 12.10. No Recourse Against Others . . . . . . . . . . . . . . . . 118
SECTION 12.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . 118
SECTION 12.12. Duplicate Originals. . . . . . . . . . . . . . . . . . . . 118
SECTION 12.13. Severability . . . . . . . . . . . . . . . . . . . . . . . 118
SECTION 12.14. Independence of Covenants. . . . . . . . . . . . . . . . . 118
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Exhibit A(1) - Form of Initial Note with Guarantee. . . . . . . . . . A.1-1
Exhibit A(2) - Form of Exchange Note with Guarantee . . . . . . . . . A.2-1
Exhibit B - Form of Legend for Global Notes. . . . . . . . . . . . B-1
Exhibit C - Form of Certificate To Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors. . . C-1
Exhibit D - Form of Certificate To Be Delivered in Connection
with Transfers Pursuant to Regulation S . . . . . . D-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
-v-
<PAGE>
INDENTURE, dated as of March 3, 1998, among Outsourcing Services
Group, Inc., a Delaware corporation (the "COMPANY"), the Guarantors (as
hereinafter defined) and First Trust National Association, as Trustee (the
"TRUSTEE").
The Company has duly authorized the creation of an issue of 10 7/8%
Senior Subordinated Notes due 2006 (the "NOTES") and, to provide therefor, the
Company has duly authorized the execution and delivery of this Indenture. All
things necessary to make the Notes, when duly issued and executed by the Company
and authenticated and delivered hereunder, the valid obligations of the Company,
and to make this Indenture a valid and binding agreement of the Company, have
been done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCELERATION NOTICE" has the meaning provided in Section 6.02.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
"ACT" means the Securities Act of 1933, as amended.
"ADJUSTED NET ASSETS" of a Guarantor at any date shall mean the lesser
of the amount by which (i) the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
the Subsidiary Guarantee, of such Guarantor at such date and (ii) the present
fair salable value of the assets of such Guarantor at such date exceeds the
amount that will be required to pay the probable liability of such Guarantor on
its
<PAGE>
-2-
debts including, without limitation, Guarantor Senior Debt (after giving effect
to all other fixed and contingent liabilities incurred or assumed on such date
and after giving effect to any collection from any Subsidiary of such Guarantor
in respect of the obligations of such Subsidiary under the Subsidiary
Guarantee), excluding debt in respect of the Subsidiary Guarantee, as they
become absolute and matured.
"AFFILIATE" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"AFFILIATE TRANSACTION" has the meaning provided in Section 4.11.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"AGENT MEMBERS" has the meaning provided in Section 2.15.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company, or shall be merged
with or into the Company or any Restricted Subsidiary of the Company, or (b) the
acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any Person (other than a Restricted Subsidiary of the Company) which
constitute all or substantially all of the assets of such Person or comprise any
division or line of business of such Person or any other properties or assets of
such Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly-Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business;
<PAGE>
-3-
PROVIDED, HOWEVER, that Asset Sales shall not include (i) a transaction or
series of related transactions for which the Company or its Restricted
Subsidiaries receive aggregate consideration of less than $500,000, (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company as permitted under Section 5.01 and (iii) a
disposition consisting of a Permitted Investment or Restricted Payment permitted
under Section 4.10.
"AUTHENTICATING AGENT" has the meaning provided in Section 2.02.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"BLOCKAGE PERIOD" has the meaning provided in Section 10.02(a).
"BOARD OF DIRECTORS" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BORROWING BASE" means the sum of (i) 85% of the net book value (after
allowance for doubtful accounts) of accounts receivable (other than intercompany
receivables) of the Company and the Restricted Subsidiaries arising in the
ordinary course of business from the sale of products sold by the Company and
the Restricted Subsidiaries or the provision of services by the Company and the
Restricted Subsidiaries and (ii) 60% of the net book value (after appropriate
write-downs of obsolescence, quality problems and the like) of inventories of
the Company and the Restricted Subsidiaries held in the ordinary course of
business, in each case on a consolidated basis with Restricted Subsidiaries in
accordance with generally accepted accounting principles.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or
<PAGE>
-4-
not voting) of corporate stock, including each class of Common Stock and
Preferred Stock of such Person and including any warrants, options or rights to
acquire any of the foregoing and instruments convertible into any of the
foregoing, and (ii) with respect to any Person that is not a corporation, any
and all partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group") or to any Affiliates thereof
(whether or not otherwise in compliance with the provisions of this Indenture);
(ii) the approval by the
<PAGE>
-5-
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); (iii) any Person or Group
(other than the Permitted Holders(s)) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the replacement of a majority of the
directors on the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"CHANGE OF CONTROL OFFER" has the meaning provided in Section 4.15.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning provided in
Section 4.15.
"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"COMPANY" means Outsourcing Services Group, Inc., a Delaware
corporation and its successors that become a party to this Indenture in
accordance with its terms.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense, (C) Consolidated Non-cash Charges LESS any non-cash items increasing
Consolidated Net Income for such period, (D) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale
and (E) fees and expenses of the Kolmar Acquisition, including, but not limited
to, capitalization of costs and expenses related thereto, all as determined
<PAGE>
-6-
on a consolidated basis for such Person and its Restricted Subsidiaries in
accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for such Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (PROVIDED that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income" or to the extent it is excluded pursuant to clause (h) of the definition
of "Consolidated Net Income") attributable to the assets which are the subject
of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed In-
<PAGE>
-7-
debtedness; PROVIDED, HOWEVER, that where such Person and one or more of its
Restricted Subsidiaries is, or two or more of such Person's Restricted
Subsidiaries are, liable for the same Indebtedness, whether as principal or
guarantor, the above sentence shall be calculated to avoid duplication.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) to the extent not included in Consolidated Interest Expense, the product of
(x) the amount of all dividend payments on any series of Preferred Stock of such
Person (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation, less interest expense which is historically allocated to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued) but only in the case
<PAGE>
-8-
in which such Person maintained separate books and records with respect to such
discontinued operations or such disposed operations; and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such Person and its Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, except to the extent of cash
dividends or distributions paid to the referent Person or to a Restricted
Subsidiary of the referent Person by such Person, (e) the net income of any
Person, other than a Restricted Subsidiary of the referent Person, except to the
extent of cash dividends or distributions paid to the referent Person or to a
Restricted Subsidiary of the referent Person by such Person, (f) any restoration
to income of any contingency reserve, except to the extent that provision for
such reserve was made out of Consolidated Net Income accrued at any time
following the Issue Date, (g) income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued), and
(h) in the case of a successor to the referent Person by consolidation or merger
or as a transferee of the referent Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for
any period, the aggregate depreciation, am-
<PAGE>
-9-
ortization and other non-cash expenses of such Person and its Restricted
Subsidiaries reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charges constituting an extraordinary item or loss
or any such charge which requires an accrual of or a reserve for cash charges
for any future period).
"COVENANT DEFEASANCE" has the meaning provided in Section 8.02(c).
"CREDIT AGREEMENT" means the Credit Agreement dated as of January 8,
1998, among the Company, as guarantor, Piedmont Laboratories, Inc., Aerosol
Services Company, Inc. and Kolmar Laboratories, Inc., as initial borrowers, the
lenders party thereto in their capacities as lenders thereunder and BT
Commercial Corporation, as agent, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (PROVIDED that such increase in borrowings is
permitted by Section 4.12) or adding or deleting Restricted Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEFAULT NOTICE" has the meaning provided in Section 10.02(a).
"DEPOSITORY" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust
<PAGE>
-10-
Company, its nominees and successors, or another Person designated as Depository
by the Company which must be a clearing agency registered under the Act.
"DESIGNATED GUARANTOR SENIOR DEBT" means (i) Indebtedness of any
Guarantor under the Credit Agreement and (ii) any other Indebtedness
constituting Guarantor Senior Debt which, at the time of determination, has an
aggregate principal amount of at least $25.0 million and is specifically
designated in the instrument evidencing such Guarantor Senior Debt as
"Designated Guarantor Senior Debt" by the Guarantor incurring said Guarantor
Senior Debt.
"DESIGNATED SENIOR DEBT" means (i) Indebtedness under or in respect of
the Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25,000,000 and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by the Company.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes other than the Class
A Preferred Stock and Class B Preferred Stock of the Company outstanding on the
Issue Date and any Class A Preferred Stock or Class B Preferred Stock of the
Company issued as dividends on such Class A Preferred Stock or Class B Preferred
Stock and the Common Stock of the Company which certain management stockholders
have the right to put such Common Stock to the Company pursuant to the terms of
the Stockholders Agreement.
"EQUITY OFFERING" of any Person means any underwritten public offering
or any private placement of any Capital Stock of such Person other than
Indebtedness or Disqualified Capital Stock convertible or exchangeable into
Capital Stock of such Person.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"EXCHANGE NOTES" means the 10 7/8% Senior Subordinated Notes due 2006
to be issued in exchange for the Initial
<PAGE>
-11-
Notes pursuant to the Registration Rights Agreement or, with respect to Initial
Notes issued under this Indenture subsequent to the Issue Date pursuant to
Section 2.02, a registration rights agreement substantially identical to the
Registration Rights Agreement.
"EXCHANGE OFFER" has the meaning assigned to such term in the
Registration Rights Agreement.
"EXCHANGE REGISTRATION STATEMENT" has the meaning assigned to such
term in the Registration Rights Agreement.
"FAIR MARKET VALUE" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company which (i) is
not organized under the laws of the United States, any state thereof or the
District of Columbia and (ii) conducts substantially all of its business
operations in a country other than the United States of America.
"FUNDING GUARANTOR" has the meaning provided in Section 11.07.
"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 are in effect from time to time.
"GLOBAL NOTE" has the meaning provided in Section 2.01.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such other Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of such other Person (whether arising
by virtue of partnership
<PAGE>
-12-
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part) (but if in part, only to the extent thereof); PROVIDED, HOWEVER, that
the term "guarantee" shall not include (A) endorsements for collection or
deposit in the ordinary course of business, (B) guarantees (other than
guarantees of Indebtedness) by the Company in respect of assisting one or more
Subsidiaries in the ordinary course of their respective businesses, including
without limitation guarantees of trade obligations and operating leases, on
ordinary business terms and (C) Obligations pursuant to representations,
warranties, covenants and indemnities in connection with the purchase and sale
of products in the ordinary course. The term "guarantee" used as a verb has a
corresponding meaning.
"GUARANTEE" means the guarantee of the obligations under this
Indenture and the Notes by each of the Guarantors as set forth in
Article Eleven.
"GUARANTOR" means (i) the domestic Restricted Subsidiaries of the
Company on the Issue Date, including, without limitation, Aerosol Services
Company, Inc., Kolmar Laboratories, Inc., and Piedmont Laboratories, Inc., and
(ii) each of the Company's Restricted Subsidiaries that in the future executes a
supplemental indenture in which such Restricted Subsidiary agrees to be bound by
the terms of this Indenture as a Guarantor; PROVIDED that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the terms
of this Indenture. Notwithstanding the above, no direct or indirect Foreign
Subsidiary of the Company, including Kolmar (Aust) Pty. Ltd, Kolmar de Mexico,
S.A. de C.V. and Kolmar Canada Inc. will be considered Guarantors.
"GUARANTOR BLOCKAGE PERIOD" has the meaning provided in Section
11.10(a).
"GUARANTOR DEFAULT NOTICE" has the meaning provided in Section
11.10(a).
"GUARANTOR NON-PAYMENT DEFAULT" has the meaning provided in Section
11.10(a).
"GUARANTOR PAYMENT DEFAULT" has the meaning provided in Section
11.10(a).
<PAGE>
-13-
"GUARANTOR SENIOR DEBT" means, with respect to any Guarantor, the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law), fees and expenses on any Indebtedness of a
Guarantor, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations of every nature under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations and (z) all obligations under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Guarantor Senior Debt" shall not include (i) any Indebtedness of
such Guarantor to a Restricted Subsidiary of such Guarantor, (ii) Indebtedness
to, or guaranteed on behalf of, any director, officer or employee of either of
such Guarantor or any Restricted Subsidiary of such Guarantor (including,
without limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by such Guarantor, (vi) Indebtedness to the extent incurred in violation of
Section 4.12, (vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of such
Guarantor.
"HOLDER" or "NOTEHOLDER" means the person in whose name a Note is
registered on the Registrar's books.
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person,
<PAGE>
-14-
(iv) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all Obligations under
any title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of the
type referred to in clauses (i) through (vi) which are secured by any lien on
any property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured, (viii) all Obligations under currency
agreements and interest swap agreements of such Person and (ix) all Disqualified
Capital Stock issued by such Person with the amount of Indebtedness represented
by such Disqualified Capital Stock being equal to the greater of its voluntary
or involuntary liquidation preference and its maximum fixed repurchase price,
but excluding accrued dividends, if any. For purposes hereof, the "maximum
fixed repurchase price" of any Disqualified Capital Stock which does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INITIAL NOTES" means, collectively, (i) the 10 7/8% Senior
Subordinated Notes due 2006 of the Company issued on the Issue Date and (ii) one
or more series of 10 7/8% Senior Subordinated Notes due 2006 that are issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.02, in
each
<PAGE>
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case for so long as such securities constitute Restricted Securities.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"INTEREST PAYMENT DATE" when used with respect to any Note, means the
stated maturity of an installment of interest specified in such Note.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person. "Investment" shall exclude extensions of trade credit by
the Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.10,
(i) "Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the fair market value
of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment (other than as specified in clause (i) above) shall be
the original cost of such Investment plus the cost of all additional Investments
by the Company or any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends,
distributions, interest payments or repayments of loans or advances in
connection with such Investment or any other amounts received in respect of such
Investment; PROVIDED that
<PAGE>
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no such payment of dividends, distributions, interest payments, repayments of
loans or advances or receipt of any such other amounts shall reduce the amount
of any Investment if such payment of dividends, distributions, interest
payments, repayments of loans or advances or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, it ceases to be a Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Common Stock
of such Restricted Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Notes.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; PROVIDED,
HOWEVER, that, as to any such arrangement in corporate form, such corporation
shall not, as to any Person of which such corporation is a Subsidiary, be
considered to be a Joint Venture to which such Person is a party.
"KOLMAR ACQUISITION" means the acquisition by the Company of all the
outstanding stock of Kolmar Laboratories, Inc. and the net assets of Kolmar
Canada from CCL Industries, Inc. and its subsidiary CCL Industries Corporation
for a total purchase price of $78 million.
"LEGAL DEFEASANCE" has the meaning provided in Section 8.02(b).
"LEGAL HOLIDAY" has the meaning provided in Section 12.07.
"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"MANAGEMENT AGREEMENT" means the Amended and Restated Management
Services Letter agreement, dated January 8, 1998, among the Company, Aerosol
Services Company, Inc., Piedmont Laboratories, Inc., The Gordon+Morris Group,
Kolmar Laboratories, Inc. and each of its subsidiaries as such letter agreement
exists on the Issue Date.
<PAGE>
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"MATURITY DATE" means March 1, 2006.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"NET PROCEEDS OFFER" has the meaning provided in Section 4.16.
"NET PROCEEDS OFFER AMOUNT" has the meaning provided in Section 4.16.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning provided in Section
4.16.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning provided in Section
4.16.
"NON-U.S. PERSON" means a person who is not a U.S. person, as defined
in Regulation S.
"NOTES" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, matured indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
<PAGE>
-18-
"OFFICER" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary or Assistant
Secretary of such Person, or any other officer designated by the Board of
Directors serving in a similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such person and otherwise complying with
the requirements of Sections 12.04 and 12.05, as they relate to the making of an
Officers' Certificate.
"OFFSHORE PHYSICAL NOTES" has the meaning provided in Section 2.01.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be in-house counsel for the Company and who is reasonably acceptable to the
Trustee, complying with the requirements of Sections 12.04 and 12.05, as they
relate to the giving of an Opinion of Counsel.
"PAYING AGENT" has the meaning provided in Section 2.03.
"PERMITTED HOLDER(S)" means HarbourVest Venture Partners-IV Direct
Fund L.P., The Gordon+Morris Group, Gordon+Morris Investment Partnership, L.P.
and their respective Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:
(i) Indebtedness under the Notes offered hereby and the Guarantees
thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the
greater of (a) $70,000,000 in the aggregate with respect to Indebtedness
under the Revolving Credit Facility, less the amount of all permanent
prepayment of Indebtedness under the Credit Agreement actually made with
the proceeds of an Asset Sale, or (b) the Borrowing Base;
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
<PAGE>
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(iv) Interest Swap Obligations of the Company or any of its Restricted
Subsidiaries covering Indebtedness of the Company or any of its Restricted
Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary of
the Company covering Indebtedness of such Restricted Subsidiary; PROVIDED,
HOWEVER, that such Interest Swap Obligations are entered into to protect
the Company and its Restricted Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with this Indenture to the
extent the notional principal amount of such Interest Swap Obligation does
not exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(v) Indebtedness under Currency Agreements; PROVIDED that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Wholly-Owned Restricted Subsidiary of the
Company to the Company or to a Wholly-Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a
Wholly-Owned Restricted Subsidiary of the Company, in each case subject to
no Lien (other than a Lien in connection with the Credit Agreement) held by
a Person other than the Company or a Wholly-Owned Restricted Subsidiary of
the Company; PROVIDED that if as of any date any Person other than the
Company or a Wholly-Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or holds a Lien in respect of such Indebtedness
(other than a Lien in connection with the Credit Agreement), such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly-Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly-Owned Restricted Subsidiary of the Company, in each case subject to
no Lien (other than a Lien in connection with the Credit Agreement);
PROVIDED that (a) any Indebtedness of the Company to any Wholly-Owned
Restricted Subsidiary of the Company is unsecured and subordinated in right
of payment, pursuant to a written agreement, to the Company's obligations
under this Indenture and the Notes and (b) if as of any date any Person
other than a Wholly-Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or any Person
<PAGE>
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holds a Lien in respect of such Indebtedness (other than a Lien in
connection with the Credit Agreement), such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business;
PROVIDED, HOWEVER, that such Indebtedness is extinguished within two
business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
in order to finance insurance premiums and other Indebtedness represented
by letters of credit for the account of the Company or such Restricted
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance
or similar requirements, all in the ordinary course of business;
(x) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business, in accordance with
customary industry practice, in amounts and for purposes customary in the
Company's industry;
(xi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for adjustment of purchase
price, earn out or other similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets or a
Restricted Subsidiary of the Company or any of its Restricted Subsidiaries,
other than guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition; PROVIDED that the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
(xii) Capitalized Lease Obligations and Purchase Money Obligations of
the Company and its Restricted Subsidiaries incurred in the ordinary course
of business not to exceed $5.0 million at any one time outstanding;
(xiii) Guarantees of Indebtedness permitted to be incurred under this
Indenture and guarantees of third-party
<PAGE>
-21-
loans to employees or officers of the Company or its Restricted
Subsidiaries permitted by clause (iv) of the definition of "Permitted
Investments";
(xiv) Refinancing Indebtedness; and
(xv) additional Indebtedness of the Company or its Restricted
Subsidiaries in an aggregate principal amount not to exceed $5,000,000 in
the aggregate at any one time outstanding.
"PERMITTED INVESTMENTS" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
Company, (ii) Investments in the Company by any Restricted Subsidiary of the
Company; PROVIDED that any Indebtedness evidencing such Investment is unsecured
and subordinated in right of payment, pursuant to a written agreement, to the
Company's obligations under the Notes and this Indenture; (iii) Investments in
cash and Cash Equivalents; (iv) loans and advances to, or guarantees of
third-party loans to, employees and officers of the Company and its Restricted
Subsidiaries for relocating expenses and purchasing Common Stock of the Company
not in excess of $2,000,000 at any one time outstanding; (v) Currency Agreements
and Interest Swap Obligations entered into in the ordinary course of the
Company's or its Restricted Subsidiaries' businesses and otherwise in compliance
with this Indenture; (vi) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
(vii) Investments made by the Company or its Restricted Subsidiaries as a result
of consideration received in connection with an Asset Sale made in compliance
with Section 4.16; (viii) Investments in Joint Ventures in businesses reasonably
related or complimentary to the Company and its Restricted Subsidiaries made in
the ordinary course of business and Investments in minority interests created by
the sale or disposition of Common Stock of any Restricted Subsidiary of the
Company, having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (viii) that are at that time
outstanding, not to exceed 4% of Total Assets at the time of such Investment
(with the fair market value of each such Investment being measured at the time
made and without giving effect to subsequent changes in value); (ix) Investments
the payment for which consists exclusively of Qualified Capital Stock of the
Company; (x) guarantees of Indebtedness permitted to be incurred under this
Inden-
<PAGE>
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ture; and (xi) additional Investments not to exceed $1,500,000 at any time
outstanding.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords or of mortgagees of landlords and
Liens of carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen and other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith, if
such reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; PROVIDED that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation or
<PAGE>
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other property subject to a Permitted Lien held by the lien holder of such
Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets (including the
cost of construction) of the Company or any Restricted Subsidiary of the
Company acquired in the ordinary course of business; PROVIDED, HOWEVER,
that (A) the related purchase money Indebtedness shall not exceed the cost
of such property or assets (including the cost of construction) and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired
and (B) the Lien securing such Indebtedness shall be created within 90 days
of such acquisition or construction;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods or construction;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
Section 4.12; PROVIDED that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any property or
as-
<PAGE>
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sets of the Company or of any of its Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the time
such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company;
(xiv) Liens arising out of consignment or similar arrangements for the
sale of goods in the ordinary course of business;
(xv) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries;
(xvi) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xvii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods; and
(xviii) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $2,500,000 at any one time outstanding and that (a) are
not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PHYSICAL NOTES" has the meaning provided in Section 2.01.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
<PAGE>
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"PRINCIPAL" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PRIVATE EXCHANGE NOTES" has the meaning set forth in the Registration
Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the
Initial Notes in the form set forth in Exhibit A(1).
"PROCEEDS PURCHASE DATE" has the meaning provided in Section 4.16.
"PRO FORMA" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent certified
public accountants.
"PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of
such Person or any of its subsidiaries to any seller or any other person
incurred or assumed in connection with the purchase of real or personal property
to be used in the business of such person or any of its subsidiaries within 180
days of such purchase.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock or Indebtedness that is convertible or exchangeable
into Capital Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"RECORD DATE" means, with respect to any Note, any of the Record Dates
specified in such Note, whether or not a Legal Holiday.
"REDEMPTION DATE," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
"REDEMPTION PRICE," when used with respect to any Note to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Notes.
"REFERENCE DATE" has the meaning provided in Section 4.10.
<PAGE>
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"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
Section 4.12 (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii), (ix), (x), (xi), (xii), (xiii) or (xv) of the definition of Permitted
Indebtedness) and Indebtedness outstanding on the Issue Date reduced by the
amount of any scheduled amortization payments or mandatory prepayments actually
paid or permanent reductions thereon, in each case that does not (1) result in
an increase in the aggregate principal amount of Indebtedness of such Person as
of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; PROVIDED that
(x) if such Indebtedness being Refinanced is Indebtedness solely of the Company,
then such Refinancing Indebtedness shall be Indebtedness solely of the Company
and (y) if such Indebtedness being Refinanced is subordinate or junior to the
Notes, then such Refinancing Indebtedness shall be subordinate to the Notes at
least to the same extent and in the same manner as the Indebtedness being
Refinanced.
"REGISTRAR" has the meaning provided in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date among the Company, the Guarantors and the
Initial Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; PROVIDED that if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal
<PAGE>
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amount of such Designated Senior Debt in respect of any Designated Senior Debt.
"RESTRICTED PAYMENT" has the meaning provided in Section 4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; PROVIDED that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means one or more revolving credit
facilities under the Credit Agreement.
"RULE 144A" means Rule 144A under the Securities Act.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SENIOR DEBT" means the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law), fees and
expenses on any Indebtedness of the Company, whether outstanding on the Issue
Date or thereafter created, incurred, assumed or guaranteed, unless, in the case
of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing,
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"Senior Debt" shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of, (x) all monetary obligations of every
nature under the Credit Agreement, including, without limitation, obligations to
pay principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt"
shall not include (i) any Indebtedness of the Company to a Subsidiary of the
Company, (ii) Indebtedness to, or guaranteed on behalf of, any director, officer
or employee of either of the Company or any of its Subsidiaries (including,
without limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) Indebtedness to the extent incurred in violation of Section
4.12, (vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in
Rule 1-02(w) of Regulation S-X under the Securities Act.
"STOCKHOLDERS AGREEMENT" means that Amended and Restated Stockholders
Agreement, dated as of June 30, 1997, among the Company and certain stockholders
of the Company, as amended as of December 31, 1997 and as in effect on the Issue
Date.
"SUBSIDIARY" or "SUBSIDIARY," with respect to any Person, means
(i) any corporation of which the outstanding Capital Stock having at least a
majority of the votes entitled to be cast in the election of directors under
ordinary circumstances shall at the time be owned, directly or indirectly, by
such Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"SURVIVING ENTITY" has the meaning provided in Section 5.01.
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"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except
as otherwise provided in Section 9.04.
"TOTAL ASSETS" means total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent consolidated
balance sheet.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"TRUST OFFICER" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture, or in the case of a
successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"UNRESTRICTED NOTES" means one or more Notes that do not and are not
required to bear the Private Placement Legend in the form set forth on Exhibit
A(1), including, without limitation, the Exchange Notes in the form set forth as
Exhibit A(2) hereto.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED that (x) the
Company certifies to the Trustee that such designation complies with
Section 4.10 and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in com-
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pliance with Section 4.12 and (y) immediately before and immediately after
giving effect to such designation, no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means non-callable direct obligations
of, and non-callable obligations guaranteed by, the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. PHYSICAL NOTES" has the meaning provided in Section 2.01.
"WARRANT AGREEMENT" means the Amended and Restated Warrant Agreement,
dated as of January 8, 1998, between the Company and Chase Manhattan Capital,
L.P. and as in effect on the Issue Date.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by, multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof by
(ii) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly-Owned Restricted Subsidiary of such Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a
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part of, this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors, if any, or any other obligor on the Notes or the Guarantees, if any.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA by reference to another statute or defined by SEC rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular; and
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
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ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.
The Initial Notes, the notation thereon relating to the Guarantees, if
any, and the Trustee's certificate of authentication shall be substantially in
the form of EXHIBIT A(1) hereto. The Exchange Notes, the notation thereon
relating to the Guarantees, if any, and the Trustee's certificate of
authentication shall be substantially in the form of EXHIBIT A(2) hereto. The
Private Exchange Notes, the notation relating thereon to the Guarantees, if any,
and the Trustee's certificate of authentication shall be substantially in the
form of EXHIBIT A(1) hereto. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or depository rule or usage.
The Company and the Trustee shall approve the form of the Notes and any
notation, legend or endorsement on them. Each Note shall be dated the date of
its issuance.
The terms and provisions contained in the Notes and the Guarantees, if
any, annexed hereto as Exhibits A(1) and A(2), shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Guarantors, if any, and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A(1) (the "GLOBAL NOTE"),
deposited with the Trustee, as custodian for the Depository, and shall bear the
legend set forth in EXHIBIT B, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A(1) (the
"OFFSHORE PHYSICAL NOTES"). Notes offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued, and Notes offered and sold in reliance
on Rule 144A may be issued, in the form of permanent certificated Notes in
registered form, in substan-
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tially the form set forth in Exhibit A(1) (the "U.S. PHYSICAL NOTES"). The
Offshore Physical Notes and the U.S. Physical Notes are sometimes collectively
herein referred to as the "PHYSICAL NOTES."
SECTION 2.02. EXECUTION AND AUTHENTICATION;
AGGREGATE PRINCIPAL AMOUNT.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature. Each Guarantor, if any, shall execute the Guarantee in the manner
set forth in Section 11.09.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $130,000,000 in one or more series,
(ii) Private Exchange Notes from time to time only in exchange for a like
principal amount of Initial Notes and (iii) Unrestricted Notes from time to time
only (x) in exchange for a like principal amount of Initial Notes or (y) in an
aggregate principal amount of not more than the excess of $130,000,000 over the
sum of the aggregate principal amount of (A) Initial Notes then outstanding, (B)
Private Exchange Notes then outstanding and (C) Unrestricted Notes issued in
accordance with (iii)(x) above, in each case upon a written order of the Company
in the form of an Officers' Certificate of the Company. Each such written order
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated, whether the Notes are to be Initial Notes,
Private Exchange Notes or Unrestricted Notes and whether the Notes are to be
issued as Physical Notes or Global Notes or such other information as the
Trustee may reasonably request. In addition, with respect to authentication
pursuant to clauses (ii) or (iii) of the first sentence of this paragraph, the
first such written order from the Company shall be accompanied by an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee stating
that the issu-
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ance of the Private Exchange Notes or the Unrestricted Notes, as the case may
be, does not give rise to an Event of Default, complies with this Indenture and
has been duly authorized by the Company. The aggregate principal amount of
Notes outstanding at any time may not exceed $130,000,000, except as provided in
Section 2.07.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Company shall use its best efforts to obtain the same
"CUSIP" number for such Notes as is printed on the Notes outstanding at such
time; PROVIDED, HOWEVER, that if any series of Notes issued under this Indenture
subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee to be a different
class of security than the Notes outstanding at such time for federal income tax
purposes, the Company may obtain a "CUSIP" number for such Notes that is
different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the "AUTHENTICATING
AGENT") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("REGISTRAR"), (b) Notes may be presented or surrendered for payment
("PAYING AGENT") and (c) notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and
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of their transfer and exchange. The Company, upon prior written notice to the
Trustee, may have one or more co-Registrars and one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying Agent" includes
any additional Paying Agent. Neither the Company nor any Affiliate of the
Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. The
Paying Agent or Registrar may resign upon 30 days prior written notice to the
Company.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that, subject to Articles Ten and Eleven, each Paying Agent
shall hold in trust for the benefit of the Holders or the Trustee all assets
held by the Paying Agent for the payment of principal of, or interest on, the
Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and the Company and the Paying Agent shall notify
the Trustee in writing of any Default by the Company (or any other obligor on
the Notes) in making any such payment. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account for
any assets disbursed and the Trustee may at any time during the continuance of
any payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
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SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee as of each Record Date and before
each related Interest Payment Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of Noteholders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar or co-Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transaction are met; PROVIDED, HOWEVER, that the Notes presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registrations of transfer
and exchanges, the Company shall issue and execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request. No service
charge shall be made to a Noteholder for any registration of transfer or
exchange. The Company may require from such Noteholder payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or similar governmental
charge payable upon exchanges or transfers pursuant to Sections 2.10, 3.06,
4.15, 4.16 or 9.06, in which event the Company shall be responsible for the
payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests
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in such Global Notes may be effected only through a book entry system maintained
by the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry.
SECTION 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and execute and the Trustee shall authenticate a replacement
Note if the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an affidavit of lost certificate and an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Note is replaced. The Company may
charge such Holder for its reasonable, out-of-pocket expenses in replacing a
Note, including reasonable fees and expenses of the Trustee and counsel and the
Trustee may charge the Company for the Trustee's reasonable out-of-pocket
expenses in replacing such Note. Every replacement Note shall constitute an
additional Obligation of the Company.
SECTION 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company, any Guarantor or any of their respective
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
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SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company, any Guarantor or any of their respective Affiliates shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer of the Trustee
actually knows are so owned shall be so considered. The Company shall notify
the Trustee, in writing, when it or any of its Affiliates repurchases or
otherwise acquires Notes, and of the aggregate principal amount of such Notes so
repurchased or otherwise acquired.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated, and shall direct
the Trustee to authenticate such Notes and certify that all conditions precedent
to the issuance of such Notes contained herein have been complied with.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company and the Trustee consider appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and shall (subject to the record-retention requirements
of the Exchange Act) dispose of all Notes surrendered for registration of
transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Notes to replace Notes that it has paid or delivered
to the Trustee for cancellation. If the Company or any Guarantor shall acquire
any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the In-
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debtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use one or more "CUSIP" numbers,
and if so, the appropriate CUSIP number(s) shall be included in all notices of
redemption or exchange as a convenience to Holders; PROVIDED that any such
notice may state that no representation is made by the Trustee as to the
correctness or accuracy of any CUSIP number(s) printed in the notice or on the
Notes, and that reliance may be placed only on the other identification numbers
printed on the Notes. The Company shall promptly notify the Trustee of any
change in the CUSIP number.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and on the Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be.
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SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTE.
(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit B.
Members of, or participants in, the Depository ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.16. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
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(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute
(and the Guarantors shall execute Guarantees), and the Trustee shall, upon
written instructions from the Company, authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Note, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.16, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Exhibit A.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.16. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after March 3,
2000 and the transferor certifies that the Restricted Security was not
acquired from the Company or Affiliate of the Company less than two years
prior to the date of the proposed transfer or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto or
(2) in the case of a transfer to a Non-U.S. Person, the proposed transferor
has delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto; and
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(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the Issue Date; PROVIDED, HOWEVER, that neither the Company
nor any Affiliate of the Company has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the second anniversary
of the Issue Date or (y) such transfer is being made by a proposed
transferor who has checked the box provided for on the form of Note
stating, or has otherwise advised the Company and the Registrar in writing,
that the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the form
of Note stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes
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which after transfer are to be evidenced by an interest in the Global Note,
upon receipt by the Registrar of written instructions given in accordance
with the Depository's and the Registrar's procedures, the Registrar shall
register the transfer and reflect on its books and records the date and an
increase in the principal amount of the Global Note in an amount equal to
the principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the circumstance contemplated by paragraph
(a)(i)(x) of this Section 2.16 exist or (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act or (iii) such Note has been sold pursuant to an effective registration
statement under the Securities Act.
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16
for a period of three years. The Company shall have the right to inspect and
make copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph Six of the
Notes, it shall notify both the Trustee
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and the Paying Agent in writing of the Redemption Date and the principal amount
of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
at least 45 days before the Redemption Date (unless a shorter notice period
shall be satisfactory to the Trustee, as evidenced in a writing signed on behalf
of the Trustee), together with an Officers' Certificate and Opinion of Counsel
stating that such redemption shall comply with the conditions contained herein
and in the Notes.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed on a PRO RATA basis, by lot or in such other
fair and appropriate manner chosen at the discretion of the Trustee and, if the
Notes are listed on any securities exchange, by a method that complies with the
requirements of such exchange; PROVIDED, however, that if partial redemption is
made with the proceeds of an Equity Offering prior to March 1, 2001, selection
of the Notes or portions thereof for redemption shall be made by the Trustee
only on a PRO RATA basis or on a nearly PRO RATA basis if practicable (subject
to the Depository's procedures, if applicable), unless such method is otherwise
prohibited. The Trustee shall make the selection from the Notes outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof to be redeemed.
Notes in denominations of $1,000 may be redeemed only in whole. The Trustee may
select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Notes that have denominations larger than $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Notes are to be redeemed, with
a copy to the Trustee and any Paying Agent. At the Company's request, the
Trustee shall give the notice of redemption in the Company's name, and at the
Company's expense.
Each notice for redemption shall identify the Notes to be redeemed and
shall state:
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(1) the Redemption Date, which, in the case of a redemption from
proceeds of an Equity Offering, shall be within 120 days following the date
upon which such Equity Offering is consummated;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless (a) the Company defaults in making the redemption
payment or (b) such redemption payment is prohibited pursuant to
Article Ten or Eleven hereof or otherwise, interest, if any, on Notes
called for redemption shall cease to accrue on and after the Redemption
Date, and the only remaining right of the Holders of such Notes is to
receive payment of the Redemption Price plus accrued interest, if any, upon
surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Note to be redeemed and that, on or after the Redemption Date, and upon
surrender of such Note, a new Note or Notes in the aggregate principal
amount equal to the unredeemed portion thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption, unless prohibited
pursuant to Article Ten or Eleven or otherwise pursuant to
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this Indenture, shall be paid at the Redemption Price (which shall include
accrued interest thereon to the Redemption Date), but installments of interest,
the maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant record dates referred
to in the Notes.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent in immediately available funds U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Notes or portions
thereof to be redeemed on that date. The Paying Agent shall promptly return to
the Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
If the Company complies with the preceding paragraph and payment of
the Notes is not prohibited under Article Ten or Eleven or otherwise, then,
unless the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the Company
shall issue and execute, and the Trustee shall authenticate for the Holder, a
new Note or Notes equal in principal amount to the unredeemed portion of the
Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment in
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full and is not prohibited from paying such money to the Holders pursuant to the
terms of this Indenture.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes. Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal, premium or interest payments hereunder. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 12.02.
SECTION 4.03. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and expense, all things reasonably necessary
to preserve and keep in full force and effect its corporate or other existence
and the corporate or other existence of each of the Restricted Subsidiaries in
accordance with the respective organizational documents of each such Restricted
Subsidiary and the material rights (charter and statutory) and franchises of the
Company and each such Restricted Subsidiary; PROVIDED, HOWEVER, that the Company
shall not be required to preserve, with respect to itself, any material right or
franchise and, with respect to any of its Restricted Subsidiaries, any such
existence, material right or franchise, if the Board of Directors of the Company
or such Restricted Subsidiary, as the case may be, shall determine in good faith
that the preservation thereof is no longer reasonably necessary or desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole.
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SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
its Properties or any of its Subsidiaries' Properties and (ii) all material
lawful claims for labor, materials and supplies that, if unpaid, might by law
become a Lien upon its Properties or any of its Subsidiaries' Properties,
except, in each case, as would not be, in the aggregate, reasonably likely to
have a material adverse effect on the business and financial condition of the
Company and its Restricted Subsidiaries, taken as a whole; PROVIDED, HOWEVER,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its Properties in good working order and condition
(subject to ordinary wear and tear) and make all reasonably necessary repairs,
renewals, replacements, additions, betterments and improvements thereto and
actively conduct and carry on its business, unless the failure to do so, in each
case, would not be, in the aggregate, reasonably likely to have a material
adverse effect on the business and financial condition of the Company and its
Restricted Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that nothing in
this Section 4.05 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
Properties if such discontinuance is, in the good faith judgment of the Board of
Directors or other governing body of the Company or the Restricted Subsidiary
concerned, as the case may be, desirable in the conduct of its businesses and is
not disadvantageous in any material respect to the Holders.
(b) The Company shall maintain insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the good faith
judgment of the Company, are adequate and appropriate for the conduct of the
business of the Company and its Restricted Subsidiaries in a prudent manner,
with reputable insurers or with the government of the United States of
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America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the good faith
judgment of the Company, for companies similarly situated in the industry,
except for any omissions thereof which would not be, in the aggregate,
reasonably likely to have a material adverse effect on the business and
financial condition of the Company and its Restricted Subsidiaries, taken as a
whole.
SECTION 4.06. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, an Officers' Certificate which complies
with TIA Section 314(a)(4) stating that a review of its activities during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed and
fulfilled its Obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of such Officer's
knowledge the Company during such preceding fiscal year has kept, observed,
performed and fulfilled each and every such covenant and the Obligations
contained in this Indenture and the Notes and no Default or Event of Default
occurred during such year and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to Section
4.08 shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture insofar as they relate
to accounting matters or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to
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the Trustee, at its address set forth in Section 12.02 hereof, by registered or
certified mail or by telegram, telex or facsimile transmission followed by hard
copy by registered or certified mail an Officers' Certificate specifying such
event, notice or other action (including any action the Company is taking or
proposes to take in respect thereof) within thirty days of such occurrence.
SECTION 4.07. COMPLIANCE WITH LAWS.
The Company shall, and shall cause each of its Subsidiaries to, comply
with all applicable statutes, rules, regulations, orders and restrictions of the
United States of America, all states and municipalities thereof, and of any
governmental department, commission, board, regulatory authority, bureau, agency
and instrumentality of the foregoing, in respect of the conduct of its
businesses and the ownership of its properties, except for such noncompliances
as are not in the aggregate reasonably likely to have a material adverse effect
on the business or financial condition of the Company and its Subsidiaries,
taken as a whole.
SECTION 4.08. REPORTS TO HOLDERS.
The Company will deliver to the Trustee within 15 days after the
filing of the same with the SEC, copies of the quarterly and annual reports and
of the information, documents and other reports, if any, which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will,
beginning on the earlier of the date the Exchange Registration Statement becomes
effective and 180 days after the Issue Date, file with the SEC, to the extent
permitted, and provide the Trustee and the Holders with such annual reports and
such information, documents and other reports specified in Sections 13 and 15(d)
of the Exchange Act within 15 days after the same would be required to be filed
with the SEC if the Company were subject to such reporting requirements. The
Company will also comply with the other provisions of TIA Section 314(a). So
long as any of the Notes remain outstanding, the Company shall make available to
any prospective purchaser of the Notes or the beneficial owner of the Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act.
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SECTION 4.09. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Guarantor, as the case may be, from paying all or any
portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be and as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Guarantor, if any, hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company that is subordinate or junior in right of payment to
the Notes or (d) make any Investment (other than Permitted Investments) (each of
the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred
to as a "RESTRICTED PAYMENT"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing or (ii) the Company is not able to incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12; or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of
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the Company) shall exceed the sum of: (w) 50% of the cumulative Consolidated
Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss) of the Company earned subsequent to the Issue Date and through the
last day of the fiscal quarter ending prior to the date the Restricted Payment
occurs (the "REFERENCE DATE") (treating such period as a single accounting
period); PLUS (x) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of the Company, including the net cash proceeds
received by the Company upon the exercise, exchange or conversion of
Indebtedness or Disqualified Capital Stock into Qualified Capital Stock; PLUS
(y) to the extent not otherwise included in Consolidated Net Income of the
Company, an amount equal to the net reduction in Investments (other than
reductions in Permitted Indebtedness) in Unrestricted Subsidiaries resulting
from dividends, interest payments, repayments of loans or advances, or other
transfers of cash, in each case, to the Company or to any Wholly-Owned
Restricted Subsidiary of the Company from Unrestricted Subsidiaries, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (in each
case valued as provided in the definition of "Investment"), not to exceed, in
the case of an Unrestricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary of the Company in such
Unrestricted Subsidiary and which were treated as a Restricted Payment under
this Indenture; PLUS (z) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(x) and (z), any net cash proceeds
from an Equity Offering to the extent used to redeem the Notes).
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) if no Default
or Event of Default shall have occurred and be continuing, the acquisition,
redemption, repurchase or retirement of any shares of Capital Stock of the
Company, either (i) solely in exchange for shares of Qualified Capital Stock of
the Company or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of shares
of Qualified Capital Stock of the Company; (3) if no Default or Event of Default
shall have occurred and be continuing, the acquisition of any Indebtedness of
the Company that is subordinate or junior in right of payment to the
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Notes either (i) solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or (B) Refinancing
Indebtedness; (4) so long as no Default or Event of Default shall have occurred
and be continuing, repurchases by the Company of Common Stock of the Company
from employees, officers or directors of the Company or any of its Subsidiaries
or their authorized representatives upon the death, disability or termination of
employment of such officers, directors and employees, in an aggregate amount not
to exceed $1,000,000 in any calendar year and $5,000,000 in the aggregate, in
each case plus the aggregate cash proceeds from any reissuance during such
calendar year of Common Stock by the Company to employees, officers or directors
of the Company and its Subsidiaries plus the aggregate cash proceeds from any
payments on life insurance policies in which the Company or its Subsidiaries is
the beneficiary with respect to any employees, officers or directors of the
Company and its Subsidiaries which proceeds are used to purchase the Common
Stock of the Company held by any such employees, officers or directors; (5) if
no Default or Event of Default shall have occurred and be continuing, the
redemption at stated maturity of the existing Class A Preferred Stock of Nancy
Lim and the payment of scheduled dividend payments thereon in accordance with
the terms of such Class A Preferred Stock; (6) if no Default or Event of Default
shall have occurred and be continuing, the repurchase by the Company of the
warrants issued in connection with the Warrant Agreement upon the exercise of
the put rights contained in such Warrant Agreement by the holders of such
warrants; and (7) repurchases of Capital Stock deemed to occur upon the exercise
of stock options if such Capital Stock represents a portion of the exercise
price thereof. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the immediately
preceding paragraph, amounts expended pursuant to clauses (1), (2)(ii),
(3)(ii)(A), (4), (5), (6) and, to the extent included in clause (iii)(x) or (z)
of the preceding paragraph, (7) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
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SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each, an "AFFILIATE
TRANSACTION"), other than (x) Affiliate Transactions permitted under paragraph
(b) below and (y) Affiliate Transactions on terms that are not less favorable
than those that might reasonably have been obtained in a comparable transaction
at such time on an arm's-length basis from a Person that is not an Affiliate of
the Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value in
excess of $500,000 shall be approved by the Board of Directors of the Company or
such Restricted Subsidiary, as the case may be, such approval to be evidenced by
a Board Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a
series of related Affiliate Transactions related to a common plan) that involves
an aggregate fair market value of more than $5,000,000, the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in paragraph (a) shall not apply to
(i) reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors or employees, agents or consultants of the Company or
any Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii) transactions exclusively
between or among the Company and any of its Wholly-Owned Restricted Subsidiaries
or exclusively between or among such Wholly-Owned Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by this Indenture;
(iii) any agreement as in effect as of the Issue Date or any amendment thereto
or any transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Company or its
Restricted Subsidiaries, as the case may be, in any
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material respect than the original agreement as in effect on the Issue Date;
(iv) Restricted Payments permitted by the provisions of Section 4.10; (v) any
issuance of securities or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans of the Company entered into in the ordinary
course of business and approved by the Board of Directors; (vi) fees and related
expenses paid pursuant to the Management Agreement; (vii) loans and advances, or
guarantees of loans of third parties, to employees and officers of the Company
and its Restricted Subsidiaries in the ordinary course of business for BONA FIDE
business purposes not in excess of $2,000,000 at any time outstanding; (viii)
indemnification agreements provided for the benefit of the Company or any
Restricted Subsidiary of the Company from officers, directors or employees of
the Company or any Restricted Subsidiary; (ix) all leases for equipment and real
property used by the Company which are between the Company or any Restricted
Subsidiary of the Company and either of Nancy Lim, Walter Lim or Howard Lim, and
any Affiliate thereof, (A) entered into in the ordinary course of business, on
terms no less favorable to the Company than could be obtained from a third party
in an arm's-length transaction and approved by the Board of Directors or (B)
contained in agreements in existence as of the Issue Date; and (x) the sale of
inventory in the ordinary course of business on customary terms no less
favorable to the Company and its Subsidiaries than could be obtained from a
third party in an arm's-length transaction.
SECTION 4.12. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "INCUR") any Indebtedness
(other than Permitted Indebtedness); PROVIDED, HOWEVER, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company or any of
its Restricted Subsidiaries may incur Indebtedness (including, without
limitation, Acquired Indebtedness) if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0 if the
Indebtedness is incurred prior to March 1, 2000 and greater than 2.25 to 1.0 if
the Indebtedness is incurred thereafter.
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SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture, the Notes and the
Guarantees; (3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary of the Company;
(4) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person or the properties or assets of the Person so
acquired; (5) agreements existing on the Issue Date (including the Credit
Agreement) to the extent and in the manner such agreements are in effect on the
Issue Date; (6) any restriction or encumbrance contained in contracts for sale
of assets permitted by this Indenture in respect of the assets being sold
pursuant to such contracts pending the close of such sale, which encumbrance or
restriction is not applicable to any asset other than the asset being sold
pursuant to such contract; (7) Purchase Money Obligations for property acquired
in the ordinary course of business that impose restrictions of the nature
described in clause (c) above on the property so acquired; (8) restrictions of
the nature described in (c) above on the transfer of assets subject to any Lien
permitted under Section 4.18 imposed by the holder of such Lien; or (9) an
agreement governing Indebtedness incurred to Refinance the Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2), (4) or
(5) above; PROVIDED, HOWEVER, that the provisions relating to such encumbrance
or restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (4) or (5).
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SECTION 4.14. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT.
The Company will not, and will not permit any Guarantor to, incur or
suffer to exist Indebtedness that is senior in right of payment to the Notes or
any Guarantee, as the case may be, and subordinate in right of payment to any
other Indebtedness of the Company or such Guarantor, as the case may be.
SECTION 4.15. LIMITATION ON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require that the Company purchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL
OFFER"), at a purchase price equal to 101% of the principal amount thereof plus
accrued interest to the date of purchase. Within 10 days after the date upon
which the Change of Control occurs requiring the Company to make a Change of
Control Offer pursuant to this Section 4.15, the Company shall so notify in
writing the Trustee.
(b) Within 30 days following the date upon which the Change of
Control occurred, the Company shall send, by first class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes validly tendered and not withdrawn will be
accepted for payment;
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by
law) (the "CHANGE OF CONTROL PAYMENT DATE");
(3) that any Note not tendered will continue to accrue interest if
interest is then accruing;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
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(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Notes the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Note purchased;
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased part or of
the Notes surrendered; PROVIDED, HOWEVER, that each Note purchased and each
new Note issued shall be in a principal amount of $1,000 or integral
multiples thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all Notes
or portions thereof so tendered and accepted and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail or deliver to the Holders so accepted payment in an amount equal
to the purchase price plus accrued interest, if any, and the Company shall
execute and issue, and the Trustee shall promptly authenticate and mail or
deliver to such Holders new Notes equal in principal amount to any unpurchased
portion of the Notes surrendered. Any Notes not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
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Any amounts remaining after the purchase of Notes pursuant to a Change
of Control Offer shall be returned by the Trustee to the Company.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations relating to such Change of Control Offer by virtue
thereof.
SECTION 4.16. LIMITATION ON ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (ii) at least 75% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition (the fair market value of Replacement Assets (as
defined below) received by the Company or any Restricted Subsidiary, as the case
may be, from such Asset Sale shall be considered cash or Cash Equivalents for
purposes of this covenant); and (iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Restricted Subsidiary to apply, the Net
Cash Proceeds relating to such Asset Sale within 270 days of receipt thereof
either (A) to prepay any Senior Debt and, in the case of any Senior Debt under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Issue Date or in any businesses
which are similar or related to the contract packaging and manufacturing
businesses ("REPLACEMENT ASSETS"), or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the
271st day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such
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Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each, a "NET PROCEEDS OFFER TRIGGER DATE"), an amount equal
to such aggregate amount of Net Cash Proceeds which have not been applied on or
before such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A),
(iii)(B) and (iii)(C) of the next preceding sentence (each a "NET PROCEEDS OFFER
AMOUNT") shall be applied by the Company or such Restricted Subsidiary to make
an offer to purchase (the "NET PROCEEDS OFFER") on a date (the "NET PROCEEDS
OFFER PAYMENT DATE") within 45 days following the applicable Net Proceeds Offer
Trigger Date, from all Holders on a PRO RATA basis, that amount of Notes equal
to the Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the Notes to be purchased, plus accrued and unpaid interest thereon,
if any, to the date of purchase; PROVIDED, HOWEVER, that if at any time any
consideration other than Cash or Cash Equivalents received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant. A transfer of assets by the Company to a Wholly-Owned Restricted
Subsidiary or by a Restricted Subsidiary to the Company or to another
Wholly-Owned Restricted Subsidiary will not be deemed to be an Asset Sale. The
Company may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $5,000,000 resulting from one
or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $5,000,000, shall be applied as
required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply with the provisions of this Section 4.16 with
respect to such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold pursuant to this Section 4.16 less the fair
market value of all liabilities of such Person related to such property and
assets not transferred shall be deemed to be Net Cash Proceeds for purposes of
this Section 4.16.
Each Net Proceeds Offer will be mailed to the record Holders as
determined on a date shown on the register of Hold-
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ers within 25 days following the Net Proceeds Offer Trigger Date, with a copy to
the Trustee. A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law. The notice shall contain
all instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.16 and that all Notes tendered will be accepted for payment; PROVIDED,
HOWEVER, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Company shall
select the Notes to be purchased on a PRO RATA basis (based on amounts
tendered) (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000 or multiples thereof
shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed, other than as may be required by
law) (the "PROCEEDS PURCHASE DATE");
(3) that any Note not tendered will continue to accrue interest if
interest is then accruing;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior
to 5:00 p.m., New York City time, on the second Business Day prior to the
Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
second Business Day preceding the Proceeds Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Notes the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Note purchased; and
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(7) that Holders whose Notes were purchased only in part will be
issued new Notes equal to principal amount to the unpurchased portion of
the Notes surrendered.
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (1) above, (ii) deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price
plus accrued interest, if any, of all Notes to be purchased and (iii) deliver to
the Trustee Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof being purchased by the Company. The Paying Agent
shall promptly mail to the Holders so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Company shall execute and
issue, and the Trustee shall promptly authenticate and mail or deliver to such
Holders new Notes equal in principal amount to any unpurchased portion of the
Notes surrendered. The Company shall publicly announce the results of the Net
Proceeds Offer on or as soon as practicable after the Proceeds Purchase Date.
For purposes of this Section 4.16, the Trustee shall act as the Paying Agent.
If the aggregate purchase price of Notes tendered pursuant to the Net
Proceeds Offer is less than the Net Cash Proceeds allotted to the purchase of
the Notes, the Company may apply the remaining Net Cash Proceeds for general
corporate purposes. Any amounts remaining after the purchase of Notes pursuant
to a Net Proceeds Offer shall be returned by the Trustee to the Company
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of this Section 4.16, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of this Section 4.16 by virtue
thereof. The agreements governing certain outstanding Senior Debt of the
Company may require that the Company and its Subsidiaries apply all proceeds
from asset sales to repay in full outstanding obligations under such Senior Debt
prior to the application of such proceeds to repurchase outstanding Notes.
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SECTION 4.17. LIMITATION ON PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES.
The Company shall not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly-Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly-Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company unless at the time
of such issuance such Restricted Subsidiary would be entitled to create, incur
or assume Indebtedness pursuant to Section 4.12 in the aggregate amount equal to
the aggregate liquidation value, plus any accrued and unpaid dividends, of the
Preferred Stock to be issued. Notwithstanding the foregoing, nothing contained
in this Section 4.17 will prohibit the ownership of Preferred Stock issued by a
Person prior to the time (a) such Person becomes a Restricted Subsidiary of the
Company, (b) such Person merges with or into a Restricted Subsidiary of the
Company or (c) a Subsidiary of the Company merges with or into such Person;
PROVIDED that such Preferred Stock was not issued by such Person in anticipation
of a transaction contemplated by any of clauses (a), (b) or (c) above.
SECTION 4.18. LIMITATION ON LIENS.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes or any Guarantee, the
Notes and such Guarantee, as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and
(ii) in all other cases, the Notes and the Guarantees are equally and ratably
secured, except for (A) Liens existing as of the Issue Date to the extent and in
the manner such Liens are in effect on the Issue Date; (B) Liens securing Senior
Debt and Liens securing Guarantor Senior Debt; (C) Liens securing the Notes and
the Guarantees; (D) Liens of the Company or a Wholly-Owned Restricted Subsidiary
of the Company on assets of any Subsidiary of the Company; (E) Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness which
has been secured by a Lien permitted under this Indenture and which has been
incurred in accordance with the provisions of this Indenture; PROVIDED, HOWEVER,
that such Liens (A) are no less favorable to the Holders and are not more
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favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (B) do not extend to or cover
any property or assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so Refinanced; and (F) Permitted Liens.
SECTION 4.19. CONDUCT OF BUSINESS.
The Company and its Restricted Subsidiaries will not engage, to any
material extent, in any businesses which are not the same, similar or related to
the contract packaging and manufacturing businesses.
SECTION 4.20. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Restricted Subsidiary (other than a Foreign
Subsidiary) that is not a Guarantor, or if the Company or any of its Restricted
Subsidiaries shall organize, acquire or otherwise invest in another Restricted
Subsidiary (other than a Foreign Subsidiary) in each case having total assets
with a book value in excess of $500,000, then such transferee or acquired or
other Restricted Subsidiary (other than a Foreign Subsidiary) and, in the case
of a transferee or acquired or other Restricted Subsidiary (other than a Foreign
Subsidiary) that does not have total assets with a book value in excess of
$500,000, when such transferee or acquired or other Restricted Subsidiary (other
than a Foreign Subsidiary) obtains assets with a book value in excess of
$500,000, shall (i) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Notes and this Indenture on the terms set forth in this Indenture and
(ii) deliver to the Trustee an Opinion of Counsel that such supplemental
indenture has been duly authorized, executed and delivered by such Restricted
Subsidiary and constitutes a legal, valid, binding and enforceable obligation of
such Restricted Subsidiary (with customary exceptions). Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture.
Nothing in this covenant shall be construed to permit any Subsidiary of the
Company to incur Indebtedness otherwise prohibited by Section 4.12.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "SURVIVING ENTITY") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, this Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed;
(ii) immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, (1) shall have a Consolidated Net Worth
equal to or greater than 90% of the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.12; (iii) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an Officers' Certificate
and an
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Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition, and if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, comply with the applicable provisions of this Article
Five and that all conditions precedent herein relating to such transaction have
been satisfied.
(b) For purposes of clause (a) above, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16)
will not, and the Company will not cause or permit any Guarantor to, consolidate
with or merge with or into any Person other than the Company or any other
Guarantor unless: (i) the entity formed by or surviving any such consolidation
or merger (if other than the Guarantor) or to which such sale, lease, conveyance
or other disposition shall have been made is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia; (ii) such entity assumes by supplemental indenture all of
the obligations of the Guarantor on the Guarantee; and (iii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing. Any merger or consolidation of a Guarantor with and
into the Company (with the Company being the Surviving Entity) or another
Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only
comply with Section 5.01(a)(iv) hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01, in which the Company is not the continuing corporation, the Surviving
Entity formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such, and thereafter the predecessor corporation shall be re-
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lieved of all Obligations and covenants under this Indenture and the Notes;
PROVIDED that solely for the purpose of calculating amounts described in clauses
(w) and (x) of the first paragraph of Section 4.10, any such Surviving Entity
shall only be deemed to have succeeded to and be substituted for the Company
with respect to the period subsequent to the effective time of this transaction
(and the Company shall be deemed to be the "Company" for such purposes for all
prior periods).
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" is:
(1) the failure to pay interest on any Notes when the same becomes
due and payable and the default continues for a period of 30 days (whether
or not such payment shall be prohibited by the subordination provisions of
this Indenture);
(2) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of this Indenture);
(3) a default in the observance or performance of any other covenant
or agreement contained in this Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to Section 5.01, which
will constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(4) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company and such failure continues for a period of 20 days or more, or the
acceleration of the final stated maturity of any such
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Indebtedness (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by the Company or such Restricted
Subsidiary of notice of any such acceleration) if the aggregate principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, in each case with respect to which
the 20-day period described above has passed, aggregates $5,000,000 or more
at any time;
(5) one or more judgments in an aggregate amount in excess of
$5,000,000 (excluding judgments to the extent covered by insurance by a
reputable insurer as to which the insurer has acknowledged coverage) shall
have been rendered against the Company or any of its Restricted
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable;
(6) the Company or any of its Significant Subsidiaries (A) commences
a voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (B) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy Law,
(C) consents to the appointment of a Custodian of it or for substantially
all of its property, (D) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (E) makes a general
assignment for the benefit of its creditors, or (F) takes any corporate
action to authorize or effect any of the foregoing;
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law,
which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any of its Significant Subsidiaries, (B) appoint a Custodian of
the Company or any of its Significant Subsidiaries or for substantially all
of its property or (C) order the winding-up or liquidation of its affairs;
and such judgment, decree or order shall remain unstayed and in effect for
a period of 60 consecutive days; or
(8) any of the Guarantees of a Significant Subsidiary ceases to be in
full force and effect or any of the Guarantees of a Significant Subsidiary
is declared to be null and void and unenforceable or any of the Guarantees
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is found to be invalid or any of the Guarantors which is a Significant
Subsidiary denies its liability under its Guarantee (other than by reason
of release of a Guarantor in accordance with the terms of this Indenture).
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default specified
in clause (6) or (7) of Section 6.01) shall occur and be continuing, the Trustee
or the Holders of at least 25% in principal amount of outstanding Notes may
declare the principal of and accrued interest on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"ACCELERATION NOTICE"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit Agreement,
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or 5 business days after receipt by the
Company and the Representative under the Credit Agreement of such Acceleration
Notice. If an Event of Default specified in clause (6) or (7) of Section 6.01
occurs and is continuing, then all unpaid principal of, and premium, if any, and
accrued and unpaid interest on all of the outstanding Notes shall IPSO FACTO
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
(b) At any time after a declaration of acceleration with respect to
the Notes as described in the preceding paragraph, the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (6) or (7) of Section 6.01, the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been cured
or waived. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative to the extent permitted
by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in
principal amount of the outstanding Notes by notice to the Trustee may waive an
existing Default or Event of Default and its consequences, except a Default in
the payment of principal of or interest on any Note as specified in clauses (1)
and (2) of Section 6.01 or except as otherwise prohibited by the TIA. When a
Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided for
in Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to
follow any direction that the Trustee reasonably believes conflicts with any law
or this Indenture, that the Trustee determines may be unduly prejudicial to the
rights of another Holder, or that may involve the Trustee in personal liability;
PROVIDED that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:
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(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) Holders of at least 25% in aggregate principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense to be
incurred in compliance with such request;
(4) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer of satisfactory indemnity; and
(5) during such 30-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction which,
in the opinion of the Trustee, is inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal and premium, if any, or
interest on such Note on or after the respective due dates set forth in such
Note (including upon acceleration thereof); PROVIDED that upon institution of
any proceeding or exercise of any remedy, such Holders provide the Trustee with
prompt written notice thereof.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company, any Guarantor, if any, or any other obligor on the Notes for
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the whole amount of principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Notes, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agent and counsel, and any other amounts due the Trustee under Section 7.07.
The Company's payment obligations under this Section 6.09 shall be secured in
accordance with the provisions of Section 7.07 hereunder. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Sections 6.09 and 7.07;
Second: subject to Articles Ten and Eleven, to Holders for amounts
due and unpaid on the Notes for interest and premium, ratably, without
preference or priority of
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any kind, according to the amounts due and payable on the Notes for
interest and premium, respectively;
Third: subject to Articles Ten and Eleven, to Holders for amounts due
and unpaid on the Notes for principal, ratably without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal; and
Fourth: subject to Articles Ten and Eleven, to the Company, the
Guarantors, if any, or any other obligor on the Notes, as their interests
may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and the TIA and no others and no covenants or
obligations shall be implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificate or opinion which by any provision
hereof is specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
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(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, or both, which shall conform to Sections 12.04 and 12.05. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or
agent appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture,
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or other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it may
see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
(g) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(h) Except with respect to Section 4.01, the Trustee shall have no
duty to inquire as to the performance of the Company with respect to the
covenants contained in Article Four. In addition, the Trustee shall not be
deemed to have knowledge of an Event of Default except (i) any Default or
Event of Default occurring pursuant to Sections 4.01, 6.01(1) or 6.01(2) or
(ii) any Default or Event of Default of which the Trustee shall have
received written notification or obtained actual knowledge.
(i) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
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SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note, the
Trustee may withhold the notice if and so long as its Board of Directors, the
executive committee of its Board of Directors or a committee of its directors
and/or Trust Officers in good faith determines that withholding the notice is in
the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15, the Trustee shall, to the extent
that any of the events described in TIA Section 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Holder a brief report
dated as of such date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Sections 313(b) and (c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
The Company shall promptly notify the Trustee in writing if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it in connection with the performance of its duties under
this Indenture. Such expenses shall include
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the reasonable fees and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers, directors and shareholders for, and hold it harmless against, any
loss, liability or expense incurred by it except for such actions to the extent
caused by any negligence, bad faith or willful misconduct on its part, arising
out of or in connection with the administration of this trust including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. At the Trustee's sole discretion, the Company shall
defend the claim and the Trustee shall provide reasonable cooperation and may
participate at the Company's expense in the defense. Alternatively, the Trustee
may at its option have separate counsel of its own choosing and the Company
shall pay the reasonable fees and expenses of such counsel; PROVIDED that the
Company will not be required to pay such fees and expenses if it assumes the
Trustee's defense, there is no conflict of interest between the Company and the
Trustee in connection with such defense as reasonably determined by the Trustee
and no Default or Event of Default has occurred and is continuing. The Company
need not pay for any settlement made without its written consent, which consent
shall not be unreasonably withheld. The Company need not reimburse any expense
or indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The obligations of the Company under this Section 7.07 and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's Obligations pursuant to Article Eight or the
termination of this Indenture.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing, such
resignation to be effective upon the appointment of a successor Trustee. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee in writing and may
appoint a successor Trustee with the Company's consent which consent shall not
be unreasonably withheld. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation without any further act shall, if such resulting,
surviving or transferee corporation is otherwise eligible hereunder, be the
successor Trustee; PROVIDED that such corporation shall be otherwise qualified
and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in the
case of a corporation included in a bank holding company system, the related
bank holding company) shall have a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition.
In addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA Section 310(a)(2). The Trustee shall comply with
TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA
Section 310 shall apply to the Company and any other obligor of the Notes.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company and any
other obligor of the Notes.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all Notes
have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, U.S. Legal Tender in such amount as is
sufficient without consideration of reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding Notes to
maturity or redemption; PROVIDED that the Trustee shall have been
irrevocably instructed to apply such U.S. Legal Tender to the payment of
said principal, premium, if any, and interest with respect to the Notes
and, PROVIDED, FURTHER, that from and after the time of deposit, the money
deposited shall not be subject to the rights of holders of Senior Debt
pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under,
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any other instrument to which the Company is a party or by which it is
bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligations under
the Notes and this Indenture have been complied with. Such Opinion of
Counsel shall also state that such satisfaction and discharge does not
result in a default under the Credit Agreement (if then in effect) or any
other agreement or instrument then known to such counsel that binds or
affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive
until the Notes are no longer outstanding pursuant to the last paragraph of
Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Notes, the Guarantees and this Indenture except for those
surviving obligations specified above.
SECTION 8.02. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, elect to have either paragraph (b) or
(c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company and the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.03, be
deemed to have been discharged from its obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.04 hereof and the
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other Sections of this Indenture referred to in (i) and (ii) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), and Holders and any amounts deposited under
Section 8.03 hereof shall cease to be subject to any obligations to, or the
rights of, any holder of Senior Debt or Guarantor Senior Debt under Article Ten
or Eleven, as the case may be, or otherwise, except for the following
provisions, which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in Section 8.04 hereof, and as more fully set
forth in such Section, payments in respect of the principal of, premium, if any,
and interest on such Notes when such payments are due, (ii) the Company's
obligations with respect to such Notes under Article Two and Section 4.02
hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (iv) this
Article Eight. Subject to compliance with this Article Eight, the Company may
exercise its option under this paragraph (b) notwithstanding the prior exercise
of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from its obligations under the covenants contained in Sections 4.10 through 4.20
and Article Five hereof with respect to the outstanding Notes on and after the
date the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders and any amounts deposited under Section 8.03 hereof shall
cease to be subject to any obligations to, or the rights of, any holder of
Senior Debt or Guarantor Senior Debt under Article Ten or Article Eleven or
otherwise. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under Section
6.01(3) hereof, but, except as specified above, the remainder of this Indenture
and such Notes
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shall be unaffected thereby. In addition, upon the Company's exercise under
paragraph (a) hereof of the option applicable to this paragraph (c), subject to
the satisfaction of the conditions set forth in Section 8.03 hereof, those
events described in Section 6.01 (except those events described in Section
6.01(1), (2), (6) and (7)) shall not constitute Events of Default.
SECTION 8.03. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the out standing Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be, of such principal or installment of
principal of or interest on the Notes; PROVIDED that the Trustee shall have
received an irrevocable written order from the Company instructing the
Trustee to apply such U.S. Legal Tender or the proceeds of such U.S.
Government Obligations to said payments with respect to the Notes;
(b) in the case of an election under Section 8.02(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
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(c) in the case of an election under Section 8.02(c) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Notes pursuant to this
Article Eight concurrently with such incurrence) or insofar as Sections
6.01(5) and 6.01(6) hereof are concerned, at any time in the period ending
on the 91st day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent (other than, in the case of such legal opinion, paragraph (f) as
to which such counsel need express no opinion) provided for or relating to
the Legal Defeasance or the Covenant Defeasance have been complied with;
and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust funds will not be subject to any
rights of any holders of Senior Debt including, without limitation, those
arising under the Indenture, and (ii) assuming no intervening bankruptcy or
insolvency of the Company between the date of deposit and the 91st day
following the deposit and that no Holder is an insider of the Company,
after the 91st day
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following the deposit, the trust funds will not be subject to the effect of
any applicable Bankruptcy Law.
SECTION 8.04. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary not withstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U. S. Government Obligations held by it as
provided in Section 8.03 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.05. REPAYMENT TO THE COMPANY OR THE GUARANTORS.
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company, or if deposited with the Trustee by any Guarantor,
to such Guarantor, upon request any excess U.S. Legal Tender or U.S. Government
Obligations held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall
pay to the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon request any money held by them for the payment of principal or
interest that remains unclaimed for two years; PROVIDED that the Trustee or such
Paying Agent, before being required to make any payment, may at the expense of
the Company cause to be published once in a newspaper of general circulation in
the City of New
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York or mail to each Holder entitled to such money notice that such money
remains unclaimed and that after a date specified therein which shall be at
least 30 days from the date of such publication or mailing any unclaimed balance
of such money then remaining will be repaid to the Company or a Guarantor.
After payment to the Company or a Guarantor, as the case may be, Noteholders
entitled to such money must look to the Company for payment as general creditors
unless an applicable law designates another Person.
SECTION 8.06. SATISFACTION AND DISCHARGE.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange of
the Notes, as expressly provided for in this Indenture) as to all outstanding
Notes when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under this Indenture by the Company;
and (iii) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel stating that all conditions precedent under this Indenture
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and each Guarantor's obligations under this Indenture
and the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Ob-
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ligations in accordance with Article Eight; PROVIDED that if the Company or any
Guarantor, as the case may be, has made any payment of interest on or principal
of any Notes because of the reinstatement of its obligations, the Company or any
Guarantor, as the case may be, shall be subrogated to the rights of the Holders
of such Notes to receive such payment from the U.S. Legal Tender or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Guarantors, when authorized by a Board Resolution,
and the Trustee, together, may amend or supplement this Indenture, the Notes or
any Guarantee without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; PROVIDED that
such amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights of any Holder in any material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder; or
(6) to provide for issuance of the Exchange Notes which will have
terms substantially identical in all material respects to the Initial Notes
(except that the transfer restrictions contained in the Initial Notes will
be modified or eliminated, as appropriate), and which will treated together
with any outstanding Initial Notes, as a single issue of securities;
PROVIDED that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate stating that such
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amendment or supplement complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Notes, may amend or supplement this Indenture, the Notes or any Guarantee
without notice to any other Holders. Subject to Section 6.07, the Holder or
Holders of a majority in aggregate principal amount of the outstanding Notes may
waive compliance by the Company with any provision of this Indenture or the
Notes without notice to any other Holder. No amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, shall, without the consent of each
Holder of each Note affected thereby:
(1) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver of any provision of this Indenture,
the Notes or any Guarantee;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(3) reduce the principal amount of any Note;
(4) change or have the effect of changing the fixed maturity of the
Notes, or change the date on which any Notes may be subject to redemption
or repurchase, or reduce the redemption or repurchase price therefor;
(5) make the principal of, or the interest on any Note payable with
anything or in any manner other than as provided for in this Indenture and
the Notes as in effect on the date hereof; or
(6) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce such
payment, or permitting Holders of a majority in principal amount of Notes
to waive Defaults or Events of Default;
(7) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer after the
occurrence of an event
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which constitutes a Change of Control or make and consummate a Net Proceeds
Offer with respect to any Asset Sale that has been consummated or modify
any of the provisions or definitions with respect thereto;
(8) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Notes or any
Guarantee in a manner which adversely affects the Holders; or
(9) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms of
this Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
written notice to the Trustee or the Company received before the date on which
the Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver (at which time such
amendment, supplement or waiver shall become effective).
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The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (9) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; PROVIDED that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal of and interest
on a Note, on or after the respective due dates expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such
notation or exchange shall be made at the sole cost and expense of the Company.
Failure to make the appropriate notation or issue a new Note shall not affect
the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to and adopted in accordance with this Article Nine;
PROVIDED that the Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture. The Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to
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it and to receive, and shall be fully protected in relying upon, an Opinion of
Counsel and an Officers' Certificate each stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture. Such Opinion of Counsel shall not be
an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. NOTES SUBORDINATED TO SENIOR DEBT OF THE COMPANY.
The Company covenants and agrees and the Trustee and each Holder, by
its acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Ten; and the Trustee and each
person holding any Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment of all
Obligations on the Notes by the Company shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment to the prior
payment in full in cash or Cash Equivalents of all Obligations on the Senior
Debt; that the subordination is for the benefit of, and shall be enforceable
directly by, the holders of Senior Debt, and that each holder of Senior Debt
whether now outstanding or hereinafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Senior Debt in reliance upon the covenants and
provisions contained in this Indenture and the Notes.
SECTION 10.02. NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt (a
"PAYMENT DEFAULT"), no payment of any kind or character shall be made by or on
behalf of the Company or any other Person on its behalf with respect to any
Obligations on the Notes or to acquire any of the Notes for cash or property or
otherwise unless and until such default has been cured, waived or has ceased to
exist or such Senior Debt shall have been discharged or paid in full in cash, or
in any other manner acceptable to the holders of such Senior Debt. In addition,
if any event of default other than a Payment Default (a "NON-PAYMENT DEFAULT")
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occurs and is continuing with respect to any Designated Senior Debt, as such
event of default is defined in the instrument creating or evidencing such
Designated Senior Debt, permitting the holders of such Designated Senior Debt
then outstanding to accelerate the maturity thereof and if the Representative
for the respective issue of Designated Senior Debt gives written notice of the
Non-payment Default to the Trustee (a "DEFAULT NOTICE"), then, unless and until
all Non-payment Defaults have been cured or waived or have ceased to exist or
the Trustee receives notice from the Representative for the respective issue of
Designated Senior Debt terminating the Blockage Period (as defined below),
during the 180 days after the delivery of such Default Notice (the "BLOCKAGE
PERIOD"), neither the Company nor any other Person on its behalf shall (x) make
any payment of any kind or character with respect to any Obligations on the
Notes or (y) acquire any of the Notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 180 days from the date the payment on the Notes was due and
only one such Blockage Period may be commenced within any 360 consecutive days.
In the event the Representative of holders of both Designated Guarantor Senior
Debt and Designated Senior Debt has given a Guarantor Default Notice to the
Company pursuant to the terms of Section 11.10 hereof, such Representative will
be deemed to have concurrently given a Default Notice hereunder. No Non-payment
Default which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Designated Senior Debt shall be, or be made,
the basis for commencement of a second Blockage Period by the Representative of
such Designated Senior Debt whether or not within a period of 360 consecutive
days, unless such Non-payment Default shall have been cured or waived for a
period of not less than 90 consecutive days (it being acknowledged that any
subsequent action or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period, that in
either case, would give rise to a Non-payment Default pursuant to any provisions
under which a Non-payment Default previously existed or was continuing shall
constitute a new Non-payment Default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Debt (PRO RATA to such
holders on the basis of the respective amount of Senior Debt held by such
holders) or their respective Representatives, as their respective interests may
appear. The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Senior Debt, if any, received from the holders of
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Senior Debt (or their Representatives) or, if such information is not received
from such holders or their Representatives, from the Company and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder;
PROVIDED that all Senior Debt thereafter due or declared to be due shall first
be paid in full in cash or Cash Equivalents before the Holders are entitled to
receive any payment of any kind or character with respect to the Obligations on
the Notes.
SECTION 10.03. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company, or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due or to become due upon all Senior Debt shall first be paid in full, in cash
or Cash Equivalents, or such payment duly provided for to the satisfaction of
the holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise; and until all
such Obligations with respect to all Senior Debt are paid in full in cash or
Cash Equivalents, any distribution to which the Holders would be entitled, but
for the subordination provisions, will be made to the holders of Senior Debt as
their interests may appear (except that Holders may receive securities of the
Company that are unsecured and subordinated at least to the same extent as the
Notes to Senior Debt as provided in the Indenture, do not have a maturity any
shorter than the security which it is replacing and will not cause the Notes to
be treated in any case or proceeding as part of the same class of claims as the
Senior Debt or any class of claims PARI PASSU with, or senior to, the Senior
Debt for payment or distribution). Upon any such dissolution, winding-up,
liquidation, reorganization, bankruptcy, insolvency, receivership or similar
proceeding or assignment for the benefit of creditors or marshaling of assets,
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee
under this In-
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denture would be entitled, except for the provisions hereof, shall be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders or
by the Trustee under this Indenture if received by them, directly to the holders
of Senior Debt (PRO RATA to such holders on the basis of the respective amounts
of Senior Debt held by such holders) or their respective Representatives, or to
the trustee or trustees under any indenture pursuant to which any of such Senior
Debt may have been issued, as their respective interests may appear, for
application to the payment of Senior Debt remaining unpaid until all such Senior
Debt has been paid in full in cash or Cash Equivalents after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders
of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on behalf
of the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 10.03(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt (PRO RATA to such holders on the basis of the
respective amount of Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of Senior Debt remaining
unpaid until all such Senior Debt has been paid in full in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to
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another corporation upon the terms and conditions provided in Article Five
hereof and as long as permitted under the terms of the Senior Debt shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article Five hereof.
SECTION 10.04. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.02 and 10.03, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with the
Trustee any moneys for such payments, or (ii) in the absence of actual knowledge
of the Trustee that a given payment would be prohibited by Section 10.02 or
10.03, the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of and interest on the Notes to the
Holders entitled thereto unless at least two Business Days prior to the date
upon which such payment would otherwise become due and payable, the Trustee
shall have received the written notice provided for in Section 10.02(a) or in
Section 10.07 (PROVIDED that, notwithstanding the foregoing, such application
shall otherwise be subject to the provisions of the first sentence of Section
10.02(a) and Section 10.03). The Company shall give prompt written notice to
the Trustee of any dissolution, winding-up, liquidation or reorganization of the
Company.
SECTION 10.05. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of cash, property or securities
of the Company applicable to the Senior Debt until the Notes shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Senior Debt by or on behalf of the Company
or by or on behalf of the Holders by virtue of this Article Ten which otherwise
would have been made to the Holders shall, as between the Company and the
Holders, be deemed to be a payment by the Company to or on account of the Senior
Debt, it being understood that the provisions of this Article Ten are and are
intended solely for the purpose of defining the relative rights of the Holders,
on the one hand, and the holders of the Senior Debt, on the other hand.
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If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of
amounts payable under the Senior Debt, then the Holders shall be entitled to
receive from the holders of such Senior Debt any payments or distributions
received by such holders of Senior Debt in excess of the amount sufficient to
pay all amounts payable under or in respect of the Senior Debt in full in cash
or Cash Equivalents.
SECTION 10.06. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Debt, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and any interest on the Notes as and when the same shall become due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Holders and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent the
Holder of any Note or the Trustee on its behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
SECTION 10.07. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume (in the absence of actual knowledge to
the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any
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payment or distribution pursuant to this Article Ten, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amounts of Senior Debt held by such person, the extent to which such
person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such person under this Article Ten and, if such
evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
SECTION 10.08. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or upon
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
the Holders, for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Debt and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.09. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of Holders
or the Company or any other person money or assets to which any holders of
Senior Debt shall be entitled by virtue of this Article Ten, except if
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such payment is made as a result of willful misconduct or gross negligence of
the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may be made and the notice given to
their Representatives, if any.
SECTION 10.10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE COMPANY OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders and without impairing or releasing the subordination
provided in this Article Ten or the obligations hereunder of the Holders to the
holders of the Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt,
or any instrument evidencing the same or any agreement under which Senior Debt
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the payment or collection of Senior Debt; and
(iv) exercise or refrain from exercising any rights against the Company and any
other Person.
SECTION 10.11. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF NOTES.
Each Holder by its acceptance of them authorizes and expressly directs
the Trustee on its behalf to take such action as may be necessary or appropriate
to effectuate, as between the holders of Senior Debt and the Holders, the
subordination provided in this Article Ten, and appoints the Trustee its
attorney-in-fact for such purposes, including, in the event of any dissolution,
winding-up, liquidation or reorganization of the Company (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for
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the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of the Company, and the filing of a claim for the unpaid
balance of its or his Notes and accrued interest in the form required in those
proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize
the Trustee or the holders of Senior Debt or their Representative to authorize
or consent to or accept or adopt on behalf of any Holders any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12. THIS ARTICLE TEN NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of a Default or an Event of Default under
Section 6.01.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to Article Six or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article Ten of
the holders, from time to time, of Senior Debt.
SECTION 10.13. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
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ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "GUARANTEE") to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, that: (i) the principal of and interest on the
Notes will be promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration or otherwise and interest on the
overdue principal, if any, and interest on any interest, to the extent lawful,
of the Notes and all other obligations of the Company to the Holders or the
Trustee hereunder or thereunder will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Notes or of any such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at stated maturity, by acceleration or otherwise, subject,
however, in the case of clauses (i) and (ii) above, to the limitations set forth
in Section 11.05. Each Guarantor hereby agrees that its Obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that this Guarantee will not be discharged
except by complete performance of the obligations contained in the Notes, this
Indenture and in this Guarantee. If any Noteholder or the Trustee is required
by any court or otherwise to return to the Company, any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or any Guarantor, any amount paid by the Company or any Guarantor to
the Trustee or such Noteholder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect as to such amount only.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the matur-
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ity of the Obligations guaranteed hereby may be accelerated as provided in
Article Six for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any acceleration of such
Obligations as provided in Article Six, such Obligations (whether or not due and
payable) shall forthwith become due and payable by each Guarantor for the
purpose of this Guarantee.
SECTION 11.02. SUBORDINATION OF GUARANTEE.
Each Guarantor agrees, and each Holder by accepting a Guarantee
agrees, that all Obligations owed under and in respect of such Guarantees are
subordinated in right of payment, to the extent and in the manner provided in
this Article Eleven, to the prior indefeasible payment in full in cash or Cash
Equivalents, of all Guarantor Senior Debt of such Guarantor, and that the
subordination of the Guarantees pursuant to this Article Eleven is for the
benefit of all holders of all Guarantor Senior Debt of such Guarantor, whether
outstanding on the Issue Date or issued thereafter.
SECTION 11.03. SEVERABILITY.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. RELEASE OF A GUARANTOR.
(a) If no Default exists or would exist under this Indenture, upon
the sale or disposition of all of the Capital Stock, or all or substantially all
of the assets, of a Guarantor by the Company or one or more Restricted
Subsidiaries of the Company and the Guarantor is released from all of its
obligations under the Credit Agreement, or upon the consolidation or merger of a
Guarantor with or into any Person in compliance with Article Five (in each case,
other than to the Company or a Wholly-Owned Restricted Subsidiary), or if any
Guarantor is dissolved or liquidated in accordance with this Indenture, or if a
Guarantor is designated an Unrestricted Subsidiary, such Guarantor and each
Subsidiary of such Guarantor that is also a Guarantor shall be automatically and
unconditionally released from all obligations under this Article Eleven without
any further action required on the part of the Trustee or any Holder; PROVIDED,
HOWEVER, that each such Guarantor is sold or disposed of in accordance with this
Indenture; AND PROVIDED, FURTHER, that if such sale or disposition constitutes
as Asset Sale, the
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Net Cash Proceeds thereof are applied in accordance with Section 4.16. Any
Guarantor not so released or the entity surviving such Guarantor, as applicable,
shall remain or be liable under its Guarantee as provided in this Article
Eleven.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a request by the Company or such
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 11.04, PROVIDED the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers' Certificates.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Notes and under this Article
Eleven.
SECTION 11.05. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, each Guarantor and each Holder
irrevocably agrees that the obligations of each Guarantor under its Guarantee
will not exceed the maximum that such Guarantor could incur without such
obligations constituting an avoidable fraudulent transfer or conveyance under
such laws, taking into account (if necessary), among other things, all other
debts of such Guarantor (including, without limitation, any contingent or
unliquidated debts and such Guarantor's Guarantor Senior Debt) at the time that
such Guarantor entered into its Guarantee or became obligated to make any
payment thereunder, as appropriate.
SECTION 11.06. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN
TERMS.
(a) Except as set forth in Section 5.01(c), nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company or another Guarantor that is a Wholly-Owned
Restricted Subsidiary of the Company or shall prevent any sale or conveyance of
the assets of a Guarantor to the Company or another Guarantor that is a
Wholly-Owned Restricted Subsidiary of the Company. Upon any such consolidation,
merger, sale or con-
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veyance, the Guarantee given by such Guarantor shall no longer have any force
or effect.
(b) Except as set forth in Article Four and Article Five hereof,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into a corporation or
corporations other than the Company or another Guarantor (whether or not
affiliated with the Guarantor), or successive consolidations or mergers in
which a Guarantor or its successor or successors shall be a party or parties,
or shall prevent any sale or conveyance of all or substantially all of the
assets of a Guarantor to a corporation other than the Company or another
Guarantor (whether or not affiliated with the Guarantor); provided, however,
that subject to Sections 11.04 and 11.06(a), the transaction is an Asset Sale
consummated in accordance with Section 4.16, or complies with Section
5.01(c) hereof.
SECTION 11.07. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under this
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets of each
Guarantor, determined in accordance with GAAP (including the Funding Guarantor)
for all payments, damages and expenses incurred by that Funding Guarantor in
discharging the Company's obligations with respect to the Notes or any other
Guarantor's Obligations with respect to this Guarantee.
SECTION 11.08. WAIVER OF SUBROGATION.
Until all Obligations are paid in full, each Guarantor hereby
irrevocably waives any claim or other rights which it may now or hereafter
acquire against the Company that arise from the existence, payment, performance
or enforcement of such Guarantor's Obligations under this Guarantee and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder against the Company, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from the Company,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to any Guarantor in violation of the preceding sentence and
the
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Notes shall not have been paid in full, such amount shall have been deemed to
have been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Holders, and shall, subject to the provisions of Section 11.02
and Article Ten, forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Notes, whether matured or unmatured,
in accordance with the terms of this Indenture. Each Guarantor acknowledges
that it will receive direct and indirect benefits from the financing
arrangements contemplated by this Indenture and that the waiver set forth in
this Section 11.08 is knowingly made in contemplation of such benefits.
SECTION 11.09. EXECUTION OF GUARANTEE.
To evidence their guarantee to the Noteholders specified in Section
11.01, the Guarantors hereby agree to execute the Guarantee in substantially the
form of Exhibit A, which shall be endorsed on each Note ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees that
its Guarantee set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
two Officers, or an Officer and an Assistant Secretary or one Officer shall sign
and one Officer or an Assistant Secretary (each of whom shall, in each case,
have been duly authorized by all requisite corporate actions) shall attest to
such Guarantee prior to the authentication of the Note on which it is endorsed,
and the delivery of such Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of such Guarantee on behalf of such
Guarantor. Such signatures upon the Guarantee may be by manual or facsimile
signature of such officers and may be imprinted or otherwise reproduced on the
Guarantee, and in case any such officer who shall have signed the Guarantee
shall cease to be such officer before the Note on which such Guarantee is
endorsed shall have been authenticated and delivered by the Trustee or disposed
of by the Company, such Note nevertheless may be authenticated and delivered or
disposed of as though the person who signed the Guarantee had not ceased to be
such officer of the Guarantor.
SECTION 11.10. NO PAYMENT ON GUARANTEES IN CERTAIN CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Guarantor Senior
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Debt or Senior Debt (a "GUARANTOR PAYMENT DEFAULT"), no payment of any kind or
character shall be made by or on behalf of such Guarantor or any other Person on
its behalf with respect to any Obligations on the Notes or any of the
obligations of such Guarantor on its Guarantee or to acquire any of the Notes
for cash or property or otherwise unless and until such default has been cured,
waived or has ceased to exist or such Senior Debt shall have been discharged or
paid in full in cash, or in any other manner acceptable to the holders of such
Senior Debt. In addition, if any other event of default other than a Guarantor
Payment Default (a "GUARANTOR NON-PAYMENT DEFAULT") occurs and is continuing
with respect to any Designated Guarantor Senior Debt of such Guarantor, as such
event of default is defined in the instrument creating or evidencing such
Designated Guarantor Senior Debt, permitting the holders of such Designated
Guarantor Senior Debt then outstanding to accelerate the maturity thereof and if
the Representative for the respective issue of Designated Guarantor Senior Debt
gives written notice of the Guarantor Non-payment Default to the Trustee (a
"GUARANTOR DEFAULT NOTICE"), then, unless and until all Guarantor Non-payment
Defaults have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Guarantor Senior Debt terminating the Guarantor Blockage Period (as defined
below), during the 180 days after the delivery of such Guarantor Default Notice
(the "GUARANTOR BLOCKAGE PERIOD"), neither such Guarantor nor any other Person
on its behalf shall (x) make any payment of any kind or character with respect
to any Obligations on the Notes or under its Guarantee or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Guarantor Blockage Period extend beyond 180 days
from the date the payment on the Notes was due and only one such Guarantor
Blockage Period may be commenced within any 360 consecutive days. In the event
that the Representative of holders of both Designated Guarantor Senior Debt and
Designated Senior Debt has given a Default Notice to the Company pursuant to the
terms of Section 10.12 hereof, such Representative will be deemed to have
concurrently given a Guarantor Default Notice hereunder. No Guarantor
Non-payment Default which existed or was continuing on the date of the
commencement of any Guarantor Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for commencement of a second
Guarantor Blockage Period by the Representative of such Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such Guarantor
Non-payment Default shall have been cured or waived for a period of not less
than 90 consecutive days (it being acknowledged that any subsequent action or
any breach of any financial covenants for a period commencing after the date of
commencement of such Guarantor Blockage Period that, in either case, would give
rise to a Guarantor Non-payment Default pursuant to
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any provisions under which a Guarantor Non-payment Default previously existed or
was continuing shall constitute a new Guarantor Non-payment Default for this
purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 11.10(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Guarantor Senior Debt (PRO
RATA to such holders on the basis of the respective amount of Guarantor Senior
Debt held by such holders) or their respective Representatives, as their
respective interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Guarantor Senior Debt,
if any, received from the holders of Guarantor Senior Debt (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from such Guarantor and only amounts included in the
information provided to the Trustee shall be paid to the holders of Guarantor
Senior Debt.
Nothing contained in this Article Eleven shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder;
PROVIDED that all Guarantor Senior Debt thereafter due or declared to be due
shall first be paid in full in cash or Cash Equivalents before the Holders are
entitled to receive any payment of any kind or character with respect to the
Obligations on the Notes or on account of any Guarantor's Guarantee.
SECTION 11.11. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolution, winding-up, reorganization, assignment for
the benefit of creditors or marshaling of assets of such Guarantor, or in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to any Guarantor or its property, whether voluntary or involuntary, all
Obligations due or to become due upon all Guarantor Senior Debt shall first be
paid in full, in cash or Cash Equivalents, or such payment duly provided for to
the satisfaction of the holders of Guarantor Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes or any of the Obligations of such Guarantor on its Guarantee, or for
the acquisition of any of the Notes for cash or property or otherwise; and until
all such Obligations with respect to all Guarantor Senior Debt are paid in full
in cash or Cash Equiva-
<PAGE>
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lents, any distribution to which the Holders would be entitled but for the
subordination provisions will be made to the holders of Guarantor Senior Debt as
their interests may appear (except that Holders shall receive Securities of the
Guarantor that are unsecured and subordinated at least to the same extent as the
Notes to Guarantor Senior Debt as provided in this Indenture, do not have a
maturity any shorter than the security which it is replacing and will not cause
the Notes to be treated in any case or proceeding as part of the same class of
claims as the Guarantor Senior Debt or any class of claims PARI PASSU with, or
senior to, the Guarantor Senior Debt for any payment or distribution). Upon any
such dissolution, winding-up, liquidation, reorganization, bankruptcy,
insolvency, receivership or similar proceeding or assignment for the benefit of
creditors or marshaling of assets, any payment or distribution of assets of any
Guarantor of any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee under this Indenture would be entitled, except
for the provisions hereof, shall be paid by such Guarantor or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the Holders or by the Trustee under this
Indenture if received by them, directly to the holders of Guarantor Senior Debt
of such Guarantor (PRO RATA to such holders on the basis of the respective
amounts of Guarantor Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Guarantor Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Guarantor
Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid
in full in cash or Cash Equivalents after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of Guarantor
Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt (whether by or
on behalf of such Guarantor, as proceeds of security or enforcement of any right
of setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar person, the Guarantor Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
<PAGE>
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(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of a Guarantor of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 11.11(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Guarantor Senior Debt (PRO RATA to such holders on the basis
of the respective amount of Guarantor Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Guarantor Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of
Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has
been paid in full in cash or Cash Equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Guarantor Senior Debt.
(d) The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of all or substantially all
of its assets, to another corporation upon the terms and conditions provided in
Section 11.06 hereof and as long as permitted under the terms of the Guarantor
Senior Debt of such Guarantor shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section if such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer assume such Guarantor's obligations hereunder in accordance with
Section 11.06 hereof.
SECTION 11.12. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
Nothing contained in this Article Eleven or elsewhere in this
Indenture shall prevent (i) any Guarantor, except under the conditions described
in Sections 11.10 and 11.11, from making payments at any time for the purpose of
making payments of principal of and interest on the Notes in respect of its
Guarantee, or from depositing with the Trustee any moneys for such payments, or
(ii) in the absence of actual knowledge by the Trustee that a given payment
would be prohibited by Section 11.10 or 11.11, the application by the Trustee of
any moneys deposited with it for the purpose of making such payments of
principal of and interest on the Notes to the Holders entitled thereto unless at
least two Business Days prior to the date upon which such payment would
otherwise become due and payable, the Trustee shall have received the written
notice provided for in Section 11.10(a) or in Section 11.15 (PROVIDED that,
notwithstanding the foregoing, such application shall otherwise be
<PAGE>
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subject to the provisions of the first sentence of Section 11.10(a) and Section
11.11). Each Guarantor shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of any Guarantor.
SECTION 11.13. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt, the holder of the Guarantee of such Guarantor shall be
subrogated to the rights of the holders of Guarantor Senior Debt to receive
payments or distributions of cash, property or securities of such Guarantor
applicable to the Guarantor Senior Debt of such Guarantor until the Notes shall
be paid in full, in the manner set forth below; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Guarantor
Senior Debt by or on behalf of such Guarantor or by or on behalf of the Holders
by virtue of this Article Eleven which otherwise would have been made to the
Holders shall, as between the Guarantors and the Holders, be deemed to be a
payment by such Guarantor to or on account of the Guarantor Senior Debt, it
being understood that the provisions of this Article Eleven are and are intended
solely for the purpose of defining the relative rights of the Holders, on the
one hand, and the holders of the Guarantor Senior Debt, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, to the payment of
amounts payable under the Guarantor Senior Debt, then the Holders shall be
entitled to receive from the holders of such Guarantor Senior Debt any payments
or distributions received by such holders of Guarantor Senior Debt in excess of
the amount sufficient to pay all amounts payable under or in respect of the
Guarantor Senior Debt in full in cash or Cash Equivalents.
SECTION 11.14. OBLIGATIONS OF EACH GUARANTOR UNCONDITIONAL.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in the Notes or the Guarantees is intended to or shall impair, as
among any Guarantor, its creditors other than the holders of Guarantor Senior
Debt, and the Holders, the obligation of such Guarantor, which is absolute and
unconditional, to pay to the Holders the principal of and any interest on the
Notes as and when the same shall become due and payable in accordance with the
terms of the Guarantees, or is intended to or shall affect the relative rights
of the Holders and creditors of any Guarantor other than the holders of
Guarantor
<PAGE>
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Senior Debt, nor shall anything herein or therein prevent the Holder of any Note
or the Trustee on its behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
in respect of cash, property or securities of any Guarantor received upon the
exercise of any such remedy.
SECTION 11.15. NOTICE TO TRUSTEE.
The Company or any Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or any such Guarantor which would
prohibit the making of any payment to or by the Trustee in respect of the
Guarantees pursuant to the provisions of this Article Eleven. Regardless of
anything to the contrary contained in this Article Eleven or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Guarantor Senior Debt or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing from
the Company or a Guarantor, or from a holder of Guarantor Senior Debt or a
Representative therefor, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume (in the absence of actual knowledge to
the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Eleven, the Trustee may request such person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amounts of Guarantor Senior
Debt held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such person under this Article Eleven, and if such evidence is not
furnished the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
SECTION 11.16. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of any Guarantor referred
to in this Article Eleven, the Trustee, subject to the provisions of Article
Seven hereof, and the Holders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or upon
certificate of the receiver, trustee in bank-
<PAGE>
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ruptcy, liquidating trustee, agent or other person making such payment or
distribution, delivered to the Trustee or the Holders, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Guarantor Senior Debt and other Indebtedness of such Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Eleven.
SECTION 11.17. TRUSTEE'S RELATION TO GUARANTOR SENIOR DEBT.
The Trustee and any agent of any Guarantor or the Trustee shall be
entitled to all the rights set forth in this Article Eleven with respect to any
Guarantor Senior Debt which may at any time be held by it in its individual or
any other capacity to the same extent as any other holder of Guarantor Senior
Debt and nothing in this Indenture shall deprive the Trustee or any such agent
of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Guarantor Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Guarantor Senior Debt and shall not
be liable to any such holders if the Trustee shall pay over or distribute to or
on behalf of Holders or any such Guarantor or any other person money or assets
to which any holders of Guarantor Senior Debt shall be entitled by virtue of
this Article Eleven, except if such payment is made as a result of willful
misconduct or gross negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Debt, the distribution may be made and the notice
given to their Representatives, if any.
SECTION 11.18. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR
OMISSIONS OF A GUARANTOR OR HOLDERS OF GUARANTOR
SENIOR DEBT.
No right of any present or future holders of any Guarantor Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder,
<PAGE>
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or by any noncompliance by such Guarantor with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Guarantor Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders and without impairing or releasing
the subordination provided in this Article Eleven or the obligations hereunder
of the Holders to the holders of the Guarantor Senior Debt, do any one or more
of the following: (i) change the manner, place or terms of payment or extend
the time of payment of, or renew or alter, Guarantor Senior Debt, or otherwise
amend or supplement in any manner Guarantor Senior Debt, or any instrument
evidencing the same or any agreement under which Guarantor Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Guarantor Senior Debt; (iii) release
any person liable in any manner for the payment or collection of Guarantor
Senior Debt; and (iv) exercise or refrain from exercising any rights against
such Guarantor and any other person.
SECTION 11.19. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF GUARANTEES.
Each Holder of the Notes and the Guarantors, by its acceptance of them
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effectuate, as between the holders of
Guarantor Senior Debt and the Holders, the subordination provided in this
Article Eleven, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of such Guarantor, the filing of a claim for the unpaid
balance of its or his Notes and accrued interest in the form required in those
proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Guarantor Senior Debt
or their Representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Notes. Nothing
<PAGE>
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herein contained shall be deemed to authorize the Trustee or the holders of
Guarantor Senior Debt or their Representative to authorize or consent to or
accept or adopt on behalf of any Holders any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee or the holders of Guarantor Senior
Debt or their Representative to vote in respect of the claim of any Holder in
any such proceeding.
SECTION 11.20. THIS ARTICLE ELEVEN NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Eleven will not be
construed as preventing the occurrence of an Event of Default.
SECTION 11.21. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Eleven will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control. If any provision of this Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the latter provision should be deemed to apply to this Indenture as so
modified or excluded, as the case may be.
SECTION 12.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by private courier service guaranteeing next day delivery, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
<PAGE>
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if to the Company or the Guarantors, if any:
Outsourcing Services Group, Inc.
425 South Ninth Avenue
City of Industry, California 91746
Attention: Joseph W. Sortais
Telecopy: (626) 336-4605
if to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Division
Telecopy: (612) 244-0711
with a copy to:
100 Wall Street - Suite 2000
Corporate Trust Dept. - 20th Floor
New York, NY 10005
Attention: Corporate Trust Division
Telecopy: (212) 809-5459
Each of the Company, the Guarantors, if any, and the Trustee by
written notice to each other such Person may designate additional or different
addresses for notices to such Person. Any notice or communication to the
Company, the Guarantors, if any, or the Trustee shall be deemed to have been
given or made as of the date so delivered if personally delivered or delivered
by private courier service guaranteeing next day delivery; when answered back,
if telexed; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to such
Holder by first class mail or other equivalent means at such Holder's address as
it appears on the registration books of the Registrar and shall be sufficiently
given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
<PAGE>
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SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and any other Person
shall have the protection of TIA Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee upon
request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with;
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(3) where applicable, a certificate or opinion by an independent
certified public accountant reasonably satisfactory to the Trustee that
complies with TIA Section 314(c).
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is rea-
<PAGE>
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sonably necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.08. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE
NOTES.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
<PAGE>
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SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A past, present or future director, officer, employee, stockholder or
incorporator, as such, of the Company, the Guarantors, if any, or of the Trustee
shall not have any liability for any obligations of the Company or any Guarantor
under the Notes, the Guarantees or this Indenture. Each Holder by accepting a
Note waives and releases all such liability. Such waiver and release are part
of the consideration for the issuance of the Notes. This provision does not
affect any possible claims under federal securities laws.
SECTION 12.11. SUCCESSORS.
All agreements of the Company and the Guarantors, if any, in this
Indenture, the Notes and the Guarantees, if any, shall bind their successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 12.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in the
Notes or in the Guarantees, if any, shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 12.14. INDEPENDENCE OF COVENANTS.
All covenants and agreements in this Indenture and the Notes shall be
given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitation of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
<PAGE>
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joseph Sortais
---------------------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
AEROSOL SERVICES COMPANY, INC.
By: /s/ Joseph Sortais
----------------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
KOLMAR LABORATORIES, INC.
By: /s/ Joseph W. Sortais
---------------------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
PIEDMONT LABORATORIES, INC.
By: /s/ Joseph W. Sortais
---------------------------------
Name: Joseph W. Sortais
Title: Chief Financial
Officer
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/ Richard Prokosch
---------------------------------
Name: Richard Prokosch
Title: Assisant Vice President
<PAGE>
EXHIBIT A(1)
[FORM OF INITIAL NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501 (A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE),
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFER IS PURSUANT TO (2)(C), (D), (E) OR (G) ABOVE, THE HOLDER MAY BE
REQUIRED TO, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
CUSIP No.:
OUTSOURCING SERVICES GROUP, INC.
10 7/8% SENIOR SUBORDINATED NOTE DUE 2006
No. $
OUTSOURCING SERVICES GROUP, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal sum of
Dollars, on March 1, 2006.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
OUTSOURCING SERVICES GROUP, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Dated: March 3, 1998 Title:
Certificate of Authentication
This is one of the 10 7/8% Senior Subordinated Notes due 2006 referred
to in the within-mentioned Indenture.
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------
Authorized Signatory
A.1-2
<PAGE>
(REVERSE OF SECURITY)
10 7/8% Senior Subordinated Note due 2006
1. INTEREST. OUTSOURCING SERVICES GROUP, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on this Note will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from March 3, 1998. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing September 1, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, First Trust National
Association (the "Trustee") will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. INDENTURE. The Company issued the Notes under an Indenture, dated
as of March 3, 1998 (the "Indenture"), between the Company, the Trustee and the
Company's three wholly-owned subsidiaries, Kolmar Laboratories, Inc., Aerosol
Services Company, Inc. and Piedmont Laboratories, Inc. Capitalized terms herein
are used as defined in the Indenture unless otherwise defined herein. This Note
is one of a duly authorized issue of Initial Notes of the Company designated as
its 10 7/8% Senior Subordinated Notes due 2006 (the "Initial Notes"). The Notes
include the Initial Notes, the Private Exchange Notes and the Unrestricted Notes
issued in exchange for the Initial Notes
A.1-3
<PAGE>
pursuant to the Registration Rights Agreement. The Initial Notes and the
Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of
the Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of them. The Notes are general unsecured
obligations of the Company limited in aggregate principal amount to $130,000,000
outstanding at any one time. Under certain circumstances as provided for in
Article Eleven of the Indenture, the payment on each Note may be guaranteed on a
senior subordinated basis by the Guarantors. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the Indenture, as the
same may be amended from time to time.
5. SUBORDINATION. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees, if any, in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Guarantor, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder
by its acceptance hereof agrees to be bound by such provisions and authorizes
and expressly directs the Trustee, on its behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee its attorney-in-fact for such purposes.
6. REDEMPTION PROVISIONS. Except as provided below, the Notes may
not be redeemed prior to March 1, 2003.
(a) OPTIONAL REDEMPTION. On or after such date, the Notes may be
redeemed at the option of the Company, at any time as a whole, or from time
to time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount)
(the "Redemption Price"), plus accrued and unpaid interest (if any) to the
Redemption Date (subject to the rights of holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date),
if redeemed during the 12-month period commencing on March 1 of the year
set forth below:
A.1-4
<PAGE>
<TABLE>
<CAPTION>
REDEMPTION
PRICE
----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . 105.438%
2004 . . . . . . . . . . . . . . . . . . . . . . . 103.625%
2005 and thereafter. . . . . . . . . . . . . . . . 101.813%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to March 1,
2001, the Company may, at its option, redeem, in part and from time to
time, with the net proceeds of one or more Equity Offerings, up to 35%
aggregate principal amount of the Notes originally issued in the Offering
at a redemption price equal to 110.875% of the aggregate principal amount
thereof plus accrued and unpaid interest thereon, if any, to the Redemption
Date; PROVIDED that at least 65% of the aggregate principal amount of the
Notes originally issued in the Offering remains outstanding immediately
after the occurrence of any such redemption and that any such redemption
occurs within 120 days following the consummation of any such Equity
Offering.
7. NOTICE OF REDEMPTION. Notice of redemption shall be mailed by
first-class mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless (a) the Company defaults in
the payment of such Redemption Price plus accrued interest, if any, or (b) if
such redemption payment is prohibited by the Indenture, the Notes called for
redemption will cease to bear interest from and after such Redemption Date and
the only right of the Holders of such Notes will be to receive payment of the
Redemption Price plus accrued interest, if any.
8. OFFERS TO PURCHASE. Section 4.15 of the Indenture provides that,
upon a Change of Control, each Holder will have the right, subject to certain
conditions set forth in the Indenture, to require the Company to repurchase such
Holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued interest to the date of repurchase. Section 4.16 of the Indenture
provides that, after certain Asset Sales, and subject to further limitations
contained therein, the Company will make an offer to purchase certain amounts of
the Notes in accordance with the procedures set forth in the Indenture.
A.1-5
<PAGE>
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange of any Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions,
the Indenture, the Notes or the Guarantees, if any, may be amended or
supplemented with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and, subject to
certain exceptions, any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect the rights of any Holder of a Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional
A.1-6
<PAGE>
Indebtedness or Liens, make payments in respect of its Capital Stock or certain
Indebtedness, enter into transactions with Affiliates, create dividend or other
payment restrictions affecting Subsidiaries, incur additional Indebtedness that
is subordinate in right of payment to any Senior Debt and senior in right of
payment to the Notes, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation and sell Preferred Stock of a Restricted
Subsidiary. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Notes or the Indenture. Each Holder of a Note by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
A.1-7
<PAGE>
19. AUTHENTICATION. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. GOVERNING LAW. The laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws to
the extent that the application of the laws of another jurisdiction would be
required thereby.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. INDENTURE. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Outsourcing Services Group, Inc., 425
South Ninth Avenue, City of Industry, California 91746, Attn: Joseph Sortais or
via facsimile at (626) 336-4605.
A.1-8
<PAGE>
SENIOR SUBORDINATED GUARANTEE
Aerosol Services Company, Inc., Kolmar Laboratories, Inc. and Piedmont
Laboratories, Inc. (the "Guarantors") have unconditionally, jointly and
severally, guaranteed on a senior subordinated basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Notes, to the extent lawful, and
the due and punctual performance of all other obligations of the Company to the
Holders of Notes or the Trustee all in accordance with the terms set forth in
Article Eleven of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clause (i) and (ii), to the
limitations set forth in Section 11.05 in the Indenture.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth and are
expressly subordinated and subject in right of payment to the prior indefeasible
payment in full in cash or Cash Equivalents of all Guarantor Senior Debt of such
Guarantor, to the extent and in the manner provided, in Article Eleven of the
Indenture, and reference is hereby made to such Indenture for the precise terms
of the Guarantee therein made.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Guarantors shall have any liability for any
obligations of the Guarantors under the Guarantees by reason of such person's
status as stockholder, officer, director, employee or incorporator. Each holder
of a Note by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Guarantees.
A.1-9
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
AEROSOL SERVICES COMPANY, INC.
By:
----------------------------------
Name:
Title:
KOLMAR LABORATORIES, INC.
By:
----------------------------------
Name:
Title:
PIEDMONT LABORATORIES, INC.
By:
----------------------------------
Name:
Title:
Attest:
----------------------
A.1-10
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , ____________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Signed:
---------------------- ------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
------------------------------
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Securities
and Exchange Commission of the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act") covering resales
of this Note (which effectiveness shall not have been suspended or terminated at
the date of the transfer) and (ii) March 3, 2000, the undersigned confirms that
it has not utilized any general solicitation or general advertising in
connection with the transfer and that this Note is being transferred:
[Check One]
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities
Act; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
A.1-11
<PAGE>
(4) ___ outside the United states to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act; or
(5) ___ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) ___ pursuant to an effective registration statement under the
Securities Act; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall
not be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: Signed:
---------------------- ------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule
A.1-12
<PAGE>
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date: Signed:
----------------------- ------------------------------------
NOTICE: To be executed by
an executive officer
A.1-13
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$_______________
Dated:
--------------------- ----------------------------------------
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee:
----------------------------------
A.1-14
<PAGE>
[FORM OF EXCHANGE NOTE]
CUSIP No.:
OUTSOURCING SERVICES GROUP, INC.
10 7/8% SENIOR SUBORDINATED NOTE DUE 2006
No. $
OUTSOURCING SERVICES GROUP, INC., a Delaware corporation (the
"Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal sum of
Dollars, on March 1, 2006.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
OUTSOURCING SERVICES GROUP, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Dated: March 3, 1998 Title:
Certificate of Authentication
This is one of the 10 7/8% Senior Subordinated Notes due 2006 referred
to in the within-mentioned Indenture.
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
10 7/8% Senior Subordinated Note due 2006
1. INTEREST. OUTSOURCING SERVICES GROUP, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on this Note will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from March 3, 1998. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing September 1, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, First Trust National
Association (the "Trustee") will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. INDENTURE. The Company issued the Notes under an Indenture, dated
as of March 3, 1998 (the "Indenture"), between the Company, the Trustee and the
Company's three wholly-owned subsidiaries, Kolmar Laboratories, Inc., Aerosol
Services Company, Inc. and Piedmont Laboratories, Inc. Capitalized terms herein
are used as defined in the Indenture unless otherwise defined herein. This Note
is one of a duly authorized issue of Initial Notes of the Company designated as
its 10 7/8% Senior Subordinated Notes due 2006 (the "Initial Notes"). The Notes
include the Initial Notes, the Private Exchange Notes and the Unrestricted Notes
issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement. The Initial
A.2-2
<PAGE>
Notes and the Unrestricted Notes are treated as a single class of securities
under the Indenture. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Company limited in aggregate principal
amount to $130,000,000 outstanding at any one time. Under certain circumstances
as provided for in Article Eleven of the Indenture, the payment on each Note may
be guaranteed on a senior subordinated basis by the Guarantors. Each Holder, by
accepting a Note, agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
5. SUBORDINATION. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees, if any, in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Guarantor, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder
by its acceptance hereof agrees to be bound by such provisions and authorizes
and expressly directs the Trustee, on its behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee its attorney-in-fact for such purposes.
6. REDEMPTION PROVISIONS. Except as provided below, the Notes may
not be redeemed prior to March 1, 2003.
(a) OPTIONAL REDEMPTION. On or after such date, the Notes may be
redeemed at the option of the Company, at any time as a whole, or from time
to time in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount)
(the "Redemption Price"), plus accrued and unpaid interest (if any) to the
Redemption Date (subject to the rights of holders of record on the relevant
Record Date to receive interest due on the relevant Interest
A.2-3
<PAGE>
Payment Date), if redeemed during the 12-month period commencing on March 1
of the year set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PRICE
----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . 105.438%
2004 . . . . . . . . . . . . . . . . . . . . . . . 103.625%
2005 and thereafter. . . . . . . . . . . . . . . . 101.813%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to March 1,
2001, the Company may, at its option, redeem, in part and from time to
time, with the net proceeds of one or more Equity Offerings, up to 35%
aggregate principal amount of the Notes originally issued in the Offering
at a redemption price equal to 110.875% of the aggregate principal amount
thereof plus accrued and unpaid interest thereon, if any, to the Redemption
Date; PROVIDED that at least 65% of the aggregate principal amount of the
Notes originally issued in the Offering remains outstanding immediately
after the occurrence of any such redemption and that any such redemption
occurs within 120 days following the consummation of any such Equity
Offering.
7. NOTICE OF REDEMPTION. Notice of redemption shall be mailed by
first-class mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless (a) the Company defaults in
the payment of such Redemption Price plus accrued interest, if any, or (b) if
such redemption payment is prohibited by the Indenture, the Notes called for
redemption will cease to bear interest from and after such Redemption Date and
the only right of the Holders of such Notes will be to receive payment of the
Redemption Price plus accrued interest, if any.
8. OFFERS TO PURCHASE. Section 4.15 of the Indenture provides that,
upon a Change of Control, each Holder will have the right, subject to certain
conditions set forth in the Indenture, to require the Company to repurchase such
Holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued interest to the date of repurchase. Section 4.16 of the Indenture
provides that, after certain Asset Sales, and subject to further limitations
contained therein, the Company
A.2-4
<PAGE>
will make an offer to purchase certain amounts of the Notes in accordance with
the procedures set forth in the Indenture.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange of any Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions,
the Indenture, the Notes or the Guarantees, if any, may be amended or
supplemented with the written consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and, subject to
certain exceptions, any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect the rights of any Holder of a Note.
A.2-5
<PAGE>
14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness or Liens, make payments in respect of its
Capital Stock or certain Indebtedness, enter into transactions with Affiliates,
create dividend or other payment restrictions affecting Subsidiaries, incur
additional Indebtedness that is subordinate in right of payment to any Senior
Debt and Senior in right of payment to the Notes, merge or consolidate with any
other Person, sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its assets or adopt a plan of liquidation and sell
Preferred Stock of a Restricted Subsidiary. Such limitations are subject to a
number of important qualifications and exceptions. The Company must annually
report to the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Notes or the Indenture. Each Holder of a Note by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
A.2-6
<PAGE>
19. AUTHENTICATION. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. GOVERNING LAW. The laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws to
the extent that the application of the laws of another jurisdiction would be
required thereby.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. INDENTURE. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Outsourcing Services Group, Inc., 425
South Ninth Avenue, City of Industry, California 91746, Attn: Joseph Sortais or
via facsimile at (626) 336-4605.
A.2-7
<PAGE>
SENIOR SUBORDINATED GUARANTEE
Aerosol Services Company, Inc., Kolmar Laboratories, Inc. and Piedmont
Laboratories, Inc. (the "Guarantors") have unconditionally, jointly and
severally, guaranteed on a senior subordinated basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Notes, to the extent lawful, and
the due and punctual performance of all other obligations of the Company to the
Holders of Notes or the Trustee all in accordance with the terms set forth in
Article Eleven of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clause (i) and (ii), to the
limitations set forth in Section 11.05 in the Indenture.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth and are
expressly subordinated and subject in right of payment to the prior indefeasible
payment in full in cash or Cash Equivalents of all Guarantor Senior Debt of such
Guarantor, to the extent and in the manner provided, in Article Eleven of the
Indenture, and reference is hereby made to such Indenture for the precise terms
of the Guarantee therein made.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Guarantors shall have any liability for any
obligation of the Guarantors under the Guarantees by reason of such person's
status as stockholder, officer, director, employee or incorporator. Each holder
of a Note by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Guarantees.
A.2-8
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
AEROSOL SERVICES COMPANY, INC.
By:
------------------------------------
Name:
Title:
KOLMAR LABORATORIES, INC.
By:
------------------------------------
Name:
Title:
PIEDMONT LABORATORIES, INC.
By:
-------------------------------------
Name:
Title:
Attest:
--------------------
A.2-9
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , ____________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Signed:
----------------------- ------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
------------------------------
A.2-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
_______________
Dated:
------------------- ----------------------------------------
NOTICE: The signature on this assignment
must correspond with the name as it
appears upon the face of the within Note
in every particular without alteration
or enlargement or any change whatsoever
and be guaranteed by the endorser's bank
or broker.
Signature Guarantee:
-------------------------
A.2-11
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITORY") OR A NOMINEE OF
THE DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE
FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR
ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE
BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY, TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection With
Transfers to Non-QIB Accredited Investors
-----------------------------------------
___________, ____
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Re: OUTSOURCING SERVICES GROUP, INC.
(the "Company")
10 7/8% Senior Subordinated
Notes due 2006 (the "Notes")
--------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated February 26, 1998, relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages
(i)-(iii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as of
March 3, 1998 relating to the Notes (the "Indenture") and the undersigned agrees
to be bound by, and not to resell, pledge or otherwise transfer the Notes except
in compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
Persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes we will do so
only (i) to the Company
<PAGE>
or any subsidiary thereof, (ii) inside the United States in accordance with Rule
144A under the Securities Act to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act), (iii) inside the United States to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you a signed letter containing certain representatives and agreements relating
to the restrictions on transfer of the Notes, substantially in the form of this
letter, (iv) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (v) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(vi) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the Notes from
us a notice advising such purchaser that resales of the Notes are restricted as
stated herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974), except as permitted in the
section entitled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certification, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
C-2
<PAGE>
You, the Company and the Initial Purchaser (as defined in the Offering
Memorandum) are entitled to rely upon this letter and are irrevocably authorized
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
------------------------------------
Authorized Signature
C-3
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
______________, ____
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Re: OUTSOURCING SERVICES GROUP, INC.
(the "Company") 10 7/8% Senior
Subordinated Notes due 2006 (the "Notes")
-----------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
1. the offer of the Notes was not made to a person in the United
States;
2. either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
3. no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
5. we have advised the transferee of the transfer restrictions
applicable to the Notes.
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------------------
Authorized Signature
D-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of March 3, 1998
by and among
OUTSOURCING SERVICES GROUP, INC.,
THE GUARANTORS NAMED HEREIN,
BT ALEX. BROWN INCORPORATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10-7/8% SENIOR SUBORDINATED NOTES DUE 2006
<PAGE>
This Registration Rights Agreement is dated as of March 3, 1998, by
and among Outsourcing Services Group, Inc., a Delaware corporation (the
"COMPANY"), each of the subsidiaries of the Company listed on the signature
pages hereto as a Guarantor (collectively, the "GUARANTORS" and, together with
the Company, the "ISSUERS") and BT Alex. Brown Incorporated (the "INITIAL
PURCHASER").
This Agreement is made pursuant to the Purchase Agreement, dated
February 26, 1998, among the Company, the Guarantors and the Initial Purchaser
(the "PURCHASE AGREEMENT"). In order to induce the Initial Purchaser to enter
into the Purchase Agreement, the Issuers have agreed to provide the registration
rights provided for in this Agreement to the Initial Purchaser and their
respective direct and indirect transferees and assigns. The execution and
delivery of this Agreement is a condition to the closing of the transactions
contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
AFFILIATE: With respect to any specified person, "Affiliate" shall
mean a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the persons
specified. For the purposes of this definition, "control," when used with
respect to any person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities, by contract or otherwise and
the terms "affiliated," controlling" and "controlled" have meanings correlative
to the foregoing.
AGREEMENT: This Registration Rights Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
BUSINESS DAY: Any day except a Saturday, a Sunday or a day on which
banking institutions in New York, New York generally are required or authorized
by law or other government action to be closed.
COMPANY: As defined in the preamble hereof.
<PAGE>
-2-
CONSUMMATE OR CONSUMMATE: When used to qualify the term "Exchange
Offer", shall mean validly and lawfully to issue and deliver the Exchange Notes
pursuant to the Exchange Offer for all Notes validly tendered and not validly
withdrawn pursuant thereto in accordance with the terms of this Agreement.
CONSUMMATION DATE: The date that is 35 days immediately following the
date that the Exchange Registration Statement shall have been declared effective
by the SEC.
EFFECTIVENESS PERIOD: As defined in Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC pursuant thereto.
EXCHANGE DATE: As defined in Section 2(d) hereof.
EXCHANGE NOTES: The 10-7/8% Senior Subordinated Notes due 2006 of the
Company, guaranteed on a senior subordinated unsecured basis by each of the
Guarantors, that are identical to the Notes in all material respects, except
that the provisions regarding restrictions on transfer shall be modified, as
provided in the Indenture (or the indenture, if different from the Indenture
pursuant to which the Exchange Notes are issued), and the issuance thereof
pursuant to the Exchange Offer shall have been registered pursuant to an
effective Registration Statement in compliance with the Securities Act.
EXCHANGE OFFER: An offer to issue, in exchange for any and all of the
Notes, a like aggregate principal amount of Exchange Notes, which offer shall be
made by the Company pursuant to Section 2 hereof.
EXCHANGE REGISTRATION STATEMENT: As defined in Section 2(a) hereof.
FILING DATE: As defined in Section 2(a) hereof.
INDEMNIFIED PERSON: As defined in Section 7(a) hereof.
INDENTURE: The Indenture, dated as of February 26, 1998, among the
Issuers and First Trust National Association, as trustee thereunder, pursuant to
which the Notes are issued, as amended or supplemented from time to time in
accordance with the terms thereof.
<PAGE>
-3-
INITIAL PURCHASER: As defined in the preamble hereof.
ISSUE DATE: As defined in Section 2(a) hereof.
ISSUERS: As defined in the preamble hereof.
LIQUIDATED DAMAGES. As defined in Section 4(a) hereof.
NOTES: The 10-7/8% Senior Subordinated Notes due 2006 of the Company,
guaranteed on a senior subordinated unsecured basis by each of the Guarantors,
issued, from time to time, pursuant to the Indenture.
PARTICIPATING BROKER-DEALER: As defined in Section 2(b) hereof.
PRIVATE EXCHANGE: As defined in Section 2(c) hereof.
PRIVATE EXCHANGE NOTES: As defined in Section 2(c) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Notes, Exchange Notes or Private
Exchange Notes covered by such Registration Statement, and all other amendments
and supplements to any such prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference, if any, in such prospectus.
REGISTRATION DEFAULT: As defined in Section 4(b) hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
and/or the Guarantors that covers any of the Notes, Exchange Notes or Private
Exchange Notes pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference, if any, in such registration statement.
<PAGE>
-4-
RULE 144(k): Rule 144(k) promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 158: Rule 158 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 174: Rule 174 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 415: Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 424: Rule 424 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
SHELF BLACKOUT PERIOD: As defined in Section 3(a) hereof.
SHELF FILING EVENT: As defined in Section 3(a) hereof.
<PAGE>
-5-
SHELF REGISTRATION: As defined in Section 3(a) hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 3(a) hereof.
SPECIAL COUNSEL: Such special counsel to the holders of Transfer
Restricted Notes as shall be agreed upon by the Issuers and holders of a
majority in aggregate principal amount of Transfer Restricted Notes, the
reasonable expenses of which holders of Transfer Restricted Notes will be
reimbursed by the Issuers pursuant to Section 6 hereof.
GUARANTORS: As defined in the preamble hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRANSFER RESTRICTED NOTE: Each Note, each Exchange Note as to which
Section 3(a)(ii) hereof is applicable, and each Private Exchange Note, in each
case upon original issuance thereof and at all times subsequent thereto until
the earliest to occur of (i) the date on which any such Note has been exchanged
by a person other than a Participating Broker-Dealer for an Exchange Note (other
than with respect to an Exchange Note as to which Section 3(a)(ii) hereof
applies) pursuant to the Exchange Offer, (ii) with respect to Exchange Notes
received by Participating Broker-Dealers in the Exchange Offer, the earlier of
(x) the date on which such Exchange Note has been sold by such Participating
Broker-Dealer by means of the Prospectus contained in the Exchange Registration
Statement and (y) the date on which the Exchange Registration Statement has been
effective under the Securities Act for a period of six months after the
Consummation Date, (iii) a Shelf Registration Statement covering such Note,
Exchange Note or Private Exchange Note has been declared effective by the SEC
and such Note, Exchange Note or Private Exchange Note, as the case may be, has
been disposed of in accordance with such effective Shelf Registration Statement,
(iv) the date on which such Note, Exchange Note or Private Exchange Note, as the
case may be, is eligible for distribution to the public without volume or manner
of sale restrictions pursuant to Rule 144(k) or (v) the date on which such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture or any other indenture under which
such Exchange Note or Private Exchange Note was issued.
TRUSTEE: The trustee under the Indenture.
<PAGE>
-6-
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
connection with which securities are sold to an underwriter for reoffering to
the public pursuant to an effective Registration Statement.
2. EXCHANGE OFFER
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the SEC, the Issuers shall (A) prepare and, on or
prior to 120 days (the "FILING DATE") after the date of original issuance of the
Notes (the "ISSUE DATE"), file with the SEC a Registration Statement under the
Securities Act with respect to an offer by the Company to the holders of the
Notes to issue and deliver to such holders, in exchange for Notes, a like
principal amount of Exchange Notes, (B) use their best efforts to cause the
Registration Statement relating to the Exchange Offer to be declared effective
by the SEC under the Securities Act on or prior to 180 days after the Issue
Date, and (C) commence the Exchange Offer and use their best efforts to issue,
on or prior to the Consummation Date, the Exchange Notes. The offer and sale of
the Exchange Notes pursuant to the Exchange Offer shall be registered pursuant
to the Securities Act on an appropriate form (the "EXCHANGE REGISTRATION
STATEMENT") and duly registered or qualified under all applicable state
securities or Blue Sky laws and will comply with all applicable tender offer
rules and regulations under the Exchange Act and state securities or Blue Sky
laws; provided that the Issuers will not be required to qualify to do business
in any State or jurisdiction in which they are not presently qualified to do
business. The Exchange Offer shall not be subject to any condition, other than
that the Exchange Offer does not violate any applicable law or regulation or
interpretation of the staff of the SEC. Upon consummation of the Exchange Offer
in accordance with this Section 2, the Issuers shall have no further
registration obligations other than with respect to (i) Private Exchange Notes,
if required (ii) Exchange Notes held by Participating Broker-Dealers and
(iii) Notes or Exchange Notes as to which Section 3(a)(ii) hereof applies. No
securities shall be included in the Exchange Registration Statement other than
the Exchange Notes.
(b) The Issuers may require each holder of Notes, as a condition to
its participation in the Exchange Offer, to represent to the Issuers and their
counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the
<PAGE>
-7-
ordinary course of its business, (ii) such holder will have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and (iii) such holder is
not an Affiliate of an Issuer, or if it has such an arrangement or understanding
or is an Affiliate of an Issuer, it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable.
If the holder is not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution of
the Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Notes that were acquired as a result
of market-making activities or other trading activities (a "Participating
Broker-Dealer"), it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
(c) If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, or any other holder of Notes is not entitled to
participate in the Exchange Offer other than for failing to tender into the
Exchange Offer, the Issuers, upon the request of the Initial Purchaser or any
such holder, shall, simultaneously with the delivery of the Exchange Notes in
the Exchange Offer, issue and deliver to the Initial Purchaser and any such
holder, in exchange (the "PRIVATE EXCHANGE") for such Notes held by the Initial
Purchaser and any such holder, a like principal amount of debt securities of the
Company, guaranteed by each of the Guarantors on a senior subordinated basis,
that are identical in all material respects to the Exchange Notes other than
transfer restrictions (the "PRIVATE EXCHANGE NOTES") (and which are issued
pursuant to the same indenture as the Exchange Notes). The Private Exchange
Notes shall bear the same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation of the staff of the SEC, the Company shall mail
the Exchange Offer Prospectus and appropriate accompanying documents, including
appropriate letters of transmittal, to each holder of Notes providing, in
addition to such other disclosures as are required by applicable law:
<PAGE>
-8-
(i) that the Exchange Offer is being made pursuant to this Agreement
and that all Notes validly tendered will be accepted for exchange;
(ii) the date of acceptance for exchange (the "EXCHANGE DATE"), which
date shall in no event be later than the Consummation Date (unless
otherwise required by applicable law);
(iii) that a holder of a Note electing to have a Note exchanged
pursuant to the Exchange Offer will be required to surrender such Note,
together with the enclosed letters of transmittal, to the institution and
at the address (located in the Borough of Manhattan, The City of New York)
specified in the notice prior to the close of business on the Exchange
Date; and
(iv) that holders of Notes that do not tender all such securities
pursuant to the Exchange Offer may no longer have any registration rights
hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by the
Company, and issue, cause the Trustee under the Indenture (or the indenture
pursuant to which the Exchange Notes are issued) to authenticate, and mail
to each holder of Notes, Exchange Notes equal in principal amount to the
principal amount of the Notes surrendered by such holder.
(e) The Issuers and the Initial Purchaser acknowledge that the staff
of the SEC has taken the position that any Participating Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Securities Act and must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
The Issuers and the Initial Purchaser also acknowledge that it is the
SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement to
the above effect
<PAGE>
-9-
and the means by which Participating Broker-Dealers may resell the Exchange
Notes, without naming the Participating Broker-Dealers or specifying the amount
of Exchange Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligations
under the Securities Act in connection with resales of Exchange Notes for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement continuously effective for a period of up to six
months after the Consummation Date or such earlier date as each Participating
Broker-Dealer shall have notified the Company in writing that such Participating
Broker-Dealer has resold all Exchange Notes acquired in the Exchange Offer or
the Issuers' counsel renders an opinion to the effect that the delivery of a
prospectus is no longer required, (y) to comply with the provisions of Section 5
of this Agreement, as they relate to the Exchange Offer and the Exchange
Registration Statement, and (z) to deliver to such Participating Broker-Dealer a
"cold comfort" letter of the independent public accountants of the Issuers and a
legal opinion as to matters reasonably requested by such Participating
Broker-Dealer relating to the Exchange Registration Statement and the related
Prospectus and any amendments or supplements thereto.
(f) The Initial Purchaser shall have no liability to any
Participating Broker-Dealer with respect to any request made pursuant to
Section 2(e).
(g) Interest on each Exchange Note or Private Exchange Note will
accrue (A) from the later of (i) the last interest payment date on which
interest was paid on the Note surrendered in exchange therefor, or (ii) if the
Note is surrendered for exchange on a date in a period which includes the record
date for an interest payment date to occur on or after the date of such exchange
and as to which interest will be paid, the date of such interest payment date or
(B) if no interest has been paid on the Notes, from the Issue Date.
(h) The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or the indenture described in
<PAGE>
-10-
this Section 2(h)(ii) shall provide that the Exchange Notes, the Private
Exchange Notes and the Notes shall vote and consent together on all matters as
one class and that neither the Exchange Notes, the Private Exchange Notes nor
the Notes will have the right to vote or consent as a separate class on any
matter.
3. SHELF REGISTRATION
(a) If (i) the Issuers are not permitted to file the Exchange
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by any applicable law or applicable interpretation of the
staff of the SEC or (ii) any holder of a Note notifies the Company that (A) due
to a change in law or policy it is not entitled to participate in the Exchange
Offer, (B) due to a change in law or policy it may not resell Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Registration Statement
is not appropriate or available for such resales by such holder or (C) it owns
Notes (including any Initial Purchaser that holds Notes as part of an unsold
allotment from the original offering of the Notes) acquired directly from an
Issuer or an Affiliate of an Issuer or (iii) any holder of Private Exchange
Notes so requests after the consummation of the Private Exchange or (iv) the
Issuers have not consummated the Exchange Offer within 215 days after the Issue
Date (each such event referred to in clauses (i) through (iv), a "SHELF FILING
EVENT"), the Issuers shall (x) promptly deliver to the holders and the Trustee
notice thereof and (y) at their own expense cause to be filed with the SEC
pursuant to Rule 415 a shelf registration statement (the "SHELF REGISTRATION
STATEMENT") as promptly as practicable and in any event prior to 60 days after
the Issuers became aware that such filing obligation arises relating to all
Transfer Restricted Notes (the "SHELF REGISTRATION") the holders of which have
provided the information required pursuant to Section 3(b) hereof (PROVIDED that
if the Shelf Filing Event arises pursuant to clause (iv) above Exchange Offer
Registration Statement shall not have been filed or shall have been withdrawn,
the Issuers shall file the Shelf Registration Statement on or prior to the 216th
day after the Issue Date), and shall use their best efforts to have the Shelf
Registration Statement declared effective by the SEC on or prior to 60 days
after the filing thereof. In such circumstances, the Issuers shall use their
best efforts to keep the Shelf Registration Statement continuously effective
under the Securities Act, until (A) two years (or such shorter period as may be
established by any
<PAGE>
-11-
amendment to the two year period set forth in Rule 144(k) under the Securities
Act) following the Issue Date or (B) if sooner, the date immediately following
the date that all Transfer Restricted Notes covered by the Shelf Registration
Statement have been sold pursuant thereto or otherwise cease to be Transfer
Restricted Notes (the "EFFECTIVENESS PERIOD"); PROVIDED that the Effectiveness
Period shall be extended to the extent required to permit dealers to comply with
the applicable prospectus delivery requirements of Rule 174; PROVIDED, FURTHER,
that the Company may suspend the effectiveness of a Shelf Registration
Statement, in the event that, and for up to five periods of up to 60 consecutive
days, but no more than an aggregate of 180 days during any 365 day period (a
"SHELF BLACKOUT PERIOD") if, (a)(i) an event occurs and is continuing as a
result of which the Shelf Registration Statement would, in the Company's good
faith judgment, contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein not misleading
and (ii) if the Company determines in good faith that the disclosure of such
event at such time would have a material adverse effect on the business,
operations or prospects of the Company or (b) the disclosure otherwise relates
to a pending material business transaction which has not yet been publicly
disclosed. Upon the occurrence of any such suspension, the Issuers will use
their best efforts to reinstate effectiveness of such Shelf Registration
Statement as soon as practicable.
(b) No holder of Transfer Restricted Notes may include any of its
Transfer Restricted Notes in any Shelf Registration Statement pursuant to this
Agreement unless and until such holder furnishes to the Company in writing,
within 30 days after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with any Shelf Registration
Statement or Prospectus or preliminary prospectus included therein. No holder
of Transfer Restricted Notes shall be entitled to Liquidated Damages pursuant to
Section 4 hereof unless and until such holder shall have provided all such
reasonably requested information. Each holder of Transfer Restricted Notes as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such holder not
materially misleading.
4. LIQUIDATED DAMAGES
(a) The parties hereto agree that the holders of Transfer Restricted
Notes will suffer damages if the Issuers
<PAGE>
-12-
fail to fulfill their obligations pursuant to Section 2 or Section 3, as
applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, in the event that:
(i) if (A) neither the Exchange Registration Statement nor the Shelf
Registration Statement is filed with the SEC on or prior to the Filing Date
or (B) notwithstanding that the Issuers have consummated or will consummate
an Exchange Offer, the Issuers are required to file a Shelf Registration
Statement and such Shelf Registration Statement is not filed on or prior to
the date required by this Agreement, then commencing on the day after
either such required filing date, Liquidated Damages shall accrue on the
principal amount of the Notes at a rate of 0.5% per annum for the first 90
days immediately following each such filing date, such Liquidated Damages
rate increasing by an additional 0.5% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) an Exchange Registration Statement or a Shelf Registration
Statement has been filed with the SEC but neither the Exchange Registration
Statement nor a Shelf Registration Statement is declared effective by the
SEC on or prior to 60 days after the applicable required filing date or (B)
notwithstanding that the Issuers have consummated or will consummate an
Exchange Offer, the Issuers are required to file a Shelf Registration
Statement and such Shelf Registration Statement is not declared effective
by the SEC on or prior to the 60th day following the date such Shelf
Registration Statement was required to be filed, then, commencing on the
day after the 60th day following the applicable required filing date,
Liquidated Damages shall accrue on the principal amount of the Notes at a
rate of 0.5% per annum for the first 90 days immediately following such
date, such Liquidated Damages rate increasing by an additional 0.5% per
annum at the beginning of each subsequent 90-day period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 36th day after the date on which the Exchange
Registration Statement was declared effective or (B) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
expiration of the Effectiveness Period, then Liquidated Damages shall
accrue on the
<PAGE>
-13-
principal amount of the Notes at a rate of 0.5% per annum for the first 90
days commencing on (x) the 36th day after such effective date, in the case
of (A) above, or (y) the day such Shelf Registration Statement ceases to be
effective in the case of (B) above, such Liquidated Damages rate increasing
by an additional 0.5% per annum at the beginning of each subsequent 90-day
period;
PROVIDED, HOWEVER, that the Liquidated Damages rate on the Notes may
not exceed in the aggregate 2.00% per annum; PROVIDED, FURTHER, HOWEVER,
that (1) upon the filing of the Exchange Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Notes for all Notes validly tendered in accordance
with the terms of the Exchange Offer (in the case of clause (iii)(A)
above), or upon the effectiveness of the Shelf Registration Statement which
had ceased to remain effective (in the case of clause (iii)(B) above),
Liquidated Damages on the Notes as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue; PROVIDED
FURTHER, that Liquidated Damages shall not accrue during any Shelf Blackout
Period permitted pursuant to Section 3(a).
(b) The Issuers shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which any Transfer Restricted Notes are issued) promptly upon the happening of
each and every event described in clauses (a)(i), (a)(ii) or (a)(iii) above
(each a "Registration Default"). The Issuers shall pay the Liquidated Damages
due on the Transfer Restricted Notes by depositing with the paying agent (which
shall not be an Issuer for these purposes) for the Transfer Restricted Notes, in
trust, for the benefit of the holders thereof, prior to 11:00 A.M. on the next
interest payment date specified by the Indenture (or such other indenture), sums
in cash sufficient to pay the Liquidated Damages then due. The Liquidated
Damages due shall be payable on each interest payment date specified by the
Indenture (or such other indenture) to the record holders entitled to receive
the interest payment to be made on such date. Each obligation to pay Liquidated
Damages shall be deemed to accrue from and including the applicable Registration
Default.
<PAGE>
-14-
(c) The parties hereto agree that the Liquidated Damages provided for
in this Section 4 constitute a reasonable estimate of the damages that will be
suffered by holders of Transfer Restricted Notes by reason of the happening of
any Registration Default.
5. REGISTRATION PROCEDURES
In connection with the Issuers' registration obligations hereunder,
the Issuers shall effect such registrations on the appropriate form available
for the sale of the Notes, the Exchange Notes or Private Exchange Notes, as
applicable, to (i) in the case of the Exchange Offer, permit the exchange of
Exchange Notes for Notes in the Exchange Offer and, if applicable, resales of
Exchange Notes by Participating Broker-Dealers and (ii) in the case of a Shelf
Registration, permit the sale of the applicable Transfer Restricted Notes in
accordance with the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Notes, and pursuant thereto the Issuers
shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a reasonable period of time
prior to the initial filing of a Shelf Registration Statement or
Prospectus, furnish to the holders of the Transfer Restricted Notes
included in such Shelf Registration Statement, their Special Counsel and
the managing underwriters, if any, copies of all such documents proposed to
be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such holders,
their Special Counsel and such underwriters, if any, and cause the officers
and directors of the Issuers, counsel to the Issuers and independent
certified public accountants to the Issuers to respond to such reasonable
inquiries as shall be necessary, in the opinion of respective counsel to
such holders and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act; PROVIDED that the foregoing
inspection and information gathering shall be conducted by the Initial
Purchaser and on behalf of any other persons, by one counsel designated by
and on behalf of such other persons; PROVIDED, HOWEVER, that the Issuers
shall not be deemed to have kept a Shelf Registration Statement effective
during the applicable period if any of them voluntarily takes any
unreasonable action or voluntarily fails to take any reasonable action
(which shall not be deemed to include any action with respect to any Shelf
Blackout Period) that results in holders of the Transfer
<PAGE>
-15-
Restricted Notes covered thereby not being able to sell such Transfer
Restricted Notes pursuant to federal securities laws during that period.
The Issuers shall not file any such initial Shelf Registration Statement or
related Prospectus which the holders of a majority in principal amount of
the Transfer Restricted Notes included in such Shelf Registration Statement
shall reasonably object to within 5 business days after receipt thereof;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for
the applicable time period required hereunder; cause the related Prospectus
to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424; and comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement as so amended or
in such Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Notes to be sold or, in
the case of an Exchange Offer, tendered for, their Special Counsel and the
managing underwriters, if any, promptly, and (if requested by any such
person), confirm such notice in writing, (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment is proposed to be filed,
and (B) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
SEC or any other Federal or state governmental authority for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information, (iii) of the issuance by the SEC, any state
securities commission, any other governmental agency or any court of any
stop order or injunction suspending or enjoining the use of a Prospectus or
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Notes, Exchange Notes or Private
Exchange Notes for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of
any event or information (but not the
<PAGE>
-16-
substance of any information or the event itself) becoming known to any
Issuer that requires the making of any changes in such Registration
Statement, Prospectus or documents so that it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, not
misleading, and that in the case of a Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(d) Use their best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of any order enjoining or suspending the use of a
Prospectus or the effectiveness of a Registration Statement or the lifting
of any suspension of the qualification (or exemption from qualification) of
any of the Notes, Exchange Notes or Private Exchange Notes for sale in any
jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to Section 3
hereof and if requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Transfer
Restricted Notes being sold pursuant to such Shelf Registration Statement,
(i) promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any, and such
holders reasonably believe should be included therein, and (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment under the Securities Act as soon as practicable after the Company
has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, that
the Issuers shall not be required to take any action pursuant to this
Section 5(e) that would, in the opinion of counsel for the Issuers, violate
any applicable laws;
(f) Upon written request to the Company by a holder of Notes,
Exchange Notes or Private Exchange Notes to be exchanged or sold pursuant
to a Registration Statement, their Special Counsel and each managing
underwriter, if any, without charge, furnish at least one conformed copy of
such Registration Statement and each amendment thereto, including financial
statements and schedules, all
<PAGE>
-17-
documents incorporated or deemed to be incorporated therein by reference,
and all exhibits to the extent requested (including those previously
furnished or incorporated by reference) as soon as practicable after the
filing of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or Private
Exchange Notes to be exchanged or sold pursuant to a Registration
Statement, their Special Counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus (including each form of
prospectus) and each amendment or supplement thereto as such persons
reasonably request; and the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
holders of Transfer Restricted Notes and the underwriters, if any, in
connection with the offering and sale of the Transfer Restricted Notes in
accordance with the terms thereof and with U.S. federal securities laws and
Blue Sky laws covered by such Prospectus and any amendment or supplement
thereto;
(h) Prior to any public offering of Notes, Exchange Notes or Private
Exchange Notes, use their best efforts to register or qualify or cooperate
with the holders of Notes, Exchange Notes or Private Exchange Notes to be
sold or tendered for, the underwriters, if any, and their Special Counsel
in connection with the registration or qualification (or exemption from
such registration or qualification) of such Notes, Exchange Notes or
Private Exchange Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any such holder or
underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective hereunder and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Notes, Exchange Notes or Private
Exchange Notes covered by the applicable Registration Statement; PROVIDED,
HOWEVER, that the Issuers shall not be required to (i) qualify generally to
do business in any jurisdiction where they are not then so qualified or
(ii) take any action which would subject them to general service of process
or to taxation in any jurisdiction where they are not so subject;
<PAGE>
-18-
(i) In connection with any sale or transfer of Transfer Restricted
Notes that will result in such securities no longer being Transfer
Restricted Notes, cooperate with the holders thereof and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company and to enable such
Transfer Restricted Notes to be in such denominations and registered in
such names as the managing underwriters, if any, or such holders may
request at least two Business Days prior to any sale of Transfer Restricted
Notes;
(j) Upon the occurrence of any event contemplated by Section 5(c)(v)
hereof, as promptly as practicable, prepare a supplement or amendment,
including, if appropriate, a post-effective amendment, to each Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file
any other required document so that, as thereafter delivered, such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and Private
Exchange Notes, if applicable);
(l) If a Shelf Registration Statement is filed pursuant to Section 3
hereof in connection with not more than one underwritten offering in which
all holders of Transfer Restricted Notes are entitled to participate, enter
into such agreements (including an underwriting agreement in form, scope
and substance as is customary in underwritten offerings) and take all such
other reasonable actions in connection therewith (including those
reasonably requested by the managing underwriters, if any, or the holders
of a majority in aggregate principal amount of the Transfer Restricted
Notes being sold) in order to expedite or facilitate the disposition of
such Transfer Restricted Notes, and, whether or not an underwriting
agreement is entered into and whether or not the
<PAGE>
-19-
registration is an underwritten registration, (i) make such representations
and warranties to the holders of such Transfer Restricted Notes and the
underwriters, if any, with respect to the business of the Issuers and their
subsidiaries (including with respect to businesses or assets acquired or to
be acquired by any of them), and the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated
by reference therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when customarily requested; (ii) obtain opinions
of counsel to the Issuers and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and Special Counsel to the holders of the
Transfer Restricted Notes being sold), addressed to each selling holder of
Transfer Restricted Notes and each of the underwriters, if any, covering
the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
Special Counsel and the managing underwriters, if any; (iii) use their best
efforts to obtain customary "cold comfort" letters and updates thereof from
the independent certified public accountants of the Issuers (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuers or of any business acquired by an Issuer or any
such subsidiary for which financial statements and financial data is, or is
required to be, included in the Shelf Registration Statement), addressed
(where reasonably possible) to each selling holder of Transfer Restricted
Notes and each of the underwriters, if any, such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling holders and the
underwriters, if any, than those set forth in Section 7 hereof (or such
other provisions and procedures acceptable to holders of a majority in
aggregate principal amount of Transfer Restricted Notes covered by such
Shelf Registration Statement and the managing underwriters, if any); and
(v) deliver such documents and certificates as may be reasonably requested
by the holders of a majority in aggregate principal amount of the Transfer
Restricted Notes being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity
<PAGE>
-20-
of the representations and warranties made pursuant to clause (i) above and
to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuers;
(m) In the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer Restricted Notes
being sold, any underwriter participating in any such disposition of
Transfer Restricted Notes, and any attorney, consultant or accountant
retained by such selling holders or underwriter, which inspection shall be
coordinated on behalf of all such underwriters and selling holders by one
representative designated by and on behalf of such underwriters and selling
holders(collectively, the "Inspectors") at the offices where normally kept,
during reasonable business hours, all relevant financial and other records,
pertinent corporate documents, instruments of the Issuer and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise any applicable due diligence responsibilities,
and properties of the Issuers and their subsidiaries (including with
respect to businesses and assets acquired or to be acquired to the extent
that such information is available to the Issuers), and cause the officers,
directors, agents and employees of the Issuers and their subsidiaries
(including with respect to businesses and assets acquired or to be acquired
to the extent that such information is available to the Issuers) to supply
all information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or accountant in
connection with such Shelf Registration; PROVIDED, HOWEVER, that such
persons shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in writing
as confidential at the time of delivery of such information shall be kept
confidential by such persons, unless and to the extent that (i) disclosure
of such information is, in the opinion of counsel for any Inspector,
necessary or advisable in connection with any action, claim, suit or
proceeding, directly or indirectly, involving or potentially involving such
Inspector and arising out of, based upon, relating to, or involving this
Agreement, or any transactions contemplated hereby or arising hereunder, or
(ii) the information in such Records has been required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (iii) disclosure of such information is
<PAGE>
-21-
required by law (excluding any disclosure requirements pursuant to Federal
securities laws in connection with the filing of the Shelf Registration
Statement or the use of any Prospectus without the consent of the Issuers
which will not be unreasonably withheld), (iv) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard such information by such person or (v) such
information becomes available to such person from a source other than the
Issuers and their subsidiaries and such source is not bound by a
confidentiality agreement; and PROVIDED, FURTHER, that the foregoing
inspection and information gathering shall be conducted by the Initial
Purchaser and on behalf of any other persons, by one counsel designated by
and on behalf of such other persons;
(n) Provide an indenture trustee for the Notes and/or the Exchange
Notes and Private Exchange Notes, as the case may be, and cause an
indenture to be qualified under the TIA not later than the effective date
of the first Registration Statement relating to the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be; and if such
indenture shall be the Indenture, in connection therewith, cooperate with
the Trustee and the holders of the Notes and/or the Exchange Notes and
Private Exchange Notes, to effect such changes to the Indenture, if any, as
may be required for the Indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable efforts to cause the
Trustee to execute, all customary documents as may be required to effect
such changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158, no later than 45 days after the end of any 12-month period (or 90
days after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Transfer
Restricted Notes are sold to underwriters in a firm commitment or
reasonable efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter after the effective date of a Registration Statement, which
<PAGE>
-22-
statement shall cover said period, consistent with the requirements of
Rule 158;
(p) Upon consummation of an Exchange Offer or a Private Exchange, if
required by the Trustee or a majority of the holders of the Notes
participating in the Exchange Offer or Private Exchange, obtain an opinion
of counsel to the Issuer, in a form customary for underwritten
transactions, addressed to the Trustee for the benefit of all holders of
Exchange Notes or Private Exchange Notes participating in the Exchange
Offer or the Private Exchange, as the case may be, that the Exchange Notes
or Private Exchange Notes, as the case may be, and the related indenture
constitute legal, valid and binding obligations of the Issuer, enforceable
against the Issuer in accordance with their respective terms;
(q) Cooperate with each seller of Transfer Restricted Notes covered
by any Registration Statement and each underwriter, if any, participating
in the disposition of such Transfer Restricted Notes and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.; and
(r) Use their best efforts to take all other steps reasonably
necessary to effect the registration of the Transfer Restricted Notes
covered by a Registration Statement contemplated hereby.
The Issuers may require a holder of Transfer Restricted Notes to be
included in a Registration Statement to furnish to the Issuers such information
regarding the distribution of such Transfer Restricted Notes as is required by
law to be disclosed in such Registration Statement and the Issuers may exclude
from such Registration Statement the Transfer Restricted Notes of any holder who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
If any such Registration Statement refers to any holder by name or
otherwise as the holder of any securities of an Issuer, then such holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such holder, to the effect that the holding
by such holder of such securities is not to be construed as a recommendation by
such holder of the investment quality of the Issuers' securities covered thereby
and that
<PAGE>
-23-
such holding does not imply that such holder will assist in meeting any future
financial requirements of the Issuers, or (ii) in the event that such reference
to such holder by name or otherwise is not required by the Securities Act, the
deletion of the reference to such holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3 hereof, each
holder of Transfer Restricted Notes agrees by acquisition of such Transfer
Restricted Notes that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii),
5(c)(iii),5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue
disposition of such Transfer Restricted Notes covered by such Registration
Statement or Prospectus until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until
it is advised in writing by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers whether or not
any Registration Statement is filed or becomes effective and whether or not any
Notes, Exchange Notes or Private Exchange Notes are issued or sold pursuant to
any Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and (B) in compliance with securities or Blue Sky laws), (ii) messenger,
telephone and delivery expenses, (iii) fees and disbursements of counsel for the
Issuers and the Special Counsel (not to exceed one firm or counsel), (iv) fees
and disbursements of all independent certified public accountants referred to in
Section 2(e) and Section 5(l)(iii) hereof (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (v) Securities Act liability insurance, if the Company
desires such insurance, (vi) the expenses relating to printing, word processing
and distributing all Registration Statements, underwriting agreements and other
documents
<PAGE>
-24-
(including, without limitation, expenses of printing certificates for Notes,
Exchange Notes and Private Exchange Notes in a form eligible for deposit with
The Depository Trust Company) necessary in order to comply with this Agreement,
(vii) the fees and expenses of the Trustee and any exchange agent and the fees
and expenses of their counsel; (viii) rating agency fees, if any, and any fees
associated with making Transfer Restricted Notes eligible for trading through
The Depository Trust Company, and (ix) fees and expenses of all other persons
retained by the Issuers. In addition, the Issuers shall pay their internal
expenses (including, without limitation, all salaries and expenses of their
respective officers and employees performing legal or accounting duties), the
expense of any annual audit, and the fees and expenses incurred in connection
with the listing of the Notes, Exchange Notes or Private Exchange Notes to be
registered on any securities exchange.
7. INDEMNIFICATION
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless (i) the Initial Purchaser, each holder of Notes, Exchange Notes and
Private Exchange Notes and each Participating Broker-Dealer, (ii) each person,
if any, who controls (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) any of the foregoing (any of the persons referred to in
this clause (ii) being hereinafter referred to as a "controlling person"), and
(iii) the respective officers, directors, partners, employees, representatives
and agents of the Initial Purchaser, each holder of Notes, Exchange Notes and
Private Exchange Notes, each Participating Broker-Dealer and any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "INDEMNIFIED PERSON"), from and against any and all losses,
claims, damages, liabilities and judgments arising out of or relating to any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or in any amendment
or supplement thereto, or arising out of or relating to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or
preliminary prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Issuers by or on behalf of
<PAGE>
-25-
such Indemnified Person expressly for use therein; PROVIDED the Issuers will not
be liable (i) in any such case to the extent that any such loss, claim, damage,
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in any Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information concerning the Initial Purchaser or any other Indemnified Person
furnished to an Issuer by the Initial Purchaser or any other Indemnified Person
specifically for use therein or (ii) with respect to the Preliminary Prospectus
or Prospectus, to the extent that any such loss, claim, damage or liability
arises solely from the fact that the Initial Purchaser or any other Indemnified
Person sold Securities to a person to whom there was not sent or given a copy of
the Prospectus (as amended or supplemented) at or prior to the written
confirmation of such sale if such Issuer shall have previously furnished copies
thereof to such Initial Purchaser or such other Indemnified Person in accordance
with this Registration Rights Agreement and the Prospectus (as amended or
supplemented) would have corrected any such untrue statement or omission.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any Prospectus or preliminary
prospectus or any amendment or supplement thereto and with respect to which
indemnity may be sought against the Issuers hereunder, such Indemnified Person
shall promptly notify the Issuers in writing and the Company shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Person and payment of all fees and expenses. Any Indemnified
Person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless (i) the employment of
such counsel shall have been specifically authorized in writing by the Issuers,
(ii) the Company shall have failed to assume the defense and employ counsel or
pay all such fees and expenses or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Person and an
Issuer and such Indemnified Person shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to any such Issuer (in which case the Company
shall not have the right to assume the defense of such action on behalf of such
Indemnified Person, it being understood, however, that the Issuers shall not, in
connection with any one such action or separate but substantially similar or
related
<PAGE>
-26-
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all such
Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such reasonable fees and expenses shall be
reimbursed as they are incurred). The Issuers shall not be liable for any
settlement of any such action effected without their prior written consent,
which shall not be unreasonably withheld (for purposes of this sentence, it is
deemed reasonable to withhold consent if such settlement (A) does not include an
unconditional written release of the Issuers, in form and substance reasonably
satisfactory to the Issuers, from all liability on claims that are the subject
matter of such proceeding or (B) includes any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Issuer). If settled
with the written consent of the Issuers, the Issuers agree, jointly and
severally, to indemnify and hold harmless each Indemnified Person from and
against any loss or liability by reason of such settlement. No Issuer shall,
without the prior written consent of each Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to which a
holder of Transfer Restricted Notes offers or sells Transfer Restricted Notes,
such holder agrees, severally and not jointly, to indemnify and hold harmless
the Issuers, their respective directors and officers and any person controlling
an Issuer within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, to the same extent as the foregoing indemnity from the
Issuers to each Indemnified Person but only with respect to information relating
to such holder furnished in writing by or on behalf of such holder expressly for
use in such Registration Statement. In any such case in which any action shall
be brought against an Issuer, any director or officer of an Issuer or any person
controlling an Issuer based on such Registration Statement and in respect of
which indemnity may be sought against a holder of Transfer Restricted Notes,
such holder shall have the rights and duties given to the Issuers under Section
7(b) hereof(except that if an Issuer shall have assumed the defense thereof,
such holder shall not be required to do so, but may
<PAGE>
-27-
employ separate counsel therein and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such holder), and
the Issuers, their respective directors and officers and any person controlling
an Issuer shall have the rights and duties given to the Indemnified Persons by
Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by each indemnifying party on the one
hand and the indemnified party on the other hand from the offering of the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be (it being
expressly understood and agreed that the relative benefits received by the
Issuers from the offering of the Notes, Exchange Notes or Private Exchange
Notes, as the case may be, shall be the amount of the net proceeds received by
the Company from the sale of the Notes), or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each indemnifying party on the one hand and
the indemnified party on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of each indemnifying party on the one hand and the indemnified party on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by an indemnifying party
or such indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuers and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
PRO RATA allocation (even if all Indemnified Persons were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by
<PAGE>
-28-
an indemnified party as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the net proceeds received by it in connection with
the sale of the Notes, Exchange Notes or Private Exchange Notes contemplated by
this Agreement (or, in the case of an underwriter that is an Indemnified Person,
the total underwriting discounts received by such underwriter) exceeds the
amount of any damages which such Indemnified Person has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Indemnified Person's obligations to contribute pursuant
to this Section 7(d) are several in proportion to the respective amount of
Notes, Exchange Notes or Private Exchange Notes included in any such
Registration Statement by each Indemnified Person and not joint.
8. RULES 144 AND 144A
Each of the Issuers covenants and agrees that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder in a timely manner in
accordance with the requirements of the Securities Act and the Exchange Act and,
if at any time such Issuer is not required to file such reports, such Issuer
will, upon the request of any Holder or beneficial owner of Transfer Restricted
Notes, make available such information necessary to permit sales pursuant to
Rule 144A under the Securities Act. Each of the Issuers further covenants and
agrees, for so long as any Transfer Restricted Notes remain outstanding that it
will make available to any Holder of Transfer Restricted Notes, all information
necessary to the extent required from time to time to enable such holder to sell
Transfer Restricted Notes without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under
the Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC.
<PAGE>
-29-
9. UNDERWRITTEN REGISTRATIONS
If any of the Transfer Restricted Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the holders of a majority in aggregate principal amount of
the Transfer Restricted Notes included in such offering and reasonably
acceptable to the Company.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such Transfer Restricted Notes on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by an Issuer or by a holder
of Notes, Exchange Notes or Private Exchange Notes of any of its obligations
under this Agreement, each holder of Notes, Exchange Notes or Private Exchange
Notes and each Issuer, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. Notwithstanding the provisions
of Section 4 hereof, the Issuers and each holder of Notes, Exchange Notes and
Private Exchange Notes agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement and each hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Issuers will not enter into any
agreement with respect to their securities that is inconsistent with the rights
granted to the holders of Notes, Exchange Notes and Private Exchange Notes and
Indemnified Persons in this Agreement or otherwise conflicts with the provisions
hereof. Without the written consent of the holders of a majority in aggregate
principal amount of the outstanding Transfer Restricted Notes, the Issuers shall
not grant to any person any rights which conflict with or are inconsistent with
the provisions of this Agreement.
<PAGE>
-30-
(c) NO PIGGYBACK ON REGISTRATIONS. The Issuers shall not grant to
any of their securityholders (other than the holders of Transfer Restricted
Notes in such capacity) the right to include any of their securities in any
Registration Statement other than Transfer Restricted Notes.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the holders
of not less than a majority of the then outstanding aggregate principal amount
of Transfer Restricted Notes; PROVIDED, HOWEVER, that, for the purposes of this
Agreement, Transfer Restricted Notes that are owned, directly or indirectly, by
the Issuers or any of their Affiliates are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
holders of Transfer Restricted Notes whose securities are being sold or tendered
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other holders of Transfer Restricted Notes may be given by
holders of a majority in aggregate principal amount of the Transfer Restricted
Notes being sold or tendered by such holders pursuant to such Registration
Statement; PROVIDED, HOWEVER, that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. Notwithstanding the foregoing, no
amendment, modification, supplement, waiver or consent with respect to Section 7
shall be effective as against any holder of an Indemnified Person unless
consented to in writing by such Indemnified Person.
(e) NOTICES. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to the Issuers, as provided in the Purchase Agreement,
(ii) if to the Initial Purchaser, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered holder of
Notes, Exchange Notes or Private Exchange
<PAGE>
-31-
Notes, to the address of such holder as it appears in the register therefor
of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each holder of Notes, Exchange
Notes and Private Exchange Notes and each Indemnified Person. The Issuers may
not assign any of their rights or obligations hereunder without the prior
written consent of each holder of Transfer Restricted Notes and each Indemnified
Person. Notwithstanding the foregoing, no successor or assignee of an Issuer
shall have any of the rights granted under this Agreement until such person
shall acknowledge its rights and obligations hereunder by a signed written
statement of such person's acceptance of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(h) GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
(i) SEVERABILITY. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this
<PAGE>
-32-
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Issuers with
respect to the Notes, the Exchange Notes and the Private Exchange Notes. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
<PAGE>
-33-
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joseph Sortais
----------------------
Name: Joseph Sortais
Title: Chief Financial
Officer
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT ALEX. BROWN INCORPORATED
By: /s/ Cristie Sheffield
---------------------------
Name: Cristie Sheffield
Title: Vice President
<PAGE>
-34-
Each of the Subsidiaries specified below agrees to become a party to
this Agreement as a Subsidiary Guarantor as of the date hereof:
AEROSOL SERVICES COMPANY, INC.
By:
----------------------------------
Name:
Title:
PIEDMONT LABORATORIES, INC.
By:
----------------------------------
Name:
Title:
KOLMAR LABORATORIES, INC.
By:
----------------------------------
Name:
Title:
<PAGE>
- ------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF
FEBRUARY 14, 1994
BY AND AMONG
AEROSOL SERVICES HOLDING CORPORATION
AND
THE INVESTORS
THAT ARE PARTIES HERETO
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of February
14,1994 and is by and among Aerosol Services Holding Corporation, a
Delaware corporation (the "Company"), London Pacific Life & Annuity
Company, a North Carolina joint stock life insurer, ASC Investment
Partners, L.P., a Delaware limited partnership, Chase Manhattan Capital
Corporation, a New York corporation, Hancock Venture Partners IV - Direct
Fund L.P., a Delaware limited partnership, Jesus Arambula, Lorena Axthelm,
Alan Bourgeois, John Dixon, Howard C. Lim, Walter K. Lim, Richard Mirabile,
Linda Storms, Elaine Suderno, and Harry Wu (each an "Investor" and,
together, the "Investors").
1. BACKGROUND. Each Investor is the holder of shares of the Company's
Common Stock or Warrants to purchase shares of the Company's Common Stock.
Each Investor and any Transferee of Common Stock or Warrants held by an
Investor shall be referred to herein as a "Holder." The term "Holder" as
used herein includes both the singular and the plural.
2. REGISTRATION
2.1 Incidental Registration.
(a) If at any time the Company proposes to register any of
its securities under the Securities Act of 1933, as amended (the
"Securities Act"), whether or not for sale for its own account, on a form
and in a manner which would permit registration of shares of Common Stock
for sale to the public under the Securities Act, it will each such time
give prompt written notice to each Holder of its intention to do so,
describing such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration, and upon the written
request of a Holder (a "Participating Holder") delivered to the Company
within 30 days after the giving of any such notice (which request shall
specify the shares of Common Stock intended to be disposed of by such
Participating Holder and the intended method of disposition thereof), the
Company will effect the registration under the Securities Act of all shares
of Common Stock which the Company has been so requested to register by
Participating Holders to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the shares of
Common Stock so to be registered, PROVIDED THAT:
(i) if, at any time after giving such written notice of
its intention to register any of its Securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register
such securities, the Company may, at its election, give written notice of
such determination to the Participating Holders and thereupon shall be
relieved of its obligation to register any shares of Common Stock in
connection with such registration (but not from its obligation to pay the
Registration Expenses already incurred in connection therewith as provided
in subdivision (b) of this Section 2. 1);
(ii) the Company shall not be obligated to effect any
registration of shares of Common Stock under this Section 2.l incidental to
<PAGE>
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans, employee stock
ownership plans or stock option plans, thrift plans pension plans or other
employee benefit plans; and
(iii) the Company shall not be obligated to effect
any registration of shares of Common Stock to the extent such shares are
validly excluded from an underwritten distribution pursuant to Sections
2.2(b) and 2.2(c) of this Agreement.
(b) The Company will pay all Registration Expenses in
connection with each registration of shares of Common Stock requested by
Participating Holders pursuant to this Section 2.1. The term "Registration
Expenses" shall mean all expenses incident to the Company's performance of
or compliance with this Section 2 including, without limitation, all
registration and filing fees; all costs incurred in connection with listing
the Common Stock on any stock exchanges or with any market systems; all
fees and expenses of complying with securities or blue sky laws; all
printing expenses; the fees and disbursements of counsel for the Company,
its independent public accountants, the underwriters (exclusive of
underwriting discounts and commissions) and any other persons retained by
the Company including the expenses of any special audits required by or
incident to such performance and compliance; the reasonable fees and
disbursements of one counsel for the Holders as a group, which counsel
shall be chosen by the Participating Holders holding a majority of the
shares of Common Stock (other than shares being sold for the Company's own
account) to be sold in connection with the registration; and any allocation
of Company personnel or other general overhead expenses of the Company or
other expenses for the preparation of financial statements or other data
prepared by the Company. Registration Expenses shall not include
underwriting discounts and commissions and applicable transfer taxes, if
any, payable pro rata with respect to all shares included in the
distribution; each Holder shall bear its pro rata portion of such
discounts, commissions and taxes.
2.2 Registration Procedures
(a) When the Company is required to effect the registration
of any shares of Common Stock under the Securities Act as provided in
Section 2.1, the Company will as expeditiously as possible:
(i) prepare and (in any event within 60 days after the
end of the period within which requests for registration may be delivered
to the Company) file with the Securities and Exchange Commission (the
"Commission") a registration statement on the appropriate form with respect
to such shares of Common Stock and use its best efforts to cause such
registration statement to become effective as promptly as practicable;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all shares of Common Stock covered by
such registration statement until the earlier of: (a) such time as all of
such shares of Common Stock have been disposed of in accordance with the
intended methods of disposition by the Participating Holders set forth in
such registration statement; or (b) the expiration of nine months after
such registration statement becomes effective;
(iii) furnish to all Participating Holders such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act,
such documents incorporated by reference in such registration statement or
prospectus, and such other documents, as any Participating Holder may
reasonably request;
(iv) use its best efforts to register or qualify all
shares of Common Stock covered by such registration statement under such
other securities or blue sky laws of such jurisdictions within the United
States and its territories as any Participating Holder shall reasonably
request, and do any and all other acts and things which may be necessary or
advisable to enable the Participating Holders to consummate the disposition
in such jurisdictions of their shares of Common Stock covered by such
registration statement, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to
subject itself to taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(v) furnish to each Participating Holder a signed
counterpart, addressed to such Participating Holder, of (A) an opinion of
counsel for the Company, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, dated the date of the closing under the underwriting agreement),
and (B) a "cold comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included
in such registration statement, covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
<PAGE>
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and its accountants'
letters delivered to underwriters in underwritten public offerings of
securities and, in the case of the accountants' letter, such other
financial matters, as any Participating Holder may reasonably request;
(vi) immediately notify the Participating Holders, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any Participating Holder prepare and
furnish to such Participating Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such shares of Common
Stock, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; and
(vii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available
to its securities holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first month of the first fiscal quarter
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act.
The Company may require any Participating Holder, when any registration is
being effected, to furnish the Company such information regarding such
Participating Holder and the distribution of the securities as the Company
may from time to time request in writing for inclusion in the applicable
registration statement as required by law or by the Commission in
connection therewith.
(b) If the Company at any time proposes to register any of
its securities under the Securities Act as contemplated by Section 2.1, and
such securities are to be distributed by or through one or more
underwriters, the Company shall, if requested by any Participating Holder
or Holders, arrange for such underwriters to include the shares of Common
Stock held by such Participating Holder or Holders among those securities
to be distributed by or through such underwriters; provided, however, that
if the underwriters shall determine as provided in Section 2.3(c) that the
inclusion of all or a specified portion of such shares would adversely
affect such offering, the Participating Holders shall have its or their
shares (or the specified portion thereof) excluded from such underwritten
offering. The Participating Holders on whose behalf such shares are to be
distributed by such underwriters shall be parties to any such underwriting
agreement and the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters, shall also be made to and for the benefit of such
Participating Holders.
(c) If a Participating Holder has requested inclusion of
shares of Common Stock in an underwritten offering, such shares may be
excluded only if all of the following conditions are met:
(i) the managing underwriter shall have determined (and
shall have advised the Participating Holders in writing) that, in its
opinion, the registration and distribution of all or a specified portion of
the Common Stock as part of the proposed distribution of securities by the
underwriters will materially and adversely affect the distribution of such
securities (such opinion to state the reasons therefor); and
(ii) the Company and the underwriters shall exclude from
the proposed offering on a pro-rata basis any securities offered by
officers, directors or other shareholders of the Company (determined in
proportion to the number of shares sought to be included by each such
person in the offering).
(d) If any registration pursuant to Section 2.1 shall be in
connection with an underwritten public offering, the Holders agree, if so
timely required in writing by the managing underwriters and if all other
officers, directors, 10% shareholders (determined as provided in Commission
Rule 16a-2) and other persons selling shares in the offering also agree to
be so bound, not to effect any public sale or distribution of shares of
Common Stock (other than as part of such underwritten public offering)
within the period commencing seven days prior to the effective date of such
registration statement and ending the earlier of (i) 120 days after the
effective date of such registration statement and (ii) the date on which
all securities under such registration statement are sold.
2.3 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering shares of
Common Stock under the Securities Act, the Company will give each
Participating Holder and its underwriter, if any, and its counsel and
accountants, the 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 will give
<PAGE>
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
necessary, in the opinion of any Participating Holder and such underwriters
or their respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.4 Indemnification
(a) In the event of any registration of any securities of the
Company under the Securities Act pursuant to Section 2. l, the Company
will, and hereby does, indemnify and hold harmless each Participating
Holder, its directors and officers, and each other person, if any, who
controls such Participating Holder within the meaning of the Securities
Act, against any losses, claims, damages, liabilities and expenses
(including reasonable legal fees and expenses and costs of investigation),
joint or several, to which such Participating Holder or any such director
or officer or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus included therein, or any
amendment or supplement thereto, or any document incorporated by reference
therein, or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse such
Participating Holder, and each such director, officer, and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided that the Company shall not be liable to such
an indemnified person in any such case to the extent (but only to the
extent) that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
or any documents incorporated by reference in any of the above in reliance
upon and in conformity with written information furnished by such
indemnified person to the Company which written information specifically
states that it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of such Participating Holder or any such director, officer, or
controlling person and shall survive the transfer of such securities by the
Participating Holder.
(b) The Company may require as a condition to including any
shares of Common Stock in any registration statement filed pursuant to
subdivision 2.2(a)(i), that the Company shall have received an undertaking
satisfactory to it from a Participating Holder, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 2.4) the Company, each director of the
Company, each officer of the Company who shall sign such registration
statement and each other person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any statement in or
omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus included therein, or any amendment
or supplement thereto or any documents incorporated by reference in any of
the above, if such statement or omission was made solely in reliance upon
and in conformity with written information furnished to the Company by such
Participating Holder which written information specifically states that it
is for use in the preparation of such registration statement, or any
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any such
director, officer or controlling person and shall survive the transfer of
such securities by such Participating Holder; provided, however, that to
the extent permitted by law, a Participating Holder's liability hereunder
shall not exceed the aggregate net offering proceeds received by such
Participating Holder from the sale of such shares.
(c) If the indemnification provided for in this Section 2.4
is unavailable or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages, liabilities, expenses or action in
respect thereof referred to herein, then the indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities, expenses or actions in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand, and the indemnified party on the other,
in connection with the statement or omissions which resulted in such
losses, claims, damages, liabilities, expenses or actions as well as any
other relevant equitable considerations, including the failure to give the
notice required hereunder. The relative fault of the indemnifying party and
the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company and the Participating Holders agree that it would not
be just and equitable if contributions pursuant to this Section were
determined by pro rata allocation or by any other method of allocation
<PAGE>
which did not take account of the equitable considerations referred to
above. The amount paid or payable to an indemnified party as a result of
the losses, claims, damages, liabilities or action in respect thereof,
referred to above, shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
contribution provisions of this Section, in no event shall the amount
contributed by any Participating Holder of shares exceed the aggregate net
offering proceeds received by such Participating Holder from the sale of
such shares. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act) shall be entitled (i) to
contribution from any person who is not guilty of such fraudulent
misrepresentation, or (ii) to the benefits of the preceding sentence.
(d) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred
to in the preceding subdivisions of this Section 2.4, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement
of such action, provided that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 2.4. In case
any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in connection
with the defense thereof; provided, however, that if the indemnified party
or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party
or parties in conducting the defense of such action or proceeding or that
there may be legal defenses available to such indemnified party or parties
different from or in addition to those available to the indemnifying party
or parties, then counsel for the indemnified party or parties shall be
entitled to conduct the defense to the extent reasonably determined by such
counsel to be necessary to protect the interests of the indemnified party
or parties (and the indemnifying party or parties shall bear the reasonable
legal and other expenses incurred in connection therewith). No
indemnifying party will 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 such indemnified party of a full and
final release from all liability in respect to such claim or litigation.
(e) Indemnification similar to that specified in the
preceding subdivisions of this Section 2.4 (with appropriate modifications)
shall be given by the Company and each Participating Holder with respect to
any required registration or other qualification of such shares of Common
Stock under any federal or state law or regulation of governmental
authority other than the Securities Act.
3. GENERAL
3.1 Rule 144 and 144A. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or a
registration statement pursuant to 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 (or, if the Company is not required to
file such reports, will, upon the request of the Holder, make publicly
available other information necessary to comply with Rule l44(c)and Rule
144A, as applicable), and will take such further action as the Holder may
reasonably request, all to the extent required from time to time to enable
the Holder to sell shares of Common Stock without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of the Holder, the Company will deliver to the
Holder (i) a verified, written statement of the President or Chief
Financial Officer as to whether it has complied with such requirements;
(ii) if applicable, a copy of the most recent annual or quarterly report of
the Company; and (iii) such other reports and documents as the Holder may
reasonably request to avail itself of Rule 144, 144A or any other rule or
regulation of the Commission allowing the Holder to sell Common Stock
without registration.
3.2 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the Holders
of seventy-five percent (75%) of the Common Stock (assuming exercise of all
Warrants) entitled to registration rights under this Agreement; provided,
however, that no such amendment or waiver may adversely and disparately
affect a Holder unless such Holder has consented to such amendment or
waiver.
3.3 Notices. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing
and shall be delivered, or mailed by first-class mail, postage prepaid,
addressed, if to the Holder in the manner set forth in the stock records of
<PAGE>
the Company, or at such other address as the Holder shall have furnished to
the Company in writing, or, if to the Company, to the attention of its
Secretary, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to the Holder.
3.4 Adjustments. This Agreement shall apply to any shares of
capital stock or Warrants of the Company or any other entity issued to the
Holder with respect to, upon exercise or conversion of, or in exchange for,
any shares of Common Stock or any Warrants held by the Holder, by way of a
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other organization or
otherwise, except for shares of capital stock which have been distributed
by the Holder to the public pursuant to a registration statement or Rule
144 (or any successor provision) under the Securities Act. Nothing in this
Agreement shall entitle any Holder to register Warrants or to require the
Company to do so.
3.5 Miscellaneous. 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, whether so expressed or not. This Agreement
embodies the entire agreement and understanding between the Holder and the
Company and supersedes all prior agreements and understandings relating to
the subject matter hereof. This Agreement shall terminate on the tenth
anniversary of the date hereof. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of
California. The headings in this Agreement are for purposes of reference
only and shall not limit or otherwise affect the meaning hereof. This
Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed on the date first written above.
ASC INVESTMENT PARTNERS, L.P.
a Delaware limited Partnership
By Its General Partner, The Gordon
+ Morris Group
By: /s/ Bruce N. Lipian
----------------------------------------
Title: Vice President
----------------------------------------
CHASE MANHATTAN CAPITAL CORPORATION
a New York Corporation
By: /s/ Christopher C. Behrens
----------------------------------------
Title: Vice President
HANCOCK VENTURE PARTNERS IV - DIRECT FUND L.P.,
a Delaware limited Partnership
By: /s/ Robert Wadsworth
----------------------------------------
Title: Authorized Officer
LONDON PACIFIC LIFE & ANNUITY COMPANY,
a North Carolina joint stock life insurer
By: /s/ Susan Y. Gressel
----------------------------------------
Title: Vice President and Treasurer
AEROSOL SERVICES HOLDING CORPORATION
a Delaware corporation
By: /s/ Howard C. Lim
----------------------------------------
Title: Chief Financial Officer
/s/ Jesus Arambula
-------------------------------------------
JESUS ARAMBULA
/s/ Lorena Axthelm
<PAGE>
-------------------------------------------
LORENA AXTHELM
/s/ Alan Bourgeois
-------------------------------------------
ALAN BOURGEOIS
/s/ John Dixon
-------------------------------------------
JOHN DIXON
/s/ Howard C. Lim
-------------------------------------------
HOWARD C. LIM
/s/ Walter K. Lim
-------------------------------------------
WALTER K. LIM
/s/ Richard Mirabile
-------------------------------------------
RICHARD MIRABILE
/s/ Linda Storms
-------------------------------------------
LINDA STORMS
/s/ Elaine Suderno
-------------------------------------------
ELAINE SUDERNO
/s/ Harry Wu
-------------------------------------------
HARRY WU
<PAGE>
___________________________________________________________
AMENDED AND RESTATED
STOCKHOLDER AGREEMENT
OUTSOURCING SERVICES GROUP, INC.
DATED AS OF JUNE 30, 1997
(Certain terms are defined in
Section 24 of this Agreement)
___________________________________________________________
AMENDED AND RESTATED STOCKHOLDER AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDER AGREEMENT is made
and entered into as of June 30, 1997, among OUTSOURCING SERVICES GROUP,
INC., as surviving company in the merger of Aerosol Services Holding
Corporation, a Delaware corporation, and Aerosol Companies Holding
Corporation, a Delaware corporation (the "Company"), GORDON + MORRIS
INVESTMENT PARTNERSHIP, L.P., a Delaware limited partnership ("GMIP"), ASCP
INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ASCP"), SAMUEL
D. GARRETSON, WALTER K. LIM and HOWARD C. LIM (Messrs. Garretson, Lim and
Lim are sometimes collectively referred to as the "Founders"), CHASE
MANHATTAN CAPITAL, L.P., as the holder of certain warrants ("Chase"),
HANCOCK VENTURE PARTNERS IV - DIRECT FUND, L.P. ("Hancock" and sometimes
with GMIP and ASCP referred to as the "Institutional Investors"), and
certain individuals listed on Exhibit A hereto who are members of the
management of the Company or its wholly owned subsidiaries Piedmont
Laboratories, Inc., a Georgia corporation ("Piedmont") or Aerosol Services
Company, Inc., a California corporation ("ASC") (such individuals, together
with any persons who become parties to this Agreement pursuant to Section
10.1 of this Agreement and each of their respective Permitted Transferees,
are referred to herein, collectively, as the "Management Shareholders").
GMIP, ASCP, the Founders, Hancock and the Management Shareholders are
hereinafter referred to collectively as the "Shareholders."
WHEREAS, the Company is the successor by merger (the
"Merger") to companies formed to acquire all of the issued and outstanding
stock of Piedmont and ASC;
WHEREAS, the Company is consummating the Merger on the
date hereof; and
WHEREAS, in connection with the Merger, on the date hereof
(the "Merger"), the Company will issue or will have outstanding shares of
its common stock, par value $0.001 per share ("Common Stock") to each
Shareholder in the number of shares of Common Stock set forth opposite the
Shareholder's name on Exhibit B hereto; and
WHEREAS, the Company anticipates that it will offer and
sell additional shares of Common Stock to stockholders and employees of the
Company and its subsidiaries or affiliates and such persons will become
parties to this Agreement pursuant to Section 10.1 hereof; and
WHEREAS, the Shareholders believe it to be in their best
interests and in the best interests of the Company that they enter into
this Agreement providing for certain rights and restrictions with respect
to the shares of Common Stock owned by them or their Permitted Transferees,
and amending, restating and superseding in their entirety the stockholder
agreements dated September 30, 1996 for Aerosol Companies Holding
Corporation and February 14, 1994 for Aerosol Services Holding Corporation;
NOW, THEREFORE, in consideration of the mutual covenants
and obligations set forth in this Agreement, the parties hereto agree as
follows:
1. Restrictions on Transfer of Common Stock.
1.1 General Restriction on Transfer. Prior to the
closing of a public offering pursuant to an effective registration
statement (a "Registration") under the Securities Act of 1933, as amended
(the "Act"), that covers (together with prior effective Registrations) (i)
not less than 50% of the outstanding shares of Common Stock on a fully
diluted basis or (ii) shares of Common Stock that, after the closing of
such public offering, will be traded on the New York Stock Exchange, the
American Stock Exchange or the National Association of Securities Dealers
Automated Quotation System (an "IPO"), no shares of Common Stock now or
<PAGE>
hereafter owned by any Shareholder or any interest therein may, directly or
indirectly, be sold, assigned, mortgaged, transferred, pledged,
hypothecated or otherwise disposed of (collectively "Transferred"), except
for (a) Transfers to a Permitted Transferee pursuant to Section 1.2 (a
"Permitted Transferee"), (b) sales of shares of Common Stock to the Company
pursuant to this Agreement or (c) Transfers to a Shareholder or a third
party of shares of Common Stock pursuant to, or otherwise permitted under,
Section 6. A Transfer in violation of this Agreement shall be void.
1.2 Permitted Transferees.
(a) Affiliates, Trusts, etc. Subject to
subsection (c) of this Section 1.2, each Institutional Investor may
Transfer any shares of Common Stock or any interest therein or its rights
to subscribe for the same to any of its Affiliates, provided that such
transfer shall not have an adverse effect on any nonrecognition treatment
afforded under Section 351 of the Internal Revenue Code of 1986, as
amended. Subject to subsection (c) of this Section 1.2 and to the
provisions of Section 6, an Institutional Investor may sell shares of
Common Stock pursuant to Rule 144A under the Act. Subject to subsection
(c) of this Section 1.2, a Management Shareholder or a Founder may Transfer
any shares of Common Stock or any interest therein or his rights to
subscribe for the same (i) with the prior written consent of the Company's
Board of Directors (the "Board") (which consent shall not be withheld
unless, in the opinion of the Board, such Transfer together with all other
Transfers made after the Merger could result in or create a "significant
risk" that the Company may become subject to, or after any Registration
will continue to be subject to, the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), to a
trust, family partnership, limited liability company or corporation of
which all the beneficiaries, partners, owners or stockholders are the
Management Shareholder or Founder, his spouse, parents, members of his
immediate family or his lineal descendants, (ii) in case of death, by will
or by the laws of intestate succession to executors, administrators,
testamentary trustees, legatees or beneficiaries, (iii) with the prior
written consent of the Board, to one or more other Management Shareholders
or Founders or (iv) with the prior written consent of the Board, to any
person the Board identifies as a current member of management of the
Company or one of its Affiliates and who becomes a Management Shareholder
by executing this Agreement. In addition to the foregoing, any transferee
of a Shareholder described above may Transfer shares of Common Stock back
to such Shareholder or to another Permitted Transferee of such Shareholder.
For the purposes of this Section 1.2, a "significant risk" shall be deemed
to arise when the number of "holders of record" (as determined in
accordance with the Exchange Act) is greater than 80% of the number of
"holders of record" that would cause the application or continued
application of the informational requirements of the Exchange Act under the
then existing circumstances. Persons who acquire shares pursuant to this
Section 1.2(a) are "Permitted Transferees."
(b) Security Agreements. Subject to subsection
(c) of this Section 1.2, a Shareholder may pledge any or all shares of
Common Stock now or hereafter owned by him or grant a security interest
therein to secure indebtedness of the Shareholder owing to the Company or a
lender approved by the Company so long as such indebtedness was incurred
for the purpose of paying all or part of the purchase price of such shares
of Common Stock or for the purpose of refinancing indebtedness incurred for
such purpose, and Institutional Investors may pledge or grant a security
interest in shares of Common Stock now owned or hereafter owned by them;
provided, however, that any pledgee pursuant to this subsection (b) shall
acquire only a security interest in such shares of Common Stock entitling
such transferee to the proceeds from any sale of such shares of Common
Stock made in compliance with the terms of this Agreement and not title to
such shares of Common Stock or any other rights incident thereto, including
any rights under this Agreement. The pledge agreements or other related
financing agreements of any Shareholder shall be subject to and acknowledge
the rights of the Company and the other Shareholders set forth herein.
(c) Agreements to Be Bound. Any Transfer of
shares of Common Stock made pursuant to subsection (a) or (b) of this
Section 1.2 shall be effective only if the Permitted Transferee agrees in
writing to be bound by the terms and conditions of this Agreement pursuant
to an instrument of assumption reasonably satisfactory in substance and
form to the Board.
(d) Status of Certain Permitted Transferees and
Warrant Holders.
(i) A Permitted Transferee of an
Institutional Investor which is a fund, partnership, corporation or limited
liability company, is under common control with such Institutional
Investor, and is identified by the transferring Institutional Investor as
its successor shall be an Institutional Investor and shall succeed to all
rights of the transferring Institutional Investor under this Agreement. If
GMIP, ASCP or Hancock distributes shares to the holders of beneficial
interests in GMIP, ASCP or Hancock, or if any Institutional Investor sells
shares to a non-Affiliate, the transferees shall be Management Shareholders
except for purposes of Sections 2 and 3 (rights and duties to sell to the
Company) and shall not have any of the rights or duties of Institutional
Investors under Sections 6, 7, 9, 10.3, 11 or 13. If Chase exercises its
warrants, in whole or in part, it shall become an "Institutional Investor"
and a "Shareholder" with respect to the shares of Common Stock acquired
<PAGE>
upon exercise of such warrants.
(ii) Permitted Transferees of Founders and
Management Shareholders shall be Management Shareholders but shall have no
rights under Section 2.1 to sell to the Company unless they are also
employees of the Company or one of its Affiliates.
2. Sales to the Company.
2.1 The Management Shareholders. Subject to all
subsections of this Section 2 and subject to Section 5, a Management
Shareholder shall have the right to sell to the Company, and the Company
shall have the obligation to purchase from such Management Shareholder,
all, but not less than all, of such Management Shareholder's shares of
Common Stock at their Fair Market Value, as defined in and determined
pursuant to Section 4.1, as of the date of termination if the employment of
such Management Shareholder with the Company and all its Affiliates thereof
is terminated by the Company without Cause (as defined in Section 24) or
terminates as a result of (a) the death or Disability (as defined in
Section 24) of such Management Shareholder, (b) the resignation of such
Management Shareholder for Good Reason (as defined in Section 24) or (c)
the retirement of such Management Shareholder upon or after reaching the
age of 65 ("Retirement").
2.2 Notice. If any Management Shareholder desires
to sell shares of Common Stock pursuant to Section 2.1, he (or his estate,
as the case may be) shall notify the Company not more than 30 days or, in
the case of a termination under clause (a) of Section 2.1, 90 days after
the occurrence of the event giving rise to such Management Shareholder's
right to sell his shares of Common Stock and shall specify the number of
shares of Common Stock such Management Shareholder owns.
2.3 Payment. Subject to Section 5, payment for
shares of Common Stock sold by a Shareholder pursuant to Section 2.1 shall
be made on the date 15 days (or the first business day thereafter if the
15th day is not a business day) following the date of the Management
Shareholder's notice unless one of the provisions of this Agreement
providing for a delayed payment is applicable.
(a) Right to Defer Sale on Death or Disability.
If the termination of employment of a Management Shareholder giving a right
to sell results from the death or Disability of such Management Shareholder
before the fifth anniversary of the Merger, then such Management
Shareholder (or his estate, as the case may be) may choose, in the notice
delivered to the Company pursuant to Section 2.2, that the Company's
purchase obligation shall be effective with respect to all or any portion
of such Management Shareholder's shares of Common Stock on the fifth
anniversary of the Merger (rather than immediately), as long as such choice
is made with respect to at least 1,000 shares of Common Stock. If the
notice delivered by such Management Shareholder (or his estate, as the case
may be) does not state a choice to delay the effectiveness of the Company's
obligation, the Company's purchase obligation shall be effective
immediately with respect to all of such Management Shareholder's shares of
Common Stock. If the Company's purchase obligation with respect to all or
any portion of any shares of Common Stock is not effective until the fifth
anniversary of the Merger by reason of a choice made under this Section
2.3, such fifth anniversary shall be deemed to be the "date of termination"
used to determine the purchase price to be paid for the shares of Common
Stock to be purchased following such fifth anniversary.
(b) Interest. Any payments required to be made
by the Company under this Section 2.3 shall accrue interest at 9% simple
interest per annum from the date used to determine the Fair Market Value to
the date the Company has paid in full for all of the shares of Common
Stock. Such interest shall not accrue or be paid for any period in which
payment is delayed solely by a failure to deliver certificates representing
the purchased shares.
2.4 Termination of Right to Sell. A Management
Shareholder's right to sell to the Company and the Company's obligation to
purchase such Shareholder's shares of Common Stock pursuant to Section 2.1
shall terminate on the earlier of (a) the tenth anniversary of the Merger
or (b) the closing of an IPO. Such termination of a Management
Shareholder's rights shall be effective notwithstanding the non-expiration
of any time period set forth in Section 2.2 but shall not affect the
Company's duties arising from a previously given valid notice exercising a
Management Shareholder's right to sell.
3. Right of the Company to Purchase From Management
Shareholders.
3.1 Right to Purchase. Subject to all subsections
of this Section 3 and subject to Section 5, the Company shall have the
right to purchase from a Management Shareholder, and each Management
Shareholder shall have the obligation to sell to the Company, all, but not
less than all, of such Management Shareholder's shares of Common Stock:
(a) Fair Market Value. If such Management
Shareholder's employment with the Company and all Affiliates thereof is
terminated as a result of (i) the death or Disability of such Management
Shareholder, (ii) the resignation of such Management Shareholder for Good
Reason, (iii) the Retirement of such Management Shareholder or (iv) the
<PAGE>
termination by the Company and all its Affiliates of the employment of such
Management Shareholder without Cause, the Company may purchase at Fair
Market Value, or
(b) Other Purchases. If such Management
Shareholder's employment with the Company and all Affiliates thereof is
terminated by the Company for Cause or terminates for any reason except any
event described in subsection (a) of this Section 3.1, until the fifth
anniversary of the Merger, the Company may purchase at the lesser of the
Fair Market Value and the Carrying Value (as defined in Section 24), and
thereafter the Company may purchase at the Fair Market Value, of the shares
of Common Stock to be purchased.
3.2 Notice. If the Company desires to purchase
shares of Common Stock from a Management Shareholder pursuant to Section
3.1, it shall notify such Management Shareholder (or his estate, as the
case may be) not more than 30 days after the occurrence of the event giving
rise to the Company's right to acquire such Management Shareholder's shares
of Common Stock.
3.3 Payment.
(a) General. Subject to Section 5 and to the
right of the Company to prepay any amounts due under this Agreement,
payment for shares of Common Stock purchased by the Company pursuant to
Section 3.1(a) shall be made on the date 15 days (or the first business day
thereafter if the 15th day is not a business day) following the date of the
Company's notice unless one of the provisions of this Agreement providing
for a delay in payment is applicable.
(b) Certain Delayed Payments. For purchases
pursuant to Section 3.1(b) (terminations for Cause and resignations without
Good Reason):
(i) if the date of termination occurs
prior to the third anniversary of the Merger, then
one-third of the purchase price of the purchased shares
shall be paid within 15 days following each of the third,
fourth and fifth anniversaries of the Merger;
(ii) if the date of termination occurs on
or after the third anniversary of the Merger and prior to
the fourth anniversary of the Merger, then (x) two-thirds
of the purchase price of the purchased shares shall be
paid by the 15th day following such fourth anniversary and
(y) one-third of the purchase price of the purchased
shares shall be paid within 15 days following the fifth
anniversary of the Merger;
(iii) if the date of termination occurs on
or after the fourth anniversary of the Merger and prior to
the fifth anniversary of the Merger, then the purchase
price of the purchased shares shall be paid by the 15th
day following such fifth anniversary; and
(iv) if the date of termination occurs on
or after the fifth anniversary of the Merger, then the
purchase price of the purchased shares shall be paid by
the 15th day after the determination of the Fair Market
Value of the shares to be purchased, but subject to the
surrender of the certificates representing the purchased
shares.
(c) Management Shareholder's Right to Defer
Payment. Notwithstanding the foregoing, if the termination of employment
of a Management Shareholder giving rise to the purchase results from the
death or Disability of such Management Shareholder prior to the fifth
anniversary of the Merger, then such Management Shareholder (or his estate,
as the case may be) may choose, within 90 days of the receipt of the notice
specified in Section 3.2, that the Company's purchase right shall be
effective with respect to all or any portion (but not less than 1,000
shares) of such shares of Common Stock on the fifth anniversary of the
Merger (rather than immediately). If a Management Shareholder (or his
estate, as the case may be) does not give written notice of a choice under
Section 3.3(b), the Company's purchase right shall be effective immediately
with respect to all of such Management Shareholder's shares of Common
Stock. If the Company's purchase right with respect to all or any portion
of any shares of Common Stock is not effective until the fifth anniversary
of the Merger by reason of a choice made under this Section 3.3, such fifth
anniversary shall be deemed to be the "date of termination" used to
determine the purchase price to be paid for the shares of Common Stock to
be purchased after such fifth anniversary. The Company shall, subject to
Section 5, pay to such Management Shareholder (or his estate, as the case
may be) whose employment so terminates the Fair Market Value of such shares
by the 15th day following the "date of termination."
(d) Interest. Any payments based on Fair
Market Value required to be made by the Company under this Section 3.3
shall accrue interest at 9% simple interest per annum on the amounts not
paid from the date on which such payment became due to the date the Company
makes such payments. Interest shall not accrue on any payments made on a
delayed basis pursuant to subparagraphs (i), (ii), (iii) or (iv) of Section
<PAGE>
3.3(b). No interest shall accrue or be paid for any period in which
payment is delayed solely by a failure to deliver certificates representing
the purchased shares.
3.4 Termination of Right to Purchase. The Company's
right to purchase from a Management Shareholder and such Management
Shareholder's obligation to sell shares of Common Stock pursuant to Section
3.1 shall terminate as to all shares for which no prior notice to purchase
has been given on the earlier of (a) the tenth anniversary of the Merger or
(b) the closing of an IPO. Such termination of the Company's rights shall
be effective even if the thirty-day time period set forth in Section 3.2
has not expired.
4. Purchase Price.
4.1 Fair Market Value.
(a) Appraisal. The Company shall engage, from
time to time, as determined by the Board or at the request of GMIP or
Hancock, an independent valuation consultant or appraiser of recognized
standing reasonably satisfactory to GMIP (the "Appraiser") to appraise the
Fair Market Value of the shares of Common Stock as of the last day of the
fiscal period then most recently ended or, at the request of the Board, as
of any more recent date (the "Appraisal Date") and to prepare and deliver a
report to the Company describing the results of such appraisal (the
"Appraisal"). However, by a vote of the Board of Directors, the Company
may, rather than obtaining an appraisal, agree with a Management
Shareholder on the value of such Management Shareholder's shares of Common
Stock and the result of such an agreement shall be an "Appraisal" but only
applicable to the Management Shareholder in question.
(b) Fair Market Value. For the purposes of
this Agreement, the "Fair Market Value" of any share of Common Stock being
purchased by or sold to the Company shall be $10.00 per share until
December 31, 1997, unless the Board requests an Appraisal for an earlier
date, and thereafter shall be the Fair Market Value of the entire Common
Stock equity interest of the Company taken as a whole, divided by the
number of outstanding shares of Common Stock, all calculated on a fully
diluted basis, without additional premiums for control or discounts for
minority interests or restrictions on transfer. After December 31, 1997
(or if earlier, the date of the first Appraisal), Fair Market Value shall
be determined (i) by the Board of Directors in good faith based on a bona
fide offer from a third party to purchase Common Stock that is as of a date
not more than sixty (60) days preceding the date for which Fair Market
Value is to be determined, (ii) if clause (i) does not apply, as set forth
in the most recent Appraisal prior to such date plus interest at 9% simple
interest per annum to the date of termination or deemed termination, or
(iii) if the selling Shareholder so chooses by notice to the Company within
30 days of the date of termination of his employment, and if the most
recent Appraisal was more than six (6) months prior to the termination of
employment, the Fair Market Value of any shares of Common Stock to be
purchased by the Company pursuant to this Agreement shall be determined as
of the next Appraisal Date following the applicable date of termination or
deemed termination, which shall be not more than six months after the date
of termination of employment. Any payments due on a delayed basis because
a Shareholder chooses the method in clause (iii) to determine Fair Market
Value shall be due fifteen days after the Company receives the second
Appraisal and shall bear interest only from such fifteenth day.
(c) Notice to Shareholders. After receipt of
any Appraisal, or any other event resulting in a determination of Fair
Market Value, the Company shall provide notice of such Fair Market Value to
each Shareholder.
4.2 Carrying Value. For the purposes of Sections
3.1 and 6.5, the "Carrying Value" of any share of Common Stock shall be
equal to the price paid by the selling Management Shareholder for all
shares sold plus simple interest at a rate per annum equal to 9% which
shall be deemed to be the carrying cost, from the date of the Merger
through the date of such purchase, less the amount of dividends paid to
such Management Shareholder in respect of such share (to the extent that
the amount of such dividends does not exceed such interest).
5. Prohibited Purchases. Notwithstanding anything to
the contrary herein, the Company shall not be permitted or obligated to
purchase any shares of Common Stock from a Shareholder hereunder to the
extent (i) the Company is prohibited from purchasing such shares by any
debt instruments or agreements (the "Financing Documents") entered into by
the Company or any of its Affiliates or by applicable law, (ii) a default
has occurred under any Financing Document and is continuing, (iii) the
purchase of such shares would, or in the reasonable opinion of the Board
might, result in the occurrence of an event of default under any Financing
Document or create a condition which would or might, with notice or lapse
of time or both, result in such an event of default or (iv) the purchase of
such shares would, in the reasonable opinion of the Board, be imprudent in
view of the financial condition (present or projected) of the Company or
the anticipated impact of the purchase of such shares on the Company's
ability to meet its obligations under any Financing Document. If the total
number of shares of Common Stock which the Company has the right or
obligation to purchase on any date exceeds the total amount permitted to be
purchased on such date pursuant to the preceding sentence (the "Maximum
Amount"), the Company shall purchase on such date only that number of
shares of Common Stock up to the Maximum Amount (and shall not be required
<PAGE>
to purchase more than the Maximum Amount) in such amounts as the Board
shall in good faith determine, applying such amounts in the following order
of priority:
(a) First, the shares of Common Stock of all
Management Shareholders whose shares of Common Stock are being purchased by
the Company by reason of termination of employment due to death or
Disability and, to the extent that the number of shares of Common Stock
that the Company is obligated to purchase from such Management Shareholders
exceeds the Maximum Amount, such shares of Common Stock pro rata among such
Management Shareholders on the basis of the number of shares of Common
Stock held by each of such Management Shareholders that the Company is
obligated or has the right to purchase; and
(b) Second, to the extent that the Maximum
Amount is in excess of the amount the Company purchases pursuant to clause
(a) above, the shares of Common Stock of all Management Shareholders whose
shares of Common Stock are being purchased by the Company by reason of
termination of employment without Cause or due to Retirement or resignation
for Good Reason up to the Maximum Amount and, to the extent that the number
of shares of Common Stock that the Company is obligated to purchase from
such Management Shareholders exceeds the Maximum Amount, such shares of
Common Stock pro rata among such Management Shareholders on the basis of
the number of shares of Common Stock held by each of such Management
Shareholders that the Company is obligated or has the right to purchase;
and
(c) Third, to the extent the Maximum Amount is
in excess of the amounts the Company purchases pursuant to clauses (a) and
(b) above, the shares of Common Stock of all other Management Shareholders
whose shares of Common Stock are being purchased by the Company up to the
Maximum Amount and, to the extent that the number of shares of Common Stock
that the Company is obligated to purchase from such Management Shareholders
exceeds the Maximum Amount, the shares of Common Stock of such Management
Shareholders in such order of priority and in such amounts as the Board in
its sole discretion shall in good faith determine to be appropriate under
the circumstances; and
Notwithstanding anything to the contrary contained in this Agreement, if
the Company is unable to make any payment when due to any Management
Shareholder under this Agreement by reason of this Section 5, the Company
shall make such payment at the earliest practicable date permitted under
this Section 5 and any such payment shall accrue simple interest (or if
such payment is accruing interest at such time, shall continue to accrue
interest) at 9% per annum from the date such payment is due and owing to
the date such payment is made. Interest shall cease to accrue during, and
shall not be paid for, any period of delay caused solely by a failure to
deliver certificates representing purchased shares. All payments of
interest accrued hereunder shall be paid only at the date of payment by the
Company for the shares of Common Stock being purchased.
6. Sales to Third Parties.
6.1 General; Co-Sales in Certain Instances; Right to
Require a Sale.
(a) No Management Shareholder or Founder shall,
prior to the earliest to occur of (i) the closing of an IPO or (ii) the
fifth anniversary of the Merger (the "Restricted Period"), sell any of his
or its shares of Common Stock to a third party except Permitted Transferees
or pursuant to Sections 6.1(b) or 6.1(c). After the termination of the
Restricted Period, a Management Shareholder or Founder may sell shares of
Common Stock to a third party only in compliance with the provisions of
Sections 6.2 and 6.3 or pursuant to Sections 6.1(b) and (c).
(b) Institutional Investors may sell shares of
Common Stock to a third party eligible to purchase under Rule 144A at any
time after the date of the Merger, subject to the right of first offer and
co-sale provisions of Section 6.2.
(c) If GMIP, ASCP and Hancock decide to sell to
a third party or parties unaffiliated with GMIP, ASCP and Hancock all (but
not less than all) of the aggregate shares of Common Stock owned by GMIP,
ASCP and Hancock, then, first offer rights under Section 6.2 shall not
apply and if requested by such third party or parties, each other
Shareholder and Chase shall join GMIP, ASCP and Hancock in such sale for a
purchase price per share of Common Stock and on other terms and conditions
not less favorable to the other Shareholders and Chase than those offered
to GMIP, ASCP and Hancock. If GMIP, ASCP, and Hancock do not require all
Stockholders and Chase to join in a sale as permitted by this Section
6.1(c) then co-sale rights under Section 6.2 shall apply.
(d) For purposes of Sections 6.1(b) and 6.1(c)
only, a "sale" shall include a merger or sale of all or substantially all
the assets of the Company or its subsidiaries.
6.2 Right of First Offer, Co-Sale Provisions. If an
Institutional Investor wishes to sell shares of Common Stock to third
parties but such sale is not a joint decision of GMIP, ASCP and Hancock
which is subject to Section 6.1(c), then the following provisions shall
apply.
<PAGE>
(a) If an Institutional Investor (the "Selling
Investor") desires to sell shares of Common Stock to a third party or
parties, then prior to offering or selling such shares of Common Stock the
Selling Investor shall deliver to the Company and each other Institutional
Investor a letter signed by the Selling Investor setting forth:
(i) the number of shares of Common Stock
which the Selling Investor desires to sell (the "ROFO
Shares");
(ii) the minimum cash purchase price per
share of Common Stock (the "ROFO Price") to be accepted by
the Selling Investor; and
(iii) the Selling Investor's offer
(irrevocable by its terms for 30 days following receipt)
to sell to the other Institutional Investors all (but not
less than all) of the ROFO Shares at the ROFO Price (the
"ROFO Offer").
The other Institutional Investors shall have the option, exercisable within
25 days following delivery of the ROFO Offer, to elect to purchase up to
their respective pro rata portion of the ROFO Shares based on the number of
shares of Common Stock (determined on a fully diluted basis) then owned by
each of them. If any Institutional Investor does not elect to purchase the
ROFO Shares pursuant to the preceding sentence, then those Institutional
Investors that do so elect shall have the right within five days after such
25-day period to elect to purchase the remaining ROFO Shares on a pro rata
basis or on such other basis as they may agree. If one or more
Institutional Investors elect to purchase all (but not less than all) ROFO
Shares, the closing of the purchase and sale pursuant to such election
shall take place within 10 days after expiration of the 25-day exercise
period.
(b) If, upon the expiration of 35 days
following delivery of the ROFO Offer, all ROFO Shares have not been
purchased by the other Institutional Investors then, (i) the Company shall
notify each Shareholder that co-sale rights pursuant to clauses (c) through
(g) of this Section 6.2 apply, and each Shareholder shall have the rights
granted under clauses (c) through (g) of this Section 6.2 with respect to
such proposed sale, and (ii) the Selling Investor may, subject to the co-
sale provisions of clauses (c) through (g) of this Section 6.2, sell to one
or more parties all (but not less than all) of the ROFO Shares for a cash
purchase price not less than the ROFO Price and not inconsistent with any
other terms in the ROFO Offer, provided that any such sale of ROFO Shares
shall be consummated within 120 days following delivery of the ROFO Offer.
(c) Should the Selling Investor receive one or
more bona fide offers (collectively, the "Purchase Offer") to purchase the
ROFO Shares, and should the Selling Investor accept or determine to accept
such Purchase Offer, then the Selling Investor promptly shall give written
notice (the "Purchase Notice") to the Company and the other Shareholders of
the terms and conditions of such Purchase Offer.
(d) Each Shareholder shall have the right,
exercisable upon written notice to the Selling Investor within five (5)
business days after receipt of the notice of the Purchase Offer, to
participate in the Selling Investor's sale of the ROFO Shares pursuant to
the specified terms and conditions of such Purchase Offer. To the extent
one or more Shareholders exercises such right of participation in
accordance with the terms and conditions set forth below, the number of
shares of Common Stock which the Selling Investor may sell pursuant to the
Purchase Offer correspondingly shall be reduced. The right of
participation of the Shareholders shall be subject to the following terms
and conditions:
(i) Each Shareholder may sell all or any
part of that number of shares of Common Stock of the
Company equal to the product obtained by multiplying (x)
the aggregate number of shares of Common Stock covered by
the Purchase Offer by (y) a fraction, the numerator of
which is the number of shares of Common Stock of the
Company owned by such Shareholder (determined on a fully
diluted basis), and the denominator of which is the sum of
shares of Common Stock of the Company at the time owned by
such Shareholder, the Selling Investor and all others
exercising rights of co-sale in connection with such
Purchase Offer (in each case, determined on a fully
diluted basis).
(ii) A Shareholder may effect participation
in the sale by delivering to the Selling Investor for
transfer one or more certificates, properly endorsed for
transfer, which represent: the number of shares of Common
Stock which such Shareholder elects to sell pursuant to
this Section 6.2.
(e) The delivery of the stock certificate by
each participating Shareholder to the purchase offeror in consummation of
the sale of the Common Stock pursuant to the terms and conditions specified
in the Purchase Notice, and the payment by the purchase offeror to each
participating Shareholder of that portion of the sale proceeds to which
<PAGE>
such Shareholder is entitled by reason of participation in such sale shall
occur simultaneously at a closing at the principal office of the Company,
or such place as the selling and purchasing parties may agree, at a time
and at a date mutually agreeable to all of the selling and purchasing
parties.
(f) The exercise or nonexercise of the rights
of the Shareholders hereunder to participate in one or more sales of Common
Stock made by a Selling Investor shall not affect adversely the rights of
any Shareholder to participate in subsequent Common Stock sales by the
Institutional Investors.
(g) The provisions of this Section 6.2 shall
not apply to any transactions with a Permitted Transferee.
6.3 Right of First Refusal.
(a) Procedure. If a Management Shareholder, or
Founder (the "Offering Shareholder") who is entitled to sell shares of
Common Stock to third parties pursuant to Section 6.1 (a) receives a bona
fide offer or offers from a third party or parties to purchase any shares
of Common Stock (the "Outside Offer"), then prior to selling such shares of
Common Stock to such third party or parties such Offering Shareholder shall
deliver to the Company a letter signed by such Offering Shareholder setting
forth:
(i) the name of the third party or
parties;
(ii) the prospective purchase price per
share of Common Stock;
(iii) all material terms and conditions
contained in the Outside Offer;
(iv) the Offering Shareholder's offer
(irrevocable by its terms for 30 days following receipt)
to sell to the Company all (but not less than all) of the
shares of Common Stock covered by the Outside Offer for a
purchase price per share of Common Stock, and on other
terms and conditions, not less favorable to the Company
than those contained in the offer of the third party or
parties (a "ROFR Offer"); and
(v) closing arrangements and a closing
date (not less than 45 nor more than 60 days following the
date of such letter) for any purchase and sale that may be
effected by the Company or any of its assignees pursuant
to this Section 6.
The Company shall, within 10 days following receipt of such letter, choose
either to purchase the shares of Common Stock subject to the ROFR Offer or
assign its rights pursuant to Section 6.4. If the Company chooses to
assign such rights pursuant to Section 6.4, it shall deliver written notice
of such assignment, on or prior to the end of such 10-day period, to the
Founders, the Institutional Investors and each Management Shareholder (the
"Management Offerees") owning not less than 10,000 shares of the Common
Stock or such greater (or, if approved by the Board of Directors, lesser)
number of shares that will assure the Company that the number and status of
the Management Offerees are such that such offer can be made without (x)
registration under the Act or (y) reliance on Regulation D promulgated
under the Act, provided that no Management Shareholder shall be given such
notice if the offer to such Management Shareholder would require
registration or qualification of the shares under federal or state
securities laws.
(b) Application of Co-Sale Rights. If, within
twenty-five (25) days of receipt by the Company of a ROFR Offer from a
Founder, any shares subject to the ROFR Offer have not been accepted for
purchase, the Company shall notify each Shareholder that co-sale rights
pursuant to subsections 9(c) through (g) of Section 6.2 apply, and each
Shareholder shall have the rights granted under subsections (c) through (g)
of Section 6.2 with respect to such proposed sale, provided that the
Founder shall be deemed to be the "Selling Investor" and the shares subject
to the Offer shall be deemed to be "ROFO Shares", in Section 6.2 for this
purpose.
(c) Effecting Sales. Unless 30 days following
receipt by the Company of the ROFR Offer described in Section 6.3(a), the
Company and any persons to whom the Company has assigned, pursuant to
Section 6.5, the right to accept the ROFR Offer has agreed to purchase all
the ROFR Shares, the Offering Shareholder may sell to such third party or
parties all the shares of Common Stock covered by the Outside Offer, for
the purchase price and on the other terms and conditions contained in the
Outside Offer but the Offering Shareholder may not sell less than the
number of shares of Common Stock covered by the Outside Offer unless the
exercise of co-sale rights is the reason. If the Company or its assignee
or assignees shall accept such ROFR Offer, the closing of the purchase and
sale pursuant to such acceptance shall take place as set forth in the ROFR
Offer of the Offering Shareholder to the Company pursuant to subparagraph
(v) of Section 6.3(a).
<PAGE>
6.4 Assignment. Subject to Section 6.3, each
Founder, each Institutional Investor, and each Management Offeree shall
have the right, if the Company has elected not to exercise its right to
purchase Common Stock pursuant to Section 6.3, to require the Company to
assign to it the Company's right of first refusal with respect to an
Outside Offer on a pro rata basis based on the number of shares of Common
Stock held by each Founder, each Institutional Investor and each such
Management Offeree.
6.5 Agreements to Be Bound. Notwithstanding
anything contained in this Section 6, any sale to a third party or any
Involuntary Transfer (as defined in Section 6.6) to an Involuntary
Transferee (as defined in Section 6.6) shall be permitted under the terms
of this Agreement only if such third party or Involuntary Transferee, as
the case may be, shall agree in writing to be bound by the terms and
conditions of this Agreement pursuant to an instrument of assumption
reasonably satisfactory in substance and form to the Company.
6.6 Involuntary Transfers. In the case of any
transfer of title or beneficial ownership of shares of Common Stock upon
default, foreclosure, forfeiture, divorce, court order, or otherwise than
by a voluntary decision on the part of a Shareholder (an "Involuntary
Transfer"), the Company shall have the right to purchase such shares
pursuant to this Section 6.6. Upon the Involuntary Transfer of any shares
of Common Stock, such Shareholder shall promptly (but in no event later
than two days after such Involuntary Transfer) furnish written notice (the
"Notice") to the Company indicating that the Involuntary Transfer has
occurred, specifying the name of the person to whom such shares have been
transferred (the "Involuntary Transferee"), giving a detailed description
of the circumstances giving rise to, and stating the legal basis for, the
Involuntary Transfer. Upon the receipt of the Notice, and for 30 days
thereafter, the Company shall have the right to purchase, and the
Involuntary Transferee shall have the obligation to sell, all (but not less
than all) of the shares of Common Stock acquired by the Involuntary
Transferee for a purchase price equal to the lesser of (a) the Fair Market
Value of such shares of Common Stock on the date of transfer to the
Involuntary Transferee (determined with reference to the most recent
Appraisal prepared and delivered pursuant to Section 4.1) and (b) the
amount of the indebtedness or other liability that gave rise to the
Involuntary Transfer plus the excess, if any, of the Carrying Value of such
shares of Common Stock over the amount of such indebtedness or other
liability that gave rise to the Involuntary Transfer.
Notwithstanding the foregoing, the Board may,
for good cause shown by the Shareholder who made the Involuntary Transfer,
determine that payment of a purchase price equal to the Fair Market Value
of such shares of Common Stock on the date of transfer to the Involuntary
Transferee would be appropriate under the circumstances, and direct that
payment be made in such amount.
The Company's right to purchase pursuant to this
Section 6.6 shall be assignable in accordance with Section 6.4 as if such
right to purchase were a "right to accept an Offer."
6.7 Termination of Right of First Refusal. All
rights and obligations pursuant to this Section 6 shall terminate upon the
earlier of the tenth anniversary of the Merger and the closing of an IPO.
7. Election of Directors.
7.1 Board Makeup. Until the earlier of (a) an IPO,
(b) the date upon which GMIP and its Affiliates own in the aggregate less
than 25% of the number of shares of Common Stock owned by GMIP immediately
after the Merger or (c) the tenth anniversary of the Merger, each of the
Shareholders agrees that from and after the Merger such Shareholder will
use his best efforts to nominate and elect and will vote all of the shares
of Common Stock owned or held of record by him to elect and, thereafter
from such period, to continue in office a Board consisting of eight
members, three of whom shall be designated by the Founders and shall be
reasonably acceptable to GMIP; one of whom shall be designated by Hancock;
one of whom shall be selected jointly by Hancock and GMIP, and three of
whom shall be designated by GMIP. The persons designated pursuant to this
Section 7.1 by the Founders, Hancock and GMIP may be changed from time to
time by the Founders, Hancock and GMIP, respectively, provided, however,
that during the term they are employed by the Company or any Affiliate,
Walter K. Lim, Howard C. Lim and Samuel D. Garretson shall each be one of
the directors named by the Founders if he is willing to serve. Following
an acquisition or merger, the Board may increase the number of directors to
not more than twelve, in which case GMIP shall name five directors, the
Founders shall name three directors (subject to the same proviso as in the
preceding sentence), Hancock shall name one director, and the balance shall
be allocated as the Board directs in the new merger agreement. If both
Michael S. Gordon and John H. Morris are no longer principals of the
manager of GMIP, then Hancock shall have the right to name one of the
directors GMIP would otherwise have the right to name, provided that
Hancock is, at such time, the beneficial owner of at least ten percent
(10%) of the Company's Common Stock. If Hancock no longer holds any Common
Stock, its rights to name a director shall terminate. On each date that
any one of Walter Lim, Howard Lim and Samuel Garretson ceases to own Common
Stock, the number of directors to be named by the Founders shall decrease
by one, and when all three of such Founders cease to own Common Stock, the
Founders shall no longer have the right to name any directors. The
<PAGE>
positions as directors formerly held by directors named by GMIP, Hancock or
Founders shall, once the other provisions of this Section 7.1 no longer
govern, be elected under the laws of Delaware without regard to this
Section 7.1.
7.2 Irrevocable Proxy. To effectuate Section 7.1
and Section 6.1 and in addition to and not in lieu of Section 7.1, each
Shareholder hereby grants to the Secretary of the Company an irrevocable
proxy solely for the purpose of voting all of the shares of Common Stock of
the Company owned by the grantor of the proxy for the election of directors
nominated in accordance with Section 7.1 or voting shares in favor of a
merger or sale of assets required by Section 6.1.
8. Stock Certificate Legend. A copy of this Agreement
shall be filed with the Secretary of the Company and kept with the records
of the Company. Each certificate representing shares of Common Stock
owned by the Shareholders shall bear upon its face the following legends in
addition to any legends required by applicable state law:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL TO THE STOCKHOLDER, WHICH COUNSEL MUST BE,
AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE,
SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER
DISPOSITION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE ACT, SUCH LAWS AND
THE STOCKHOLDER AGREEMENT, DATED AS OF _______ __,
1997.
(b) THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
CONDITIONS, AS SPECIFIED IN A STOCKHOLDER AGREEMENT
ENTERED INTO AS OF THE TH DAY OF_____, 1997, COPIES
OF WHICH ARE ON FILE AT THE OFFICE OF THE ISSUER AND
WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF
SUCH SHARES UPON WRITTEN REQUEST."
All Shareholders shall be bound by the
requirements of such legends to the extent that such legends are
applicable. Upon a Registration of any shares of Common Stock, the
certificates representing such shares shall be replaced, at the expense of
the Company, with certificates not bearing the legend required by Section
8(a).
9. Change of Control. Each of the Shareholders agrees
that from and after the date hereof, if a transaction or series of related
transactions is proposed whereby 50% or more, in the aggregate, of the
voting power of the Company is to be transferred to one or more third
parties, then each of the Shareholders (a) shall vote all of the shares of
Common Stock beneficially owned or held of record by it or him against such
proposed transaction, and (b) shall not transfer the shares of Common Stock
beneficially owned or held of record by it or him to such third party or
parties, unless in each case the Institutional Investors by a Required Vote
have consented to such transaction and all of the Shareholders have an
opportunity to participate in such transaction pro rata giving effect to
the respective economic interest of their respective shares of Common
Stock.
10. Covenants; Representations and Warranties.
10.1 New Management Shareholders. Each of the
parties hereto hereby agrees that any director or employee of the Company
or any of its Affiliates who after the date of this Agreement is offered
shares of Common Stock shall, as a condition precedent to the acquisition
of such shares of Common Stock, become a party to this Agreement by
executing the same and delivering it to the Company at its address
specified in Section 18 hereof. Upon such execution and delivery, such
employee shall be a Management Shareholder for all purposes of this
Agreement unless such employee is the principal shareholder of a company
acquired by the Company and is designated a Founder by the Board.
10.2 No Other Arrangements or Agreements. Each
Shareholder and Chase hereby represents and warrants to each of the other
parties hereto that, except for the stockholder agreements superseded
hereby, and subscription agreements or stock purchase agreements or warrant
agreements entered into on or prior to the date hereof, he or it has not
entered into or agreed to be bound by any other arrangements or agreements
of any kind with any other party with respect to the shares of Common
Stock, including, but not limited to, arrangements or agreements with
respect to the acquisition, disposition or voting of shares of Common Stock
(whether or not such agreements and arrangements are with the Company,
other Shareholders or holders of Common Stock that are not parties to this
Agreement) except for stock pledge agreements with lenders approved by the
Board. Each Shareholder and Chase agrees that, except as disclosed above,
he or it will not enter into any such other arrangements or agreements as
he or it has represented and warranted to above with any other party as
<PAGE>
long as any of the terms of this Agreement remain in effect, except in
connection with this Agreement or in connection stock options or other
similar fringe benefit programs of the Company or any of its Affiliates.
10.3 Restrictions on Fundamental Changes. Without a
Required Vote, the Company shall not:
(a) Issue any additional shares of Common
Stock, except for up to 200,000 shares which the Company may issue and sell
(directly or upon the exercise of stock options) to persons who are, or
effective on purchasing shares become, employees of or substantially full-
time consultants to the Company and become Management Shareholders;
(b) Issue or sell any additional shares of
preferred stock or any securities convertible into or exchangeable for
Common Stock or any class of security ranking prior to Common Stock;
(c) Reorganize, consolidate or merge with or
into another corporation, or sell all or substantially all its assets to
another entity;
(d) Amend its Certificate of Incorporation;
(e) Amend its by-laws in any manner which is
inconsistent with the terms of this Stockholder Agreement or which provides
for, permits or requires, for the taking of any corporate action, a
different vote than is specified therein on the date hereof unless such
amendment is for the purpose of conforming the bylaws to this Agreement;
(f) Declare any dividend on the shares of
Common Stock; or
(g) Take any action as sole shareholder of
Piedmont or ASC to cause, or otherwise permit, (i) Piedmont or ASC to cease
to be a wholly owned subsidiary of the Company, or (ii) Piedmont or ASC to
reorganize, consolidate or merge with or into another corporation, or sell
all or substantially all of its assets to another entity.
10.4 Management Incentive Plan. The Company agrees
that after the effective date of the Merger it will continue in effect,
with appropriate modifications (including an extension for at least five
years after the Merger and the inclusion of both the ASC and Piedmont
Management Shareholders), a Management Incentive Plan having substantially
the terms and conditions set forth on Exhibit _ to this Agreement.
11. Amendment and Modification. This Agreement may be
amended, modified or supplemented only by written agreement of the Company,
the Institutional Investors by a Required Vote and the Founders and
Management Shareholders owning a majority of the shares of Common Stock
that are owned by all the Founders and Management Shareholders. If the
Company, the Institutional Investors by a Required Vote and the requisite
number of Founders and Management Shareholders shall have so agreed, the
Company shall notify all other Shareholders promptly after such amendment,
modification or supplement shall take effect. However, no amendment shall
adversely affect a Management Shareholder's rights under Section 2 without
such Management Shareholder's consent.
12. Parties.
12.1 Assignment. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and assigns,
provided that neither the Company nor any Founder or Management Shareholder
shall assign any of its rights or obligations pursuant to this Agreement
without the prior written agreement of the Institutional Investors by a
Required Vote. In the case of Permitted Transferees, third parties and
Involuntary Transferees, such Permitted Transferees, third parties or
Involuntary Transferees, as the case may be, shall be deemed the
Shareholder hereunder for purposes of obtaining the benefits or enforcing
the rights of such Shareholder hereunder, provided that no Permitted
Transferee, third party or Involuntary Transferee, as the case may be,
shall derive any rights under this Agreement unless and until such
Permitted Transferee, third party or Involuntary Transferee, as the case
may be, has delivered to the Company a valid undertaking to become, and
becomes, bound by the terms of this Agreement to which the transferring
Shareholder is subject.
12.2 Termination. Any party to, or person who is
subject to, this Agreement which ceases to own shares of Common Stock or
any interest therein shall cease to be a party to, or person who is subject
to, this Agreement and thereafter shall have no rights or obligations
hereunder. This Agreement shall likewise terminate on earlier of ten years
or from the date of the Merger or the completion of an IPO but such
termination shall not alter rights pursuant to notices validly given under
Sections 2 and 3.
13. Recapitalizations, Exchanges, etc. Affecting the
Common Stock. Except as otherwise provided herein, the provisions of this
Agreement shall apply to the full extent set forth herein with respect to
(a) the shares of Common Stock and (b) 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
<PAGE>
respect of, in exchange for, or in substitution for the shares of Common
Stock, by reason of any stock dividend, split, reverse split, combination,
recapitalization, reclassification, merger, consolidation or otherwise.
Except as otherwise provided herein, this Agreement is not intended to
confer upon any person, except for the parties hereto, any rights or
remedies hereunder.
14. Transfer of Common Stock. If at any time the Company
purchases any shares of Common Stock pursuant to this Agreement, the
Company may pay the purchase price determined under this Agreement for the
shares of Common Stock it purchases by wire transfer of funds or Company
check in the amount of the purchase price, and upon receipt of payment of
such purchase price or, pursuant to Section 3.3 or Section 5, any portion
thereof, the selling Shareholder shall deliver the certificates
representing the number of shares of Common Stock being purchased in a form
suitable for transfer, duly endorsed in blank, and free and clear of any
lien, claim or encumbrance. Notwithstanding anything in this Agreement to
the contrary, the Company shall not be required to make any payment for
shares of Common Stock purchased hereunder until delivery to it of the
certificates representing such shares. If the Company is purchasing less
than all the shares of Common Stock represented by a single certificate,
the Company shall deliver to the selling Shareholder a certificate for any
unpurchased shares of Common Stock.
15. Further Assurances. Each party hereto or person
subject hereto shall do and perform or cause to be done and performed all
such further acts and things and shall execute and deliver all such other
agreements, certificates, instruments and documents as any other party
hereto or person subject hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
16. Governing Law. This Agreement and the rights and
obligations of the parties hereunder and the persons subject hereto shall
be governed by, and construed and interpreted in accordance with, the law
of the State of Delaware, without giving effect to the choice of law
principles thereof.
17. Invalidity of Provision. 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.
18. Notices. All notices and other communications
hereunder shall be in writing and, unless otherwise provided herein, shall
be deemed duly given if delivered personally or by telecopy or mailed by
registered or certified mail (return receipt requested) or by Federal
Express or other similar courier service to the parties at the following
addresses (or at such other address for the party as shall be specified by
like notice):
(a) If to the Company:
Outsourcing Services Group, Inc.
Attention: Secretary
425 So. Ninth Avenue
City of Industry, California 91746
with a copy to:
The Gordon + Morris Group
Attention: President
840 Newport Center Drive, Suite 600
Newport Beach, California 92660
(b) if to a Shareholder or Chase, as listed below
such party's signature or, if not so listed, to it at its address as
reflected in the stock records of the Company, or as such party shall
designate to the Company in writing, with a copy to GMIP at its address
indicated below.
(c) If to GMIP:
Gordon + Morris Investment Partnership, L.P.
840 Newport Center Drive, Suite 600
Newport Beach, California 92660
with a copy to:
The Gordon + Morris Group
Attention: President
840 Newport Center Drive, Suite 600
Newport Beach, California 92660
19. Headings; Execution in Counterparts. The headings
and captions contained herein are for convenience and shall not control or
affect the meaning or construction of any provision hereof. This Agreement
may be executed in any number of counterparts, each of which shall be
deemed to be an original and which together shall constitute one and the
same instrument.
20. Expenses. The Company shall pay the fees and
expenses of the Management Shareholders reasonably incurred by them in
<PAGE>
connection with the preparation, negotiation and closing of this Agreement,
provided, however, that the Company shall not be obligated to pay pursuant
to this Agreement the fees and expenses of more than one advisor for all of
the Management Shareholders.
21. Entire Agreement. This Agreement and the agreements
referred to herein embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings relating to the shares of Common Stock, other than those
expressly set forth or referred to herein or in the agreements referred to
herein. This Agreement supersedes all prior agreements and understandings
among the parties with respect to such subject matter.
22. Injunctive Relief. The shares of Common Stock cannot
readily be purchased or sold in the open market, and for that reason, among
others, the Company, the Shareholders and Chase will be irreparably damaged
in the event this Agreement is not specifically enforced. Each of the
parties therefore agrees that in the event of a breach of any provision of
this Agreement, the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of this Agreement. Such
remedies shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedy which the Company, the Shareholders or Chase
may have. Each Shareholder and Chase hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts in California or
Delaware for the purposes of any suit, action or other proceeding arising
out of or based upon this Agreement or the subject matter hereof. Each
Shareholder and Chase hereby consents to service of process by mail made in
accordance with Section 18.
23. Attorneys' Fees. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled
to recover such reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they
may be entitled, as may be ordered in connection with such proceeding.
24. Definitions. Terms used in this Agreement shall have
the meanings ascribed to them in this Section 24 unless such terms are
defined elsewhere in this Agreement:
Act: The Securities Act of 1933, as amended.
Affiliate: A person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, any other person. In the case of GMIP, its
affiliates shall also include each of its limited partners and their heirs,
successors and estates. In the case of Hancock, its affiliates shall also
include each of its limited partners and their heirs, successors and
estates.
Appraisal: As defined in Section 4.1(a).
Appraisal Date: The last day of the Company's most
recently completed fiscal year or, if applicable, the latest date for which
an Appraisal has been obtained.
Appraiser: An independent evaluation consultant or
appraiser of recognized national standing reasonably satisfactory to GMIP
retained for the purpose of appraising the fair market value of the shares
of the common stock.
ASCP: As defined in the first sentence of this
Agreement.
Board: The Board of Directors of the Company.
Carrying Value: As defined in Section 4.2.
Cause: The term "Cause" used in connection with a
termination of employment of a Management Shareholder shall mean the
definition used in such person's written employment agreement, if any, and
otherwise shall mean a termination of such Management Shareholder's
employment by the Company and its Affiliates due to (i) the continued
failure, after written notice, by such Management Shareholder substantially
to perform his duties with the Company or any of its Affiliates (other than
any such failure resulting from incapacity due to reasonably documented
physical or mental illness), or (ii) the engaging by such Management
Shareholder in serious misconduct which is material to the performance by
such Management Shareholder of his duties and obligations for the Company
or any of its Affiliate, including, without limitation, the disclosure of
material secret or confidential information of the Company or any of its
Affiliates.
Common Stock: The $0.001 par value common stock of
Outsourcing Services Group, Inc.
Company: Outsourcing Services Group, Inc., a
Delaware corporation. Persons employed by any subsidiary of the Company
<PAGE>
shall be deemed employees of the Company for all purposes of this
Agreement.
Disability: The termination of the employment of any
Management Shareholder by the Company or any of its Affiliates shall be
deemed to be by reason of a "Disability" if, as a result of such Management
Shareholder's incapacity due to reasonably documented physical or mental
illness, such Management Shareholder shall have been unable for more than
six months within any 12 month period to perform his duties with the
Company or any of its Affiliates on a full time basis and within 30 days
after written notice of termination has been given to such Management
Shareholder, such Management Shareholder shall not have returned to the
full time performance of his duties. The date of termination in the case
of a termination for "Disability" shall be the last day of the
aforementioned 30-day period.
Exchange Act: As Defined in Section 1.2.
Fair Market Value: As defined in Section 4.1(b).
Financing Documents: Any debt instrument or
agreement entered into by the Company or any of its subsidiaries.
Founders: As defined in the first sentence of this
Agreement.
Good Reason: A termination of a Management
Shareholder's employment with the Company or its Affiliates shall be for
"Good Reason" if such Management Shareholder voluntarily terminates his
employment with the Company or any of its Affiliates as a result of either
of the following:
(i) without the Management Shareholder's prior
written consent, a reduction in his current salary, other
than any such reduction that is part of a general salary
reduction or other concessionary arrangement affecting all
employees or affecting the group of employees of which the
Management Shareholder is a member;
(ii) the taking of any action by the Company or any
of its Affiliates that substantially diminishes the
aggregate value of the benefits provided him under the
medical, health, accident, disability, life insurance,
thrift and retirement plans in which he was participating
on the date of his execution of this Agreement, other than
any such reduction which is (x) required by law, (y)
implemented in connection with a general concessionary
arrangement affecting all employees or affecting the group
of employees of which the Management Shareholder is a
member or (z) generally applicable to all beneficiaries of
such plans; or
(iii) a relocation, without such Management
Shareholder's consent, of his principal place of
employment to a site more than 50 miles from his place of
employment at the time of signing this Agreement or such
other place to which a relocation has occurred with the
Management Shareholder's consent; or
(iv) any other state of facts or circumstances which
has been determined to be a "constructive termination" by
the Board.
GMIP: As defined in the first sentence of this
Agreement.
Hancock: As defined in the first sentence of this
Agreement.
Institutional Investor: As defined in the first
sentence of this Agreement, and including Chase to the extent provided in
Section 1.2(d)(i).
Involuntary Transferee: As defined in Section 6.6.
Involuntary Transfer: A transfer of title or
beneficial ownership of shares of Common Stock upon default, foreclosure,
forfeit, divorce, court order, or otherwise than by a voluntary decision on
the part of a Shareholder.
IPO: As defined in Section 1.1.
Management Offerees: Management Shareholders owning
not less than 10,000 shares of the Common Stock or such greater number of
shares that will assure the Company that the number and status of the
Management Offerees are such that an offer by a third party to purchase any
share of common stock can be made without (a) registration under the Act,
or (b) reliance on Regulation D promulgated under the Act.
Management Shareholders: As defined on Page 1 of the
Agreement.
<PAGE>
Maximum Amount: As defined in Section 5.
Merger: The consummation of the Merger, as defined
in the Recitals.
Notice: As defined in Section 6.7.
Offer: As defined in Paragraph 6.3(a)(iv).
Offering Shareholder: A Management Shareholder or
Founder who is entitled to sell shares of Common Stock to third parties
pursuant to Section 6.1 and who has received a bona fide offer or offers
from a third party or parties to purchase any shares of Common Stock.
Outside Offer: As defined in Section 6.3(a).
Permitted Transferee: Transferee identified in
Section 1.2.
Purchase Offer: As defined in Section 6.3.
Registration: An effective registration statement
under the Securities Act of 1933, as amended.
Required Vote: The vote or written consent of the
holders of at least two-thirds of the shares then held by the Institutional
Investors.
Restricted Period: The earlier to occur of (a) the
closing of an IPO, or (b) the fifth anniversary of the closing.
Retirement: The retirement of a Management
Shareholder upon or after reaching the age of 65.
ROFO Offer, ROFO Price, ROFO Shares: As defined in
Section 6.2.
ROFR Offer: As defined in Section 6.3.
Selling Investor: As defined in Section 6.2.
Shareholders: As defined on page 1, and including
Chase to the extent provided in Section 1.2(d)(i). However, for purposes
of receiving notices and exercising co-sale rights under Article 6, Chase
shall be deemed a Shareholder
Significant Risk: As defined in Section 1.2(a).
Transfers: The direct or indirect sale, assignment,
mortgage, transfer, pledge, hypothecation or other disposition of shares of
Common Stock now or hereafter owned by any Shareholder or any interest
therein.
IN WITNESS WHEREOF, this Agreement has been signed by
each of the parties hereto on the date opposite such party's signature
hereto, and shall be effective as of the date first above written.
OUTSOURCING SERVICES GROUP, INC.,
Date: By: /s/ Joseph Sortais
------------------------------
Joseph W. Sortais,
Chief Financial Officer
By: /s/ Walter Lim
------------------------------
Walter K. Lim, Chairman
GORDON + MORRIS INVESTMENT
PARTNERSHIP, L.P.
By: Gordon + Morris Partners, L.P.,
General Partner
Date: 6/26/97 By: /s/ John H. Morris
------------------------------
Title: Partner
HANCOCK VENTURE PARTNERS IV -
DIRECT FUND, L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
Date: 6/25/97 By: /s/ Robert Wadsworth
--------------------------
Authorized Officer
<PAGE>
Address: 1 Financial Center
Boston, MA 02111
ASC INVESTMENT PARTNERS, L.P.
By: The Gordon + Morris Group,
as general partner
Date: 6/26/97 By: /s/ John H. Morris
------------------------------
Title: President
CHASE MANHATTAN CAPITAL CORPORATION
Date: By: John M.B. O'Connor
------------------------------
Title:
Date: 6/26/97
------------------------------
(Signature of Management
Shareholder or Founder)
Name: Christopher Denney
---------------------------
(Please Print)
Address: 1924 Edenvale Crescent
Burlington, Ontario L7P3L9
Canada
Spousal Waiver
___________________________ [Name of spouse] hereby waives and
releases any and all equitable or legal claims and rights, actual, inchoate
or contingent which _____ [he or she] may acquire with respect to the
disposition, voting or control of the shares of Common Stock subject to
this Agreement, except for rights in respect of the proceeds of any
disposition of such Common Stock.
---------------------------------
(Signature of Spouse)
Date: 6/26/97
---------------------------------
(Signature of Management
Shareholder or Founder)
Name: Ian R. Gecker
---------------------------
(Please Print)
Address: 482 Milledge Gate
Mariette, GA 30067
Spousal Waiver
Lydia Gecker [Name of spouse] hereby waives and releases any and all
equitable or legal claims and rights, actual, inchoate or contingent which
_____ [he or she] may acquire with respect to the disposition, voting or
control of the shares of Common Stock subject to this Agreement, except for
rights in respect of the proceeds of any disposition of such Common Stock.
/s/ Lydia Gecker
---------------------------------
(Signature of Spouse)
Date: 6/27/97
---------------------------------
(Signature of Management
Shareholder or Founder)
Name: Michael J. Garretson
--------------------------------
(Please Print)
Address: 3975 Sundown Drive
Gainesville, GA 30506
<PAGE>
Spousal Waiver
Elizabeth R. Garretson [Name of spouse] hereby waives and releases any and
all equitable or legal claims and rights, actual, inchoate or contingent
which _____ [he or she] may acquire with respect to the disposition, voting
or control of the shares of Common Stock subject to this Agreement, except
for rights in respect of the proceeds of any disposition of such Common
Stock.
/s/ Elizabeth R. Garretson
---------------------------------
(Signature of Spouse)
Date: 6/26/97
---------------------------------
(Signature of Management
Shareholder or Founder)
Name: Gregory G. Garretson
-------------------------------
(Please Print)
Address: 1180 Antioch Rd.
Gainesville, GA 30506
Spousal Waiver
Mary Garretson [Name of spouse] hereby waives and releases any and all
equitable or legal claims and rights, actual, inchoate or contingent which
_____ [he or she] may acquire with respect to the disposition, voting or
control of the shares of Common Stock subject to this Agreement, except for
rights in respect of the proceeds of any disposition of such Common Stock.
/s/ Mary Garretson
---------------------------------
(Signature of Spouse)
Date:
---------------------------------
(Signature of Management
Shareholder or Founder)
Name: Richard G. Mirabile Sr.
---------------------------------
(Please Print)
Address: 1363 Louisa Ave.
West Covina, CA 91790
Spousal Waiver
Della M. Mirabile [Name of spouse] hereby waives and releases any and all
equitable or legal claims and rights, actual, inchoate or contingent which
_____ [he or she] may acquire with respect to the disposition, voting or
control of the shares of Common Stock subject to this Agreement, except for
rights in respect of the proceeds of any disposition of such Common Stock.
/s/ Della M. Mirabile
--------------------------
(Signature of Spouse)
Date: 6/26/97
--------------------------
(Signature of Management
Shareholder or Founder)
Name: Harry Wu
--------------------------
(Please Print)
Address: 6128 W. San Vicente
Los Angeles, CA 90042
Spousal Waiver
Kim Wu [Name of spouse] hereby waives and releases any and all equitable or
legal claims and rights, actual, inchoate or contingent which _____ [he or
she] may acquire with respect to the disposition, voting or control of the
shares of Common Stock subject to this Agreement, except for rights in
respect of the proceeds of any disposition of such Common Stock.
<PAGE>
/s/ Kim Wu
--------------------------
(Signature of Spouse)
Date: 6/26/97
--------------------------
(Signature of Management
Shareholder or Founder)
Name: Elaine M. Suderno
--------------------------
(Please Print)
Address: 10528 Acoro Street
Bellflower, CA 90706
Spousal Waiver
________________________ [Name of spouse] hereby waives and releases any
and all equitable or legal claims and rights, actual, inchoate or
contingent which _____ [he or she] may acquire with respect to the
disposition, voting or control of the shares of Common Stock subject to
this Agreement, except for rights in respect of the proceeds of any
disposition of such Common Stock.
--------------------------
(Signature of Spouse)
Date: 6/26/97
--------------------------
(Signature of Management
Shareholder or Founder)
Name: Lorena Axthelm
---------------------------
(Please Print)
Address: 1069 N. Glendora Ave.
Covina, CA 91724
Spousal Waiver
_________________________ [Name of spouse] hereby waives and releases any
and all equitable or legal claims and rights, actual, inchoate or
contingent which [he or she] may acquire with respect to the
disposition, voting or control of the shares of Common Stock subject to
this Agreement, except for rights in respect of the proceeds of any
disposition of such Common Stock.
--------------------------
(Signature of Spouse)
Date: 6/26/97
---------------------------
(Signature of Management
Shareholder or Founder)
Name: Linda L. Storms
---------------------------
(Please Print)
Address: 1101 Calle Malaga Dr.
Duarte, CA 91010
Spousal Waiver
_________________________ [Name of spouse] hereby waives and releases any
and all equitable or legal claims and rights, actual, inchoate or
contingent which _____ [he or she] may acquire with respect to the
disposition, voting or control of the shares of Common Stock subject to
this Agreement, except for rights in respect of the proceeds of any
disposition of such Common Stock.
---------------------------
(Signature of Spouse)
<PAGE>
Date: 6/26/97
---------------------------
(Signature of Management
Shareholder or Founder)
Name: Joseph Sortais
--------------------------
(Please Print)
Address: 12 Cedar Tree Lane
Irvine, CA 92612
Spousal Waiver
Mary Lou Sortais [Name of spouse] hereby waives and releases any and all
equitable or legal claims and rights, actual, inchoate or contingent which
_____ [he or she] may acquire with respect to the disposition, voting or
control of the shares of Common Stock subject to this Agreement, except for
rights in respect of the proceeds of any disposition of such Common Stock.
/s/ Mary Lou Sortais
----------------------------
(Signature of Spouse)
Date: 6/26/97
----------------------------
(Signature of Management
Shareholder or Founder)
Name: Walter K. Lim
---------------------------
(Please Print)
Address: 14720 Horticulture Dr.
Hacienda Heights, CA
01745
Spousal Waiver
Sylvia Lim [Name of spouse] hereby waives and releases any and all
equitable or legal claims and rights, actual, inchoate or contingent which
________ [he or she] may acquire with respect to the disposition, voting or
control of the shares of Common Stock subject to this Agreement, except for
rights in respect of the proceeds of any disposition of such Common Stock.
/s/ Sylvia Lim
----------------------------
(Signature of Spouse)
Date: 6/26/97
----------------------------
(Signature of Management
Shareholder or Founder)
Name: Howard C. Lim
----------------------------
(Please Print)
Address: P.O. Box 2312
City of Industry, CA
91746-0312
Spousal Waiver
_________________________ [Name of spouse] hereby waives and releases any
and all equitable or legal claims and rights, actual, inchoate or
contingent which _____ [he or she] may acquire with respect to the
disposition, voting or control of the shares of Common Stock subject to
this Agreement, except for rights in respect of the proceeds of any
disposition of such Common Stock.
----------------------------
(Signature of Spouse)
Date: 6/26/97
----------------------------
(Signature of Management
Shareholder or Founder)
Name: Samuel D. Garretson
----------------------------
<PAGE>
(Please Print)
Address: 1665 Chevron Way
Atlanta, GA 30350
Spousal Waiver
Delphine E. Garretson [Name of spouse] hereby waives and releases any and
all equitable or legal claims and rights, actual, inchoate or contingent
which _____ [he or she] may acquire with respect to the disposition, voting
or control of the shares of Common Stock subject to this Agreement, except
for rights in respect of the proceeds of any disposition of such Common
Stock.
/s/ Delphine E. Garretson
----------------------------
(Signature of Spouse)
EXHIBIT A
Management Shareholders
Ian Gecker
Michael J. Garretson
Gregory G. Garretson
Richard Mirabile
Harry Wu
Elaine Suderno
Lorena Axthelm
Linda Storms
Joseph W. Sortais
Institutional Investors
Hancock Venture Partners IV - Direct Fund L.P.
ASC Investment Partners, L.P.
Gordon + Morris Investment Partnership, L.P.
Warrant Holder
Chase Manhattan Capital, L.P.
EXHIBIT B
A full list is on file with the corporate secretary of the Company. The
amount applicable to the individual stockholder signing this Agreement is
as follows:
<TABLE>
<CAPTION>
Name of
Shareholder Number of Shares
<S> <C>
GMIP 316,970
Hancock 343,916
ASCP 75,648
Walter K. Lim 192,974
Howard C. Lim 185,609
Samuel D. Garretson 101,187
Gregory Garretson 12,191
Michael Garretson 12,191
Ian Gecker 8,534
Richard Mirabile 5,295
Harry Wu 1,841
Elaine Suderno 1,841
Lorena Axthelm 1,841
Linda Storms 1,841
Joseph W. Sortais 5,295
<CAPTION>
Name of Number of Shares
Warrant Holder Subject to Warrants
<S> <C>
Chase 80,883
</TABLE>
<PAGE>
AMENDMENT TO STOCKHOLDER AGREEMENT
THIS AMENDMENT TO STOCKHOLDER AGREEMENT (this "Amendment") is made and
entered into as of December 31, 1997, among OUTSOURCING SERVICES GROUP,
INC. (the "Company"); GORDON + MORRIS INVESTMENT PARTNERSHIP, L.P., a
Delaware limited partnership ("GMIP"); ASC INVESTMENT PARTNERS, L.P., a
Delaware limited partnership ("ASCP"); HARBOURVEST VENTURE PARTNERS IV
DIRECT FUND, L.P. (presently named Hancock Venture Partners IV-Direct Fund,
L.P. and in the process of changing its name ) ("HarbourVest", and
sometimes with GMIP and ASCP referred to as the "Institutional Investors"),
and certain Founders and Management Shareholders, parties hereto that own
at least a majority of the shares of Common Stock that are owned by all
Founders and Management Shareholders.
R E C I T A L S
A. The Company, GMIP, ASCP, the Founders, HarbourVest and Management
Shareholders are parties to the Amended and Restated Stockholders
Agreement, dated as of June 30, 1997 (the "Agreement"). Capitalized terms
used herein and not otherwise defined, have the meanings given in the
Agreement.
B. The Company is party to a Share and Asset Purchase Agreement,
whereby the Company has agreed to acquire certain assets of CCL Industries
Inc. ("CCL") and the issued and outstanding shares of Kolmar Laboratories,
Inc. ("Kolmar") from CCL Industries Corporation, a wholly owned indirect
subsidiary of CCL (the "Kolmar Acquisition").
C. The Company intends to issue additional shares of its Common Stock
in order to finance the Kolmar Acquisition, including 1,100,000 shares to
an Affiliate of HarbourVest, which is becoming a party to the Agreement.
D. Section 11 to the Agreement provides that it may be amended by the
written agreement of the Company, the Institutional Investors by a required
vote, and the Founders and Management Shareholders owning a majority of the
shares of Common Stock that are owned by all the Founders and Management
Shareholders.
TERMS AND PROVISIONS
In consideration of the foregoing recitals and of the following terms
and provisions, it is agreed:
1. HarbourVest Name Change. All references in the Agreement to Hancock
shall now be to HarbourVest and its Affiliates.
2. Change in Board Makeup. Section 7.1 of the Agreement is hereby
amended and restated in its entirety as follows:
"7.1 Board Makeup. Until the earlier of (a) an IPO, (b) the date
upon which (i) GMIP and its Affiliates own in the aggregate fewer
than 33% of the greatest number of shares of Common Stock owned
by GMIP and such Affiliates at any time and (ii) HarbourVest and
its Affiliates own in the aggregate fewer than 33% of the
greatest number of shares of Common Stock owned by HarbourVest
and such Affiliates at any time, or (c) June 30, 2007, each of
the Shareholders agrees that from and after June 30, 1997 such
Shareholder will use his best efforts to nominate and elect and
will vote all of the shares of Common Stock owned or held of
record by him to elect and, thereafter from such period, to
continue in office a Board consisting of nine members, three of
whom shall be designated by the Founders and shall be reasonably
acceptable to GMIP; two of whom shall be designated by
HarbourVest; three of whom shall be designated by GMIP, and one
of whom shall be Christopher Denney, so long as he is the Chief
Executive Officer of the Company and is willing to serve. The
persons designated pursuant to this Section 7.1 by the Founders,
HarbourVest and GMIP may be changed from time to time by the
Founders, HarbourVest and GMIP, respectively, provided, however,
that Walter K. Lim, Howard C. Lim and Samuel D. Garretson shall
each be one of the directors named by the Founders if he is
willing to serve as long as each such person holds at least
thirty-three percent (33%) of the Common Stock he now holds. If
both Michael S. Gordon and John H. Morris are no longer
principals of the manager of GMIP, then HarbourVest shall have
the right to name one of the directors GMIP would otherwise have
the right to name, provided that HarbourVest is, at such time,
the beneficial owner of at least ten percent (10%) of the
Company's Common Stock. If either GMIP and its affiliates or
HarbourVest and its affiliates no longer hold at least thirty
three percent (33%) of the highest number of shares of the Common
Stock held at any time by them, the rights of GMIP, or
HarbourVest, as appropriate, to name a director shall terminate.
On each date that any one of Walter Lim, Howard Lim and Samuel
Garretson ceases to own at least thirty three percent (33%) of
the Common Stock he now holds, the number of directors to be
named by the Founders shall decrease by one, and when all three
of such Founders cease to own at least thirty three percent (33%)
of the Common Stock they each now hold, the Founders shall no
longer have the right to name any directors. If Christopher
<PAGE>
Denney ceases to be a director because he is no longer Chief
Executive Officer, Mr. Denney's seat will be filled by the
incoming Chief Executive Officer. The positions as directors
formerly held by directors named by GMIP, HarbourVest or Founders
shall, once the other provisions of this Section 7.1 no longer
govern, be elected under the laws of Delaware without regard to
this Section 7.1."
3. Increase to Authorized Shares/Options. Section 10.3(a) of the
Agreement shall be amended and restated in its entirety as follows:
"(a) Issue any additional shares of Common Stock, except
for up to 750,000 shares which the Company may issue and sell
(directly or upon the exercise of stock options) to persons who
are, or effective on purchasing shares become, employees of or
substantially full-time consultants to the Company and become
Management Shareholders;"
4. Consents.
(a) Kolmar Acquisition. The undersigned hereby consent to the Kolmar
Acquisition and the issuance of up to 3,000,000 shares of the Company's
Common Stock in connection with the Kolmar Acquisition.
(b) Certificate of Amendment. The undersigned hereby consent to the
filing of Certificate of Amendment, dated as of January 8, 1998, to the
Company's Certificate of Incorporation in connection with the Kolmar
Acquisition, which Certificate of Amendment increases the authorized shares
of the Company's Common Stock from 2 million to 6 million and which amends
certain provisions of the Company's Preferred Stock.
(c) Ratification. The undersigned hereby ratify all actions taken by
or on behalf of the Company prior to the effective date hereof in connection
with Section 5(a) and (b) above.
5. Further Assurances. Each party hereto or person subject hereto
shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or person
subject hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Amendment and the consummation of the
transactions contemplated hereby.
6. Governing Law. This Amendment and the rights and obligations of the
parties hereunder and the persons subject hereto shall be governed by, and
construed and interpreted in accordance with, the law of the State of
Delaware, without giving effect to the choice of law principles thereof.
7. Invalidity of Provision. The invalidity or unenforceability of any
provision of this Amendment in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Amendment in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
8. Headings; Execution in Counterparts. The headings and captions
contained herein are for convenience and shall not control or affect the
meaning or construction of any provision hereof. This Amendment may be
executed in any number of counterparts, each of which shall be deemed to be
an original and which together shall constitute one and the same
instrument.
9. Modifications and Conflicts. Except as expressly modified and
supplemented herein, all of the terms and conditions of the Agreement
remain in full force and effect; provided, however, that in the event of
any conflict between the provisions of the Agreement and the provisions of
this Amendment, the provisions of this Amendment shall control.
10. Integration. The Agreement as amended by this Amendment supersedes
all prior agreements or understandings between the parties relating to its
subject matter. There are no oral agreements pertaining to the subject
matter of the Agreement as amended by this Amendment, and this Amendment
shall supersede all oral representations and statements by the parties.
This Amendment may be modified only by as provided for in the Agreement.
11. Effectiveness. This Amendment shall become effective upon the
closing of the Kolmar Acquisition. Provided such closing occurs, the
"effective date" for purposes of this Amendment shall be December 31, 1997.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE AMENDMENT TO STOCKHOLDER AGREEMENT]
IN WITNESS WHEREOF, this Amendment has been signed by each of the
parties hereto on the date opposite such party's signature hereto, and
shall be effective as of the date first above written.
<PAGE>
OUTSOURCING SERVICES GROUP, INC.,
Date: 12/31/97 By: /s/ Joseph Sortais
---------------------------------
Joseph W. Sortais,
Chief Financial Officer
By: /s/ Walter Lim
---------------------------------
Walter K. Lim, Chairman
GORDON + MORRIS INVESTMENT
PARTNERSHIP, L.P.
By: Gordon + Morris Partners, L.P.,
General Partner
Date: 12/31/97 By: /s/ Michael S. Gordon
---------------------------------
Title: General Partner
HANCOCK VENTURE PARTNERS IV
DIRECT FUND, L.P.
By: Back Bay Partners XII L.P.
Its General Partner
By: Hancock Venture Partners Inc.
Its Managing Member
Date: 12/31/97 By: /s/ Robert Wadsworth
---------------------------------
Authorized Officer
ASC INVESTMENT PARTNERS, L.P.
By: The Gordon + Morris Group,
as general partner
Date: 12/31/97
By: /s/ Michael S. Gordon
---------------------------------
Title: Chairman
[SIGNATURE PAGE CONTINUES]
Date: 12/31/97 /s/ Walter Lim
------------------------------------
Walter K. Lim
Date: 12/31/97 /s/Howard Lim
------------------------------------
Howard C. Lim
Date: 12/31/97 /s/ Samuel Garretson
------------------------------------
Samuel D. Garretson
By signing below HarbourVest Partners V-Direct Fund L.P. joins in and
becomes a party to the Agreement, as amended.
HARBOURVEST PARTNERS V-
DIRECT FUND L.P.
By: HVP V-Direct Associates L.L.C.
Its General Partner
By: HarbourVest Partners, LLC
Its Managing Member
<PAGE>
Date: 12/31/97 By: /s/ Robert Wadsworth
--------------------------------
Authorized Officer
<PAGE>
CREDIT AGREEMENT
$70,000,000.00
among
OUTSOURCING SERVICES GROUP, INC.,
As Guarantor
AEROSOL SERVICES COMPANY, INC., AND
PIEDMONT LABORATORIES, INC.,TOGETHER WITH
SUBSIDIARIES OF OSG WHICH BECOME
ADDITIONAL BORROWERS HEREUNDER,
as Borrowers,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 11.8 HEREOF,
as Lenders,
BT COMMERCIAL CORPORATION,
as Agent.
and
HELLER FINANCIAL, INC.,
as Co-Agent
DATED AS OF JANUARY 8, 1998
TABLE OF CONTENTS
ANNEXES
Annex I - List of Lenders and Commitment Amounts
EXHIBITS
Exhibit A - Form of Revolving Note
Exhibit B - Form of Borrower Security Agreement
Exhibit C - Form of Lock Box Agreement and Blocked Account
Agreement
Exhibit D - Form of Compliance Certificate
Exhibit E - Form of Borrowing Base Certificate
Exhibit F - Form of Notice of Borrowing
Exhibit G - Form of Assignment and Assumption Agreement
Exhibit H - Form of Collateral Access Agreement
Exhibit I - Forms of Joinder Agreement(s)
Exhibit J - Form of Guarantor Security Agreement
Exhibit K - Form of OSG Guarantee
Exhibit L - Form of Borrower Guarantee
Exhibit M - Form of Subsidiary Guarantee
Exhibit N - Form of Pledge Agreement
Exhibit O - Form of Intercompany Note
Exhibit P - Form of Letter of Credit Request
SCHEDULES
Schedule A - Closing Document List
Schedule B - Disclosure Schedule
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of
January 8, 1998, among OUTSOURCING SERVICES GROUP, INC., a Delaware
corporation, as a Guarantor ("OSG"), its wholly-owned Subsidiaries AEROSOL
SERVICES COMPANY, INC., a California corporation ("ASC"), and PIEDMONT
LABORATORIES, INC., a Georgia corporation ("PLI"), as the initial Borrowers
and, following consummation of the Kolmar Acquisition, KOLMAR LABORATORIES,
INC., a Delaware corporation ("Kolmar"), as an additional Borrower, each
financial institution identified on Annex I (together with its successors
and assigns, a "Lender"), and BT COMMERCIAL CORPORATION acting as agent for
the Lenders and the Issuing Bank (the "Agent") and HELLER FINANCIAL, INC.
acting as co-agent (the "Co-Agent").
W I T N E S S E T H
WHEREAS, OSG owns all of the issued and outstanding capital
stock of ASC and PLI;
<PAGE>
WHEREAS, OSG has entered into that certain Share and Asset
Purchase Agreement dated October 28, 1997, among CCL Industries, Inc.
("CCL"), CCL Industries Corporation and OSG (the "Purchase Agreement")
pursuant to which OSG will purchase all of the issued and outstanding
capital stock of Kolmar and certain assets of CCL (the "Kolmar
Acquisition") on the terms set forth therein;
WHEREAS, in order to fund the purchase price for the Kolmar
Acquisition, OSG will borrow at least $70,000,000 (the "Bridge Loan") and
certain existing shareholders of OSG will purchase at least $20,900,000 of
additional common stock of OSG;
WHEREAS, OSG, ASC and PLI have requested that the Lenders make
loans and other financial accommodations available to Borrowers to
refinance certain Indebtedness of OSG, ASC and PLI and for other working
capital and corporate purposes of the Borrowers as provided herein,
including future acquisitions, and that, in connection therewith, the Agent
act as agent for the Lenders;
WHEREAS, OSG, ASC and PLI have requested that additional
Subsidiaries of OSG, including Kolmar, may become Borrowers or Borrower
Parties hereunder; and
WHEREAS, the Lenders are willing to make loans and other
financial accommodations available to the Borrowers, including future
Subsidiaries of OSG, and the Agent is willing to act as agent in connection
therewith, in each case on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I.
DEFINITIONS.
1.1 General Definitions.
Accounts means (i) with respect to any Borrower, as defined in the Security
Agreement, and (ii) with respect to any Guarantor, as defined in the
Guarantor Security Agreement.
Acquisition means (i) the acquisition by any Credit Party of all of the
issued and outstanding capital stock or other equity interests of a Person,
(ii) the acquisition by any Credit Party of all or substantially all of the
assets of a Person or a line of business of a Person or (iii) the merger or
consolidation of any Credit Party with a Person other than a Person that
was a Subsidiary of such Credit Party immediately prior to such merger.
Acquisition Documents means, (i) as to the Kolmar Acquisition, the Purchase
Agreement (including all schedules and exhibits thereto) and all other
agreements or instruments entered into by any Credit Party pursuant to or
in connection therewith or in connection with the Kolmar Acquisition, and
(ii) as to any other Permitted Acquisition, the stock or asset purchase
agreement (including all schedules and exhibits thereto) and all other
agreements or instruments entered into by any Credit Party pursuant to or
in connection therewith or with the Permitted Acquisition, in each case as
amended, supplemented or otherwise modified from time to time to the extent
not prohibited by the terms of any Credit Document.
Adjusted Eurodollar Rate means, with respect to each Interest Period for
any Eurodollar Rate Loan, the rate obtained by dividing (i) the Eurodollar
Rate for such Interest Period by (ii) a percentage equal to 1 minus the
stated maximum rate (stated as a decimal) of all reserves, if any, required
to be maintained against "Eurocurrency liabilities" as specified in
Regulation D of the Board of Governors of the Federal Reserve System (or
against any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Rate Loans is determined
or any category of extensions of credit or other assets which includes
loans by a non-United States office of any Lender to United States
residents).
Affiliate of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with or is a director
or officer of such Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to vote ten
percent (10%) or more of the securities having ordinary voting power for
the election of directors or the direct or indirect power to direct the
management and policies of a business; provided, however, that entities
controlled by HVP shall not be Affiliates of the Credit Parties within the
meaning of this definition based upon HVP's direct or indirect ownership of
equity interests or voting stock of OSG on the Closing Date.
Agent is defined in the preamble to this Credit Agreement, and shall
include any successor appointed pursuant to Section 10.8.
Agent Advance is defined in Section 2.2.
Applicable Eurodollar Rate Margin means 2.25% per annum; provided that if
<PAGE>
the Funded Debt Ratio for the applicable period ending with the then most
recently ended fiscal quarter (as shown on the quarterly Compliance
Certificate delivered pursuant to Section 7.1) is within the ranges set out
below and no Default or Event of Default exists as of the end of such
fiscal quarter (as shown on such Compliance Certificate or otherwise), the
Applicable Eurodollar Rate Margin shall be the per annum rate set out
opposite the applicable range below:
<TABLE>
<CAPTION>
Funded Debt Ratio Applicable Eurodollar Rate Margin
----------------- ----------------------------------
<S> <C>
less than or equal to 3.75:1.0
but greater than 3.25:1.0 2.0%
less than or equal to 3.25:1.0
but greater than 2.75:1.0 1.75%
less than or equal to 2.75:1.0 1.5%
</TABLE>
In the event of the delivery of a Compliance Certificate showing an
increase or decrease in the Funded Debt Ratio which requires a change in
the Applicable Eurodollar Rate Margin, the change in the Applicable
Eurodollar Rate Margin shall be effective from the first day of the
calendar month immediately following receipt of the Compliance Certificate
(provided that the Compliance Certificate is received by the Agent no later
than 10:00 A.M. Los Angeles time at least one (1) Business Day prior to the
first of such calendar month) until the next such date on which the
Applicable Eurodollar Margin Rate is subject to change following the
delivery of (or failure to deliver) a Compliance Certificate showing an
increase or decrease in the Funded Debt Ratio which requires a change in
the Applicable Eurodollar Rate Margin. The failure to deliver any
Compliance Certificate by the date required hereunder (after giving effect
to any applicable grace period) shall automatically cause the Applicable
Eurodollar Rate Margin to be the maximum per annum rate described above,
effective as of the first day of the calendar month immediately following
the date on which the delivery of the Compliance Certificate was otherwise
required.
Applicable Lending Office means, with respect to each Lender, such Lender's
Eurodollar Lending Office in the case of a Eurodollar Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.
Applicable Prime Rate Margin means 0.75% per annum; provided that if the
Funded Debt Ratio for the applicable period ending with the then most
recent ended fiscal quarter (as shown on the quarterly Compliance
Certificate delivered pursuant to Section 7.1) is within the ranges set out
below and no Default or Event of Default exists as of the end of such
fiscal quarter (as shown on such Compliance Certificate or otherwise), the
Applicable Prime Rate Margin shall be the per annum rate set out opposite
the applicable range below:
<TABLE>
<CAPTION>
Funded Debt Ratio Applicable Prime Rate Margin
----------------- ----------------------------
<S> <C>
less than or equal to 3.75:1.0
but greater than 3.25:1.0 0.50%
less than or equal to 3.25:1.0
but greater than 2.75:1.0 0.25%
less than or equal to 2.75:1.0 0%
</TABLE>
In the event of the delivery of a Compliance Certificate showing an
increase or decrease in the Funded Debt Ratio which requires a change in
the Applicable Prime Rate Margin, the change in the Applicable Prime Rate
Margin shall be effective from the first day of the calendar month
immediately following receipt of the Compliance Certificate (provided that
the Compliance Certificate is received by the Agent no later than 10:00
A.M. Los Angeles time at least one (1) Business Day prior to the first day
of such calendar month) until the next such date on which the Applicable
Prime Rate Margin is subject to change following the delivery of (or
failure to deliver) a Compliance Certificate showing an increase or
decrease in the Funded Debt Ratio which requires a change in the Applicable
Prime Rate Margin. The failure to deliver any Compliance Certificate by
the date required hereunder (after giving effect to any applicable grace
period) shall automatically cause the Applicable Prime Rate Margin to be
the maximum per annum rate described above, effective as of the first day
of the calendar month immediately following the date on which the delivery
of the Compliance Certificate was otherwise required.
ASC is defined in the preamble to this Credit Agreement.
Assignment and Assumption Agreement is defined in Section 11.8.
Auditors means a nationally recognized firm of independent public
accountants selected by the Borrowers and satisfactory to the Agent in its
sole discretion. For purposes of this Credit Agreement, the firm of
Deloitte & Touche LLP or KPMG Peat Marwick shall be deemed to be
satisfactory to the Agent.
Bankruptcy Code means Title 11 of the U.S. Code (11 U.S.C. sections 101 et
seq.), as amended from time to time, and any successor statute.
Benefit Plan means a "defined benefit plan" (as defined in Section 3(35) of
ERISA) for which OSG, any Subsidiary of OSG or any ERISA Affiliate has been
an "employer" (as defined in Section 3(5) of ERISA) within the past six
years.
<PAGE>
Blocked Account Agreement is defined in Section 4.11.
Borrower Guarantee means the Borrower Guarantee and Contribution Agreement
executed by the Borrowers in favor of the Agent, the Lenders and the
Issuing Bank pursuant to Section 5.1(a), substantially in the form of
Exhibit L.
Borrower Party means any of the Borrowers, Kolmar Canada and any Foreign
Subsidiary of a Borrower designated as a "Borrower Party" in accordance
with Sections 8.17 or Section 8.20 hereof as to which all conditions set
forth in such Sections have been met.
Borrower Security Agreement means the Security Agreement executed by the
Borrowers pursuant to Section 5.1(a) substantially in the form of Exhibit
B.
Borrowers means (i) prior to consummation of the Kolmar Acquisition, ASC
and PLI, collectively, (ii) upon consummation of the Kolmar Acquisition,
ASC, PLI and Kolmar, collectively, and (iii) upon consummation of a
Permitted Acquisition, any Subsidiary of OSG designated as a "Borrower" in
accordance with Section 8.20 hereof and as to which all conditions set
forth in such Section 8.20 have been met, collectively with the other
Persons then Borrowers hereunder.
Borrowing means a borrowing consisting of Revolving Loans of the same Type
made, continued or converted on the same day.
Borrowing Base means, as to each Borrower Party, the sum of:
(i) up to eighty-five percent (85%) of its Eligible
Accounts Receivable, plus
(ii) the lesser of $20,000,000.00 and up to sixty percent
(60%) of its Eligible Inventory, plus
(iii) the lesser of $16,500,000 and
(A) from the Closing Date to and including December
31, 1999 the sum of (x) up to sixty-five percent (65%)
of the Equipment Value of its Eligible Equipment and
(y) up to thirty percent (30%) of the Real Estate
Value of its Eligible Real Property; and
(B) in 2000, the sum of (x) up to fifty-five percent
(55%) of the Equipment Value of its Eligible Equipment
and (y) up to twenty percent (20%) of the Real Estate
Value of its Eligible Real Property ; and
(C) in 2001, the sum of (x) up to forty-five percent
(45%) of the Equipment Value of its Eligible Equipment
and (y) up to ten percent (10%) of the Real Estate
Value of its Eligible Real Property; and
(D) thereafter, up to thirty-five percent (35%) of
the Equipment Value of its Eligible Equipment; minus
(iv) the aggregate amount of reserves, if any, established
by the Agent under Section 2.1(b).
The Borrowing Base of each Borrower shall be determined for
such Borrower and each of its Subsidiaries which are Borrower Parties (but
not Borrowers).
Borrowing Base Certificate means a certificate of Borrowers showing the
Borrowing Base of each Borrower Party provided under Section 5.1 or Section
7.2 and substantially in the form of Exhibit E.
Bridge Loan is defined in the preamble to this Credit Agreement, and shall
include any "Term Loan" made in accordance with the terms of the Bridge
Loan Documents in a principal amount not to exceed the then outstanding
principal amount of the Bridge Loan.
Bridge Loan Documents means the Senior Subordinated Credit Agreement dated
as of the Closing Date among OSG, certain of its Subsidiaries as
guarantors, the lenders named therein and Bankers Trust Company, as Agent
pursuant to which the Bridge Loan is to be made, which shall contain such
terms and conditions as approved by the Agent and the Majority Lenders, as
amended, supplemented or otherwise modified from time to time to the extent
permitted under Section 8.11(c) hereof.
Business Day means any day that is not a Saturday, Sunday or a day on which
commercial banks in Los Angeles, California or New York, New York are
required or permitted by law to be closed. When used in connection with
Eurodollar Rate Loans, this definition will also exclude any day on which
commercial banks are not open for dealing in U.S. dollar deposits in the
London (England, U.K.) interbank market.
Capital Expenditures for a period means, the sum of all expenditures
capitalized for financial statement purposes in accordance with GAAP
(whether payable in cash or other property or accrued as a liability),
including the capitalized portion of Capital Leases and that portion of
Investments allocable to property, plant or equipment. Capital
<PAGE>
Expenditures shall exclude proceeds of a Casualty Loss applied to the
repair or replacement of the property affected by the Casualty Loss.
Capital Lease means, as to any Person, any lease of property, whether real,
personal or mixed, under which such Person is the lessee or sublessee
which, in conformity with GAAP, should be accounted for as a capital lease
on such Person's balance sheet.
Cash Equivalents means any of the following, so long as the same are
maintained in accounts in which the Agent has a perfected first priority
security interest and, to the extent constituting Investment Property,
Control: (i) securities issued, guarantied or insured by the United States
or any of its agencies and having maturities of not more than one year;
(ii) certificates of deposit having maturities of not more than one year
issued by the Agent, any Lender or by a U.S. federal or state chartered
commercial bank of recognized standing whose capital and unimpaired surplus
is in excess of $200,000,000 and whose short-term commercial paper rating,
or that of its parent holding company, is at least A-1 or the equivalent by
Standard & Poor's Rating Group, a division of McGraw Hill, Inc. ("S&P") and
at least P-1 or the equivalent by Moody's Investors Services, Inc.; and
(iii) commercial paper maturing no more than one (1) year from the date
issued and, at the time of acquisition, having a rating of at least A-1
from S&P or at least P-1 from Moody's Investors Services, Inc.
Casualty Loss means (i) the loss, damage, or destruction of any asset owned
or used by any Credit Party, (ii) the condemnation, confiscation, or other
taking, in whole or in part, of any such asset, or (iii) the diminishment
of such asset so as to render use for its intended purpose impracticable or
unreasonable.
Change of Control means the occurrence of one or more of the following
events:
(i) G+M and HVP or entities controlled by or under
common control with such Persons shall cease to have the power, by
ownership of stock, pursuant to the Stockholder Agreement or
otherwise, collectively, to elect a majority of the board of
directors of OSG; or
(ii) any "person" or "group" (as those terms are defined
in the Securities Exchange Act of 1934, in effect on the date
hereof) other than G + M or HVP or entities controlled by or under
common control with such Persons shall acquire or become the
beneficial owner of shares representing 25% or more of the shares
of OSG's stock having the power to elect directors; or
(iii) OSG shall cease to be the legal and beneficial owner,
directly or indirectly, of all of the issued and outstanding
capital stock of any Borrower; or
(iv) a "change of control" occurs within the meaning of
such term (or similar term) in any Subordinated Debt or the
Governing Documents of OSG.
Closing Date means, the date, if any, prior to January 31, 1998 on which
the conditions set forth in Sections 5.1 and 5.2 have been satisfied or
waived and the initial Revolving Loans are made.
Closing Document List is defined in Section 5.1.
Co-Agent is defined in the preamble to this Credit Agreement.
Code is defined in Section 1.3.
Collateral means, collectively, all property and interests in property,
real, personal or mixed, identified as security for the Obligations under
the Collateral Documents.
Collateral Access Agreement means any landlord waiver, mortgagee waiver,
bailee letter or any similar acknowledgement agreement of any warehouseman
or processor in possession of Inventory, substantially in the form of
Exhibit H or such other form as is approved by the Agent.
Collateral Documents means, collectively, the Borrower Security Agreement,
the Guarantor Security Agreement, the Intellectual Property Security
Agreements, all Pledge Agreements, all Pledge Amendments, all Joinder
Agreements, all Mortgages, all Lockbox Agreements, all Blocked Account
Agreements and all other contracts, instruments and other documents
pursuant to which Liens or Control are now or hereafter granted to the
Agent to secure the Obligations.
Collection Account is defined in Section 4.11.
Collections means all cash, funds, checks, notes, instruments and any other
form of remittance tendered by account debtors in payment of Accounts.
Commitment of a Lender means its commitment to make Revolving Loans and to
participate in Letters of Credit, up to the amount set forth opposite its
name on Annex I or in the applicable Assignment and Assumption Agreement,
as such amount may be reduced from time to time.
Compliance Certificate means a certificate delivered by Borrowers pursuant
<PAGE>
to Section 7.1 substantially in the form attached hereto as Exhibit D,
including a calculation in reasonable detail of compliance with the
covenants set forth in Article 8.
Concentration Account is defined in Section 4.11.
Contingent Obligation means, without duplication, any direct, indirect,
contingent or non-contingent guaranty or obligation for the Indebtedness of
another, except endorsements in the ordinary course of business.
Contractual Obligation, as applied to any Person, means any provision of
any securities issued by that Person or any indenture, mortgage, deed of
trust, security agreement, pledge agreement, guaranty, lease, contract,
undertaking, agreement or instrument to which that Person is a party or by
which it or any of its properties is bound, or to which it or any of its
properties is subject.
Control means "control" over Investment Property within the meaning of
Section 8-106 of the Code.
Credit Agreement means this Credit Agreement, as it may be supplemented,
amended, extended, amended and restated or otherwise modified from time to
time.
Credit Documents means, collectively, this Credit Agreement, the Revolving
Notes, the Letters of Credit, each Guarantee, each Intercompany Note, each
Joinder Agreement, each of the Collateral Documents and all other
documents, agreements, instruments, opinions and certificates now or
hereafter executed and delivered in connection herewith or therewith, as
modified, amended, extended, restated or supplemented from time to time.
Credit Parties means, collectively, OSG, the Borrowers, all Subsidiaries of
OSG and any other parties to the Credit Documents (except the Lenders, the
Agent, the Co-Agent and issuers of opinions).
Default means an event, condition or default which with the giving of
notice, the passage of time or both would be an Event of Default.
Defaulting Lender is defined in Section 2.8.
Disbursement Account means, as to each Borrower, its operating account
maintained with the Disbursement Account Bank.
Disbursement Account Bank means Bankers Trust (Delaware).
Dollars or $ means United States Dollars.
Domestic Lending Office means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" opposite its name on
Annex I hereto or in the applicable Assignment and Assumption Agreement, as
such annex may be amended from time to time.
Domestic Subsidiary means each Subsidiary of OSG organized under the laws
of the United States or any state thereof.
EBITDA for a period means the consolidated net income (loss) of OSG and its
Subsidiaries for the period (i) plus all Interest Expense, income and
franchise tax expense, depreciation and amortization (including
amortization of any goodwill or other intangibles) for the period, (ii)
minus gains or plus losses attributable to any fixed asset sales in the
period, (iii) plus or minus any other non-cash charges which have been
subtracted or added in calculating consolidated net income for the period,
(iv) minus extraordinary gains or plus extraordinary losses, net of taxes
and (v) plus any expenses incurred in connection with the Transactions on
or prior to the Closing Date (excluding those expenses which have been
capitalized) paid in such period.
Eligible Accounts Receivable means, as to any Borrower Party, Accounts of
such Borrower Party deemed by the Agent in the exercise of its Permitted
Discretion to be eligible for inclusion in the calculation of the Borrowing
Base. In determining the amount to be so included, the face amount of such
Accounts shall be reduced by the amount of all returns, discounts,
deductions, claims, credits, charges, or other allowances. Whenever
proceeds of a Revolving Loan are to be used by a Borrower, immediately and
directly, to purchase Accounts in any Permitted Acquisition or to acquire a
Person which will be a Borrower Party in accordance with Section 8.20 then,
subject to (i) such arrangements as the Agent may reasonably request to
ensure that the proceeds are so used, (ii) the Borrower's compliance with
Section 8.20 and (iii) the satisfaction of all other conditions of
eligibility, such Accounts shall be added to Eligible Accounts for purposes
of determining the Borrowing Base of such Borrower. Unless otherwise
approved in writing by the Agent, an Account shall not be an Eligible
Account Receivable if (without duplication):
(a) it arises out of a sale made by the Borrower Party to an
Affiliate; or
(b) it is unpaid more than 90 days after the original date of
invoice; or
(c) it is owed by an account debtor as to which fifty percent
(50%) or more of all Accounts owed by that account debtor (and its
<PAGE>
Affiliates) are ineligible under clause (b) above; or
(d) when aggregated with all other Accounts of an account
debtor, the Account exceeds fifteen percent (15%), or thirty percent (30%)
for Sebastian International, in face value of all Accounts of all Borrower
Parties then outstanding, but only to the extent of such excess, unless
supported by an irrevocable letter of credit satisfactory to the Agent (as
to form, substance and issuer) and assigned to and directly drawable by the
Agent; or
(e) the account debtor for the Account is a creditor of the
Borrower Party, has asserted a right of setoff, has disputed its liability
or made any claim with respect to the Account or any other Account which
has not been resolved, but only to the extent of the amount owed by the
Borrower Party to the account debtor, the amount of such actual or asserted
right of setoff, or the amount of such dispute or claim, as the case may
be; or
(f) the account debtor is (or its assets are) the subject of
an Insolvency Event; or
(g) the Account is not payable in Dollars or the account
debtor for the Account is located outside the continental United States or
Canada, unless the Account is supported by an irrevocable letter of credit
satisfactory to the Agent (as to form, substance and issuer) and assigned
to and directly drawable by the Agent; or
(h) the sale to the account debtor is on a bill-and-hold,
guarantied sale, sale-and-return, sale on approval or consignment basis or
made pursuant to any other written agreement providing for repurchase or
return; provided that Accounts in an aggregate amount of up to $3,000,000
for all Borrower Parties may be Eligible Accounts Receivable hereunder if
the goods have been completed and stored at the direction of the account
debtor, which has been confirmed in writing; or
(i) the Agent reasonably determines in good faith by its own
credit analysis that collection of the Account is uncertain or the Account
may not be paid; or
(j) the account debtor is the United States of America or
Canada or any department, agency or instrumentality thereof, unless the
Borrower Party duly assigns its rights to payment of such Account to the
Agent pursuant, in the case of the United States of America, to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. sections 3727
et seq.) and, in the case of Canada, pursuant to any corresponding
Requirements of Law; or
(k) the goods giving rise to such Account have not been
shipped and delivered to, or as directed by, and accepted by the account
debtor, the services giving rise to such Account have not been performed
and accepted, or the Account otherwise does not represent a final sale; or
(l) the Account does not comply with all Requirements of Law,
including without limitation the Federal Consumer Credit Protection Act,
the Federal Truth in Lending Act and Regulation Z of the Board of Governors
of the Federal Reserve System; or
(m) the Account is subject to any adverse security deposit,
progress payment or other similar advance made by or for the benefit of the
applicable account debtor, but only to the extent of such security deposit,
progress payment or other similar advance; or
(n) the Account is not subject to a valid and perfected first
priority Lien in favor of the Agent or does not otherwise conform to the
representations and warranties contained in the Credit Documents.
Eligible Equipment means, as to any Borrower Party, Equipment owned by such
Borrower Party deemed by the Agent in the exercise of its Permitted
Discretion to be eligible for inclusion in the Borrowing Base. Whenever
proceeds of a Revolving Loan are to be used by a Borrower, immediately and
directly, to purchase Equipment (including, without limitation, in any
Permitted Acquisition or to acquire a Person which will be a Borrower Party
in accordance with Section 8.20) then, subject to (i) such arrangements as
the Agent may reasonably request to ensure that the proceeds are so used,
(ii) compliance by the Borrower with Section 8.20 to the extent applicable,
and (iii) the satisfaction of all other conditions of eligibility, such
Equipment shall be added to Eligible Equipment for purposes of determining
the Borrowing Base of such Borrower. Unless otherwise approved in writing
by the Agent, an item of Equipment shall not be Eligible Equipment if
(without duplication):
(a) it is not owned solely by such Borrower Party or such
Borrower Party does not have good, valid and marketable title thereto; or
(b) it is not located in the United States or Ontario, Canada;
or
(c) it is not located on property owned by such Borrower
Party, or if located on property leased by such Borrower Party is not
subject to a Collateral Access Agreement executed by the lessor; or
(d) it is not subject to a valid and perfected first priority
<PAGE>
Lien in favor of the Agent or is subject to any other Liens (other than
Permitted Encumbrances described in clauses (d), (e), or (k) of Section
8.8) which are not prior to the Liens in favor of the Agent; or
(e) it is fixtures or accessions to Equipment; or
(f) it has not been appraised and an appraisal meeting the
requirements of Section 7.2(c) has not been delivered to the Agent;
provided that with respect to new Equipment purchased by a Borrower Party
in an arm's length transaction from a Person that is not an Affiliate of
any Credit Party, no appraisal shall be required at the time of
acquisition.
Eligible Inventory means, as to any Borrower Party, the aggregate amount of
Inventory deemed by the Agent in the exercise of its Permitted Discretion
to be eligible for inclusion in the calculation of the Borrowing Base. In
determining the amount to be so included, Inventory shall be valued at the
lower of cost or market in accordance with GAAP consistent with the
Borrower Party's current and historical accounting practice. Whenever
proceeds of a Revolving Loan are to be used by a Borrower, immediately and
directly, to purchase Inventory (including, without limitation, in any
Permitted Acquisition or to acquire a Person which will be a Borrower Party
in accordance with Section 8.20), then, subject to (i) such arrangements as
the Agent may reasonably request to ensure that the proceeds are so used,
(ii) compliance by the Borrower with Section 8.20 to the extent applicable,
and (iii) the satisfaction of all other conditions of eligibility, such
Inventory shall be added to Eligible Inventory for purposes of determining
the Borrowing Base of such Borrower. Unless otherwise approved in writing
by the Agent, an item of Inventory shall not be included in Eligible
Inventory if (without duplication):
(a) it is not owned solely by such Borrower Party or such
Borrower Party does not have good, valid and marketable title thereto; or
(b) it is not located in the United States or Ontario, Canada;
or
(c) it is not located on property owned by such Borrower Party
or, if located on property leased by such Borrower Party or in a contract
warehouse, is not subject to a Collateral Access Agreement executed by the
mortgagee, lessor or the contract warehouseman, as the case may be, and
segregated or otherwise separately identifiable from goods of others, if
any, stored on the premises; or
(d) it is not subject to a valid and perfected first priority
Lien in favor of the Agent or is subject to any other Liens (other than
Permitted Encumbrances described in clauses (d), (e) or (k) of Section
8.8); or
(e) it consists of goods returned or rejected by the Borrower
Party's customers or goods in transit to third parties (other than to
warehouse sites covered by a Collateral Access Agreement); or
(f) it is proprietary shipping packaging, but only to the
extent the value of such proprietary shipping packaging exceeds $1,250,000
for all Borrower Parties; or
(g) it is located on property owned or leased by an outside
processor or is otherwise held by such outside processors but only to the
extent that the aggregate amount of such Inventory exceeds $100,000 for all
Borrower Parties; or
(h) it is not first-quality finished goods, work-in-process,
or raw materials, is obsolete or slow moving, or does not otherwise conform
to the representations and warranties contained in the Credit Documents.
Eligible Real Property means, as to any Borrower Party, real property as to
which such Borrower Party owns fee simple title and which is deemed by the
Agent in the exercise of its Permitted Discretion to be eligible for
inclusion in the Borrowing Base. Unless otherwise approved in writing by
the Agent, no parcel of real property shall be Eligible Real Property if
(without duplication):
(i) it is not owned solely by such Borrower Party or such
Borrower Party does not have good, valid, marketable and insurable title
thereto; or
(ii) it is not located in the United States or Ontario,
Canada; or
(iii) it is not subject to a valid and perfected first priority
Lien in favor of the Agent, which Lien has been insured by title insurance
(to the extent available in such jurisdiction) in form, substance and
amount acceptable to the Agent subject only to such exceptions to title as
are acceptable to the Agent; or
(iv) it has not been appraised and an appraisal meeting the
requirements of Section 5.a(l) (or other valuation method approved by the
Agent in its Permitted Discretion) has not been delivered to the Agent.
Environmental Laws means all federal, state, provincial, local and foreign
laws, statutes, ordinances, regulations, rules, judgments, orders, notice
<PAGE>
requirements, decrees, guidelines, policies or Requirements of Law, or
common law requirements and bases of liability, relating to or imposing
liability or standards of conduct concerning pollution or protection of
human health or the environment (including, without limitation, ambient
air, surface water, ground water, land surface, flora, fauna or subsurface
strata), including, without limitation, those relating to emissions,
discharges, releases or threatened releases or Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials,
in each case as now or at any time hereafter in effect.
Environmental Reports means those environmental assessments described on
Schedule B, Part 6.17.
Equipment means (i) as to any Borrower, as defined in the Borrower Security
Agreement or (ii) as to any Guarantor, as defined in the Guarantor Security
Agreement.
Equipment Value means, as to Equipment owned by any Borrower Party, the
orderly liquidation value of such Borrower's Eligible Equipment as
established in the most recent appraisal delivered pursuant to Section 5.1,
Section 7.2(b) or Section 8.20 hereof (or any other valuation method
approved by the Agent in its Permitted Discretion); provided that the
Equipment Value of any new Equipment purchased by a Borrower Party in an
arms length transaction from a Person that is not an Affiliate of a Credit
Party shall initially be the purchase price thereof.
ERISA means the Employee Retirement Income Security Act of 1974, 29 U.S.C.
sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
ERISA Affiliate means any entity required to be aggregated with OSG or any
of its Subsidiaries under Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code.
Eurodollar Lending Office means, with respect to any Lender, the office of
such Lender specified as its "Eurodollar Lending Office" opposite its name
on Annex I, as such annex may be amended from time to time (or, if no such
office is specified, its Domestic Lending Office), or as specified in on
Assignment and Assumption Agreement, or such other office or Affiliate of
such Lender as such Lender may from time to time specify to the Borrowers
and the Agent.
Eurodollar Rate means, with respect to the Interest Period for each
Eurodollar Rate Loan comprising part of the same Borrowing, an interest
rate per annum equal to the rate (rounded upward to the nearest whole
multiple of one-sixteenth (1/16) of one percent (1.00%) per annum, if such
rate is not such a multiple) of the offered quotation, if any, to first
class banks in the Eurodollar market by Bankers Trust Company for U.S.
dollar deposits of amounts in immediately available funds comparable to the
principal amount of the Eurodollar Rate Loan for which the Eurodollar Rate
is being determined with maturities comparable to the Interest Period for
which such Eurodollar Rate will apply as of approximately 10:00 A.M. New
York time two (2) Business Days prior to the commencement of such Interest
Period.
Eurodollar Rate Loan means a Revolving Loan that bears interest as provided
in Section 4.2 hereof.
Event of Default is defined in Article 9.
Excess Availability of the Borrowers, at any time, means the remaining
amount then available to be borrowed by the Borrowers in accordance with
Section 2.1(a).
Expenses means all reasonable costs and expenses of the Agent incurred in
connection with the Credit Documents and the transactions contemplated
herein or therein, including, without limitation, (i) the costs of
conducting record searches, examining collateral, opening bank accounts and
lockboxes, depositing checks, receiving and transferring funds (including
charges for checks for which there are insufficient funds), and other out-
of-pocket costs of administration and costs and expenses incurred in
enforcement of the Credit Documents, (ii) the fees and expenses of legal
counsel and paralegals (including the allocated cost of internal counsel
and paralegals), accountants, appraisers and other consultants, experts or
advisors retained by the Agent, (iii) fees and expenses incurred in
connection with the assignments of or sales of participations in the
Revolving Loans (but excluding any fees and expenses payable by a Lender
pursuant to Section 11.8(b) in connection with an assignment of its rights
hereunder), (iv) the cost of title insurance premiums, real estate survey
costs, fees and taxes in connection with the filing of financing
statements, and (v) the costs of preparing and recording Collateral
Documents, releases of Collateral, and waivers, amendments, and
terminations of any of the Credit Documents.
Expiration Date means December 31, 2002.
Federal Funds Rate means, for any period, a fluctuating interest rate per
annum 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
<PAGE>
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 Agent from
three Federal Funds brokers of recognized standing selected by it.
Fees means, collectively, the Unused Line Fee, the Letter of Credit Fees,
the L/C Facing Fee, the Documentary L/C Fees, the Issuing Bank Fees, and
the fees provided in the Fee Letter.
Fee Letter means the letter dated October 30, 1997 between OSG and BT
Commercial Corporation providing for the payment of certain fees in
connection with this Credit Agreement.
Financial Statements means the consolidated and consolidating balance
sheets, statements of operations, statements of cash flows and statements
of changes in shareholder's equity of OSG and its Subsidiaries for the
period specified (or for periods prior to the Closing Date, of ASC or PLI,
as applicable), prepared in accordance with GAAP and consistently with
prior periods.
Fiscal Year means the fiscal year of the Credit Parties for accounting and
tax purposes, which for all years after the Closing Date shall end on
December 31.
Fixed Charges means, without duplication, for the relevant period the sum
of the following: (i) Interest Expenses paid in cash, (ii) provision for
income and franchise taxes (excluding deferred taxes), (iii) scheduled
payments of principal with respect to all Indebtedness, including payments
under Capital Leases, but excluding payments of Revolving Loans which do
not reduce the Commitments, (iv) Capital Expenditures, (v) dividends and
distributions paid in cash to holders of any capital Stock of OSG or any
warrants or options to purchase such capital stock, and (vi) amounts paid
to redeem, repurchase or retire any capital stock of OSG or any warrants or
options to purchase such capital stock.
Foreign Lender means any Lender organized under the laws of a jurisdiction
outside of the United States.
Foreign Subsidiary means each Subsidiary of OSG other than a Domestic
Subsidiary.
Funded Debt means all Indebtedness payable more than one year after the
creation thereof determined on a consolidated basis, including without
limitation the Revolving Loans and the principal portion of Capital Leases,
but excluding Indebtedness from one Credit Party to another.
Funded Debt Ratio means, as of any date of determination, the ratio of (i)
the aggregate amount of all Funded Debt of OSG and its Subsidiaries
outstanding on such date to (ii) EBITDA of OSG and its Subsidiaries for the
four fiscal quarters ending on such date; provided (a) with respect to any
Subsidiary acquired in a Permitted Acquisition during such period, if OSG
has delivered to the Agent financial statements audited by the Auditors
including quarterly information for each fiscal quarter to be included in
the calculation of EBITDA, EBITDA for such four fiscal quarter period shall
be calculated after giving pro forma effect to such Permitted Acquisition
as if it had been consummated on the first day of such period and (b) with
respect to any Subsidiary whose stock or assets are sold during such
period, EBITDA for such four fiscal quarter period shall be reduced by an
amount equal to the EBITDA (if positive) of such Subsidiary or the assets
sold or increased by an amount equal to the EBITDA (if negative) of such
Subsidiary or the assets sold. For purposes of calculating pro forma
compliance with this covenant in connection with a Permitted Acquisition,
Funded Debt shall include all Funded Debt incurred in connection with such
Permitted Acquisition (including any Indebtedness of any acquired
Subsidiary which will remain outstanding after the Acquisition or any
Indebtedness assumed in such Permitted Acquisition), and EBITDA shall be
calculated as of the end of the most recent fiscal quarter, but giving
effect to the Permitted Acquisition as if it had been consummated on the
first day of the four fiscal quarter period ending on such date.
G+M means The Gordon + Morris Group.
GAAP means generally accepted accounting principles in the United States as
in effect from time to time.
Governing Documents means, with respect to any Person, its certificate or
articles of incorporation, by-laws, partnership agreement, membership
agreement, and other organizational or governing documents, including any
document establishing the rights, preferences and privileges of any capital
stock or other equity interests and any shareholder's or similar agreement
among holders of any equity interests.
Governmental Authority means any nation or government, any state, province,
territory or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
Guarantees means, collectively, the OSG Guarantee, the Borrower Guarantee
and the Subsidiary Guarantee.
Guarantor means, collectively, OSG and each of its Domestic Subsidiaries
and each Borrower Party (other than a Borrower).
<PAGE>
Guarantor Security Agreement means a Security Agreement executed by a
Guarantor in favor of the Agent pursuant to Section 5.1(a), Section 7.15 or
Section 8.20, substantially in the form of Exhibit J.
HVP means Harbour Vest Partners LLC.
HVP Agreement means the letter agreement concerning Advisory and Financial
Services Fees dated as of January 8, 1998 between OSG and HVP, as amended
or modified to the extent permitted under Section 8.21 hereof.
Hazardous Materials means (i) any chemical, material or substance (whether
solid, liquid or gas) at any time defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste," "infectious
waste," "toxic substances" or any other formulations intended to define,
list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or words of similar import under any
applicable Environmental Laws; (ii) any oil, petroleum, petroleum fraction
or petroleum derived substance; (iii) any drilling fluids, produced waters
and other wastes associated with the exploration, development or production
of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in
any form; (vii) urea formaldehyde foam insulation; (viii) electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million; (ix)
pesticides and (x) radon.
Highest Lawful Rate means, as to any Lender at any given time during which
any Obligations shall be outstanding hereunder, the maximum nonusurious
interest rate that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations, under the laws of
the State of New York (or the law of any other jurisdiction whose laws may
be mandatorily applicable notwithstanding other provisions of this Credit
Agreement and the other Credit Documents), or under applicable federal laws
which may presently or hereafter be in effect and which allow a higher
maximum nonusurious interest rate than under New York (or such other
jurisdiction's) law, in any case after taking into account, to the extent
permitted by applicable law, any and all relevant payments or charges under
this Credit Agreement and any other Credit Documents executed in connection
herewith, and any available exemptions, exceptions and exclusions.
Indebtedness of a Person means, without duplication, (i) indebtedness for
borrowed money or for the deferred purchase price of property or services
(other than current liabilities incurred in connection with the purchase of
goods and services in the ordinary course of business and payable in
accordance with customary practices), whether on open account or evidenced
by a note, bond, debenture or similar instrument, (ii) that portion of
obligations under Capital Leases that is properly classified as a liability
on a balance sheet in conformity with GAAP, (iii) reimbursement obligations
for letters of credit, banker's acceptances or other credit accommodations,
(iv) liabilities, as determined by the Agent, under any Interest Rate
Agreement, (v) Contingent Obligations, and (vi) obligations secured by any
Lien on that Person's property, even if that Person has not assumed such
obligations or if such obligations are nonrecourse to the credit of such
Person.
Insolvency Event means, with respect to any Person, the occurrence of any
of the following under the laws of any applicable jurisdiction: (i) such
Person shall be adjudicated insolvent or bankrupt, or shall generally fail
to pay or admit in writing its inability to pay its debts as they become
due, (ii) such Person shall seek dissolution or reorganization or
liquidation or the appointment of a receiver, trustee, custodian,
administrator or liquidator or similar person for it or a substantial
portion of its property, assets or business or to effect a plan or other
arrangement with its creditors, (iii) such Person shall make a general
assignment for the benefit of its creditors, or consent to or acquiesce in
the appointment of a receiver, trustee, custodian, administrator or
liquidator or similar person for a substantial portion of its property,
assets or business, (iv) such Person shall file a voluntary petition under
any bankruptcy, insolvency or similar law, or (v) such Person, or a
substantial portion of its property, assets or business shall become the
subject of an involuntary proceeding or petition for its dissolution,
reorganization, or liquidation or the appointment of a receiver, trustee,
custodian, administrator or liquidator or shall become subject to any writ,
judgment, warrant of attachment, execution or similar process, and any such
proceeding, petition, writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within 45
days after commencement, filing or levy, as the case may be, or any order
for relief shall be entered in any such proceeding.
Intellectual Property Security Agreements means, collectively, any Patent
Security Agreement, Trademark Security Agreement or Copyright Security
Agreement executed and delivered by a Credit Party to secure its
Obligations.
Intercompany Note means any promissory note executed by one or more Credit
Parties evidencing loans or advances from one or more Credit Parties to
another Credit Party, substantially in the form attached hereto as Exhibit
O, together with any Allonge thereto.
<PAGE>
Interest Expense means, without duplication, the consolidated expense of
OSG and its Subsidiaries for interest on Indebtedness, including, without
limitation, amortization of original issue discount, incurrence fees (to
the extent included in interest expense), the interest portion of any
deferred payment obligation and the interest component of any Capital Lease
obligation, but excluding any interest payable in kind, and net of interest
income.
Interest Period means for any Eurodollar Rate Loan the period commencing on
the date of such Borrowing and ending on the last day of the period
selected by the Borrower pursuant to the provisions below. The duration of
each such Interest Period shall be one, two, three or, if approved by all
Lenders, six months, in each case as the applicable Borrower may, in an
appropriate Notice of Borrowing, Notice of Continuation or Notice of
Conversion, select; provided, however, that no Borrower may select any
Interest Period that ends after the Expiration Date. Whenever the last day
of any Interest Period would otherwise occur on a day other than a Business
Day, the last day of such Interest Period shall be extended to occur on the
next succeeding Business Day, provided that if such extension would cause
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the
next preceding Business Day.
Interest Rate Agreement means any interest rate protection or hedge
agreement, including, without limitation, interest rate future, option,
swap, and cap agreements.
Internal Revenue Code means the Internal Revenue Code of 1986, amendments
thereto, successor statutes, and regulations or guidance promulgated
thereunder.
Inventory means (i) as to any Borrower, as defined in the Security
Agreement and (ii) as to any Guarantor, as defined in the Guarantor
Security Agreement.
Investment means all expenditures made and all liabilities incurred
(including Contingent Obligations) for or in connection with the
acquisition of stock or Indebtedness of a Person, loans, advances, capital
contributions or transfers of cash or other property to a Person, or
acquisition of substantially all the assets of a Person or any line of
business of a Person. In determining the aggregate amount of Investments
outstanding at any particular time, (i) a guaranty shall be valued at not
less than the principal amount guaranteed and outstanding; (ii) returns of
capital (but only by repurchase, redemption, retirement, repayment,
liquidating dividend or liquidating distribution) shall be deducted; (iii)
earnings, whether as dividends, interest or otherwise, shall not be
deducted; and (iv) decreases in the market value shall not be deducted and
increases in market value shall not be included.
Investment Property means all "investment property" as defined in Section
9-115 of the Code.
Issuing Bank means Bankers Trust Company or any Lender, Affiliate of any
Lender or other financial institution acceptable to the Agent and the
Borrowers which may at any time issue a Letter of Credit for the account of
any Borrower (or for the joint account of any Borrower and the Agent or any
Lender) under this Credit Agreement. If there is more than one Issuing
Bank, all references to "the Issuing Bank" shall be deemed to refer to each
Issuing Bank or to all Issuing Banks, as the context requires.
Issuing Bank Fees is defined in Section 4.4.
Joinder Agreement means, as applicable (i) an agreement duly executed and
delivered by each additional Borrower (including by Kolmar immediately
following the consummation of the Kolmar Acquisition), substantially in the
form attached hereto as Exhibit I-1 or (ii) an agreement duly executed and
delivered by any Subsidiary of OSG acquired after the Closing Date, other
than a Borrower (and not designated an additional Borrower under Section
8.20), substantially in the form attached hereto as Exhibit I-2.
Kolmar means Kolmar Laboratories, Inc., a Delaware corporation.
Kolmar Acquisition is defined in the recitals to this Credit Agreement.
Kolmar Australia means Kolmar (Aust.) Pty Ltd, a corporation organized
under the laws of New South Wales, Australia and a Wholly-owned Subsidiary
of Kolmar.
Kolmar Canada means Kolmar Canada Inc., a corporation organized pursuant to
the Business Corporations Act (Ontario) and initially a Wholly-owned
Subsidiary of OSG and then a Wholly-owned Subsidiary of Kolmar following
the Kolmar Acquisition.
Kolmar Mexico means Kolmar de Mexico, S.A. de C.V., a corporation organized
under the laws of the United Mexican States and a Wholly-owned Subsidiary
of Kolmar.
Lender is defined in the preamble to this Credit Agreement.
Lender Advance is defined in Section 2.2.
L/C Facing Fees, Letter of Credit Fees and Documentary L/C Fees are defined
<PAGE>
in Section 4.4.
Letter of Credit Obligations means, without duplication, the sum of the
aggregate undrawn amount of all Letters of Credit outstanding, plus the
aggregate amount of all drawings under Letters of Credit for which
Borrowers have not reimbursed the Issuing Bank, plus the aggregate amount
of all payments made by the Lenders to the Issuing Bank for participations
in Letters of Credit for which the Borrowers have not reimbursed the
Lenders.
Letter of Credit Request is defined in Section 3.3.
Letters of Credit means all letters of credit issued for the account of the
Borrowers or any of them under Article 3 and all amendments, renewals,
extensions or replacements thereof.
Lien means any lien, claim, charge, pledge, security interest, assignment,
hypothecation, deed of trust, mortgage, lease, conditional sale, retention
of title, or other preferential arrangement having substantially the same
economic effect as any of the foregoing, whether voluntary or imposed by
law, and any agreement to give any such Lien.
Loan means a Revolving Loan.
Loan Account is defined in Section 4.9.
Lockboxes, Lockbox Agreements, and Lockbox Bank are defined in Section
4.11.
Majority Lenders means those Lenders owed or holding in the aggregate more
than fifty percent (50%) of the total Commitments or, if the Commitments
are terminated, more than fifty percent (50%) of the Revolving Loans and/or
Letter of Credit Obligations then outstanding.
Management Agreement means the Amended and Restated Management Services
among OSG, ASC, PLI and G + M dated as of January 8, 1998, as amended or
modified to the extent permitted under Section 8.21 hereof.
Mandatory Redeemable Obligation means an obligation of OSG or any of its
Subsidiaries (or guaranteed by any of them) which must be redeemed or
repaid (i) at a fixed or determinable date, whether by operation of sinking
fund or otherwise, (ii) at the option of any Person other than OSG or such
Subsidiary, or (iii) upon the occurrence of a condition not solely within
the control of OSG or such Subsidiary, such as a redemption required to be
made out of future earnings.
Material Adverse Effect means (i) a material adverse effect on the
business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of the Credit Parties, taken as a
whole, (ii) a material adverse effect on the legality, validity or
enforceability of this Agreement or any Credit Document; (iii) the
impairment of the ability of the Credit Parties taken as a whole to repay
the Obligations or perform the other obligations under the Credit Documents
or of the Agent or the Lenders to enforce the Obligations or realize upon
the Collateral, or (iv) a material adverse effect on the value of the
Collateral or the amount which the Agent or the Lenders would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral.
Material Contract means any Contractual Obligation to which any Credit
Party is a party (other than the Credit Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material
Adverse Effect.
Mortgaged Properties means, collectively, all real property and interests
in real property subject to the Mortgages.
Mortgages means, collectively, all mortgages, deeds of trust, deeds to
secure debt, assignments of rents and leases, or similar agreements
pursuant to which a Credit Party grants to the Agent a Lien on real
property or interests in real property to secure the Obligations.
Multiemployer Plan means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which OSG, any of its Subsidiaries or any ERISA
Affiliate has contributed within the past six years or with respect to
which OSG or any of its Subsidiaries may incur any liability.
Notice of Borrowing is defined in Section 2.2.
Notice of Continuation is defined in Section 4.14(a).
Notice of Conversion is defined in Section 4.14(b).
Obligations means, collectively, all present and future obligations and
liabilities of the Credit Parties arising under or in connection with this
Credit Agreement or any other Credit Document, due or to become due to the
Agent, any Issuing Bank, any Lender or any other Person entitled to
indemnification pursuant to Section 11.10, or (to the extent permitted by
the Credit Documents) any of their respective successors, transferees or
assigns, and shall include, without limitation, (i) unpaid principal and
interest hereunder and under the Revolving Notes (including interest
accruing on or after the occurrence of an Insolvency Event, whether or not
<PAGE>
allowed as a claim in any proceeding relating to the Insolvency Event),
(ii) reimbursement obligations under Letters of Credit, (iii) Fees,
Expenses and indemnification and expense reimbursement obligations arising
under Section 11.10, (iv) the Obligations of OSG under the OSG Guarantee,
(v) the Obligations of the Borrowers (in their capacity as guarantors)
under the Borrower Guarantee, (vi) the Obligations of the Subsidiary
Guarantors under the Subsidiary Guarantee and (vii) all obligations and
liabilities of the Borrowers to any Lender in respect of Interest Rate
Agreements permitted hereunder. Obligations of any Credit Party means all
Obligations, as defined above, of such Credit Party.
Operating Lease means, as to any Person, any lease of property, whether
real, personal or mixed, under which such Person is the lessee or sublessee
which is not a Capital Lease.
OSG is defined in the preamble to this Credit Agreement.
OSG Guarantee means the Guarantee executed by OSG in favor of the Agent,
the Lenders and the Issuing Bank pursuant to Section 5.1(a), substantially
in the form of Exhibit K.
Permitted Acquisition means an Acquisition consummated by OSG or a Borrower
permitted under Section 8.20 or otherwise approved by the Agent and the
Majority Lenders.
Permitted Discretion means the Agent's reasonable good faith judgment based
upon any factor which it believes in good faith: (i) will or could
reasonably be expected to adversely affect the value of any Collateral, the
enforceability or priority of the Agent's Liens thereon or the amount which
the Agent and the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral; (ii) reasonably suggests that any
collateral report or financial information delivered to the Agent by any
Person on behalf of any Borrower Party is incomplete, inaccurate or
misleading in any material respect; (iii) materially increases the
likelihood of a bankruptcy, reorganization or other insolvency proceeding
involving OSG or any of its Subsidiaries or any of the Collateral, or
(iv) creates or reasonably could be expected to create a Default or Event
of Default. In exercising such judgment, the Agent may reasonably consider
such factors already included in or tested by the definition of Eligible
Accounts Receivable, Eligible Inventory, Eligible Equipment or Eligible
Real Property, as well as any of the following: (i) the financial and
business climate of the Borrower Party's industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to
the Accounts, (iii) changes in demand for, and pricing of, Inventory, (iv)
adverse changes in any concentration of risk with respect to Accounts or
Inventory, and (v) any other factors that adversely change the credit risk
of lending to the Borrowers on the security of the Accounts, the Inventory,
Equipment or real estate of any Borrower Party. The burden of establishing
lack of good faith shall be on the Borrowers.
Permitted Encumbrance means any Lien permitted under Section 8.8.
Person means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government
(including any division, agency or department thereof), and its successors,
heirs and assigns.
Plan means any employee benefit plan, program or arrangement maintained or
contributed to by OSG or any of its Subsidiaries, or with respect to which
any of them may incur liability.
Pledge Agreement means any Pledge Agreement executed by a Credit Party in
favor of the Agent pursuant to Section 5.1(a) or 8.20 substantially in the
form of Exhibit N, together with any Pledge Amendment thereto.
Pledge Amendment means any amendment to a Pledge Agreement to add
additional "Pledged Collateral."
PLI is defined in the preamble to this Credit Agreement.
Prime Lending Rate means the rate which Bankers Trust Company announces as
its prime lending rate from time to time. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company and each of the
Lenders may make commercial loans or other loans at rates of interest at,
above or below the Prime Lending Rate.
Prime Rate Loan means a Revolving Loan that bears interest as provided in
Section 4.1 hereof.
Pro Forma means the unaudited pro forma opening consolidated and
consolidating balance sheet of OSG and its Subsidiaries, prepared in
accordance with GAAP, and giving effect to the Kolmar Acquisition, the
repayment of Indebtedness on the Closing Date and the incurrence of the
Obligations and other Transactions occurring on the Closing Date.
Projections means OSG's forecasted consolidated and consolidating balance
sheets, income statements, cash flow statements and capitalization
statements, prepared by management of OSG on a basis consistent with OSG's
historical financial statements, for the period commencing on January 1,
<PAGE>
1998 and ending on the fifth anniversary thereof, together with appropriate
supporting details and a statement of underlying assumptions and including,
without limitation, a calculation of compliance with the covenants
contained in Sections 8.1 through 8.6, inclusive.
Proportionate Share of a Lender means a fraction, expressed as a decimal,
obtained by dividing its Commitment by the total Commitments of all the
Lenders or, if the Commitments are terminated, by dividing its then
outstanding Revolving Loans and/or Letter of Credit participations by the
aggregate Revolving Loans and/or Letter of Credit Obligations of all
Lenders then outstanding.
Purchase Agreement is defined in the recitals to this Credit Agreement.
Purchase Money Liens is defined in Section 8.7.
Real Estate Value means, as to a Borrower Party, the fair market value of
such Borrower Party's fee interest in Eligible Real Property, as
established pursuant to an appraisal delivered under Section 5.1(l), 7.2(b)
or 8.20 hereof, or other valuation method approved by the Agent in its
Permitted Discretion.
Register is defined in Section 11.8.
Reportable Event means any of the events described in Section 4043 of ERISA
and the regulations thereunder.
Requirement of Law means (i) the Governing Documents of a Person, (ii) any
law, treaty, rule or regulation or determination of an arbitrator, court or
other Governmental Authority, or (iii) any franchise, license, lease,
permit, certificate, authorization, qualification, easement, right of way,
right or approval binding on a Person or any of its property.
Retiree Health Plan means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA.
Revolving Loans is defined in Section 2.1.
Revolving Note means, as to a Borrower, a promissory note of such Borrower
payable to the order of any Lender, substantially in the form of Exhibit A,
and Revolving Notes means the Revolving Notes of a Borrower or all
Borrowers, as applicable.
Security Agreement mean any Security Agreement executed by a Credit Party
in favor of the Agent pursuant to Section 5.1(a), substantially in the form
of Exhibit B or G, as applicable.
Sellers means, collectively CCL Industries, Inc. and CCL Industries
Corporation as sellers under the Purchase Agreement, and any additional
Person named as a "seller" thereunder.
Series A Preferred Stock means OSG's Series A Preferred Stock, par value
$0.001 per share issued and outstanding on the Closing Date.
Series B Preferred Stock means OSG's Series B Preferred Stock par value
$0.001 per share, issued and outstanding on the Closing Date.
Settlement Date is defined in Section 2.6.
Stockholder Agreement means the Amended and Restated Stockholder Agreement
dated as June 30, 1997 among OSG and its stockholders and warrant holders,
as amended by the Amendment to Stockholder Agreement dated as of January 8,
1998.
Subordinated Debt means (i) all Indebtedness of OSG and its Subsidiaries
under the Bridge Loan Documents and (ii) all other Indebtedness of OSG (and
guarantees thereof by its Domestic Subsidiaries) which is subordinated in
right of payment to the Obligations on such terms and conditions as
approved in writing by the Agent and the Majority Lenders, and contains
such payment terms, covenants and events of default as approved in writing
by the Agent and the Majority Lenders, as the same may be amended,
supplemented or otherwise modified in accordance with Section 8.11(c).
Subsidiary of a Person means a corporation, partnership, limited liability
company, or other entity in which that Person directly or indirectly owns
or controls the shares of stock, partnership interests, membership
interests, or other ownership interests having ordinary voting power to
elect a majority of the board of directors or appoint other managers of
such corporation partnership, limited liability company, or other entity.
Subsidiary Guarantee means each Subsidiary Guarantee and Contribution
Agreement or Subsidiary Guarantee executed by a Subsidiary Guarantor in
favor of the Agent, the Lenders and the Issuing Bank pursuant to Section
7.15 or Section 8.20, substantially in the form of Exhibit M (with
appropriate modifications required for any Foreign Subsidiary).
Subsidiary Guarantor means each present and future Domestic Subsidiary of
OSG (other than a Borrower) and each Foreign Subsidiary of OSG which is a
Borrower Party (other than a Borrower).
Syndication Date means the earlier of 90 days after the Closing Date and
<PAGE>
the date on which the Agent notifies the Borrowers that the primary
syndication of the Revolving Loans and the Commitments has been completed,
as determined by the Agent in its sole discretion.
Termination Event means (i) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan; (ii) the withdrawal of OSG, any of its
Subsidiaries or any ERISA Affiliate from a Benefit Plan during a plan year
in which it was a "substantial employer" (as defined in Section 4001(a)(2)
of ERISA); (iii) the providing of notice of intent to terminate a Benefit
Plan in a distress termination (as described in Section 4041(c) of ERISA);
(iv) the institution by the Pension Benefit Guaranty Corporation of
proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any
event or condition (a) which could reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer
Plan, or (b) that could reasonably be expected to result in termination of
a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of OSG, any of its Subsidiaries or any ERISA Affiliate from a
Multiemployer Plan.
Test Period means, for any determination made under Section 8.1, 8.2 or
8.3, the four consecutive fiscal quarters of OSG and its Subsidiaries then
last ended; provided, however, that for the first Fiscal Year following the
Closing Date, the Test Period shall be (i) for March 31, 1998, the fiscal
quarter then ended, (ii) for June 30, 1998, the two consecutive fiscal
quarters then ended, and (iii) for September 30, 1998, the three
consecutive fiscal quarters then ended.
Transactions means the Kolmar Acquisition, the funding of Revolving Loans
and the Bridge Loan on the Closing Date, the purchase of OSG's common stock
on the Closing Date, the repayment of Indebtedness on the Closing Date and
the payment of all fees and costs and expenses associated therewith.
Transaction Documents means, collectively, the Purchase Agreement, the
Credit Documents, the Bridge Loan Documents, the stock purchase agreement
and all related agreements, instruments and documents executed and
delivered in connection with the Transactions.
Type means, in reference to a Revolving Loan, that it is a Eurodollar Rate
Loan or a Prime Rate Loan.
United States means the United States of America.
Unused Line Fee is defined in Section 4.3.
Wholly-owned Subsidiary of a Person means a Subsidiary of such Person as to
which all shares of capital stock or other ownership interests of all
classes are owned by such Person except for directors' qualifying shares or
similar shares in an immaterial amount required to be owned by other
Persons under applicable Requirements of Law.
1.2 Accounting Terms and Determinations. Unless otherwise
defined or specified herein, all accounting terms used in this Credit
Agreement shall be construed in accordance with GAAP, applied on a basis
consistent in all material respects with the Financial Statements delivered
to the Agent on or before the Closing Date. All accounting determinations
for purposes of determining compliance with Sections 8.1 through 8.5 hereof
shall be made in accordance with generally accepted accounting principles
as in effect on the Closing Date and applied on a basis consistent in all
material respects with the audited Financial Statements delivered to the
Agent on or before the Closing Date. The Financial Statements required to
be delivered hereunder from and after the Closing Date, and all financial
records, shall be maintained in accordance with GAAP. If GAAP shall change
from the basis used in preparing the audited Financial Statements delivered
to the Agent on or before the Closing Date, the certificates required to be
delivered pursuant to Section 7.1 demonstrating compliance with the
covenants contained herein shall, at the election of the Borrowers or upon
the request of the Majority Lenders, include calculations setting forth the
adjustments necessary to demonstrate how the Credit Parties are in
compliance with the financial covenants based upon GAAP as in effect on the
Closing Date.
1.3 Other Terms; Headings. Terms used herein that are defined
in the Uniform Commercial Code in effect in the State of New York (the
"Code") shall have the meanings given in the Code. Each of the words
"hereof," "herein," and "hereunder" refer to this Credit Agreement as a
whole. An Event of Default shall "continue" or be "continuing" until such
Event of Default has been waived in accordance with Section 11.11 hereof.
References to Articles, Sections, Annexes, Schedules, and Exhibits are
internal references to this Credit Agreement, and to its attachments,
unless otherwise specified. The headings and the Table of Contents are for
convenience only and shall not affect the meaning or construction of any
provision of this Credit Agreement. Except as provided otherwise, all
references to documents and agreements shall mean such documents and
agreements as amended, supplemented, waived or otherwise modified,
including, without limitation, as to any Credit Document, as amended by any
Joinder Agreement or Pledge Amendment.
ARTICLE 2.
REVOLVING LOANS.
<PAGE>
2.1 Revolving Credit Commitments.
(a) Subject to the terms and conditions set forth in this
Credit Agreement, on and after the Closing Date and to and excluding the
Expiration Date, each Lender severally agrees to make loans and advances to
the Borrowers ("Revolving Loans") in an amount not to exceed at any time
its Proportionate Share of the lesser of (x) the total Commitments and (y)
the sum of the Borrowing Bases of all Borrower Parties, minus, in each
case, the then outstanding Letter of Credit Obligations of all Borrowers,
and to each Borrower in an amount not to exceed at any time its
Proportionate Share of the Borrowing Base of such Borrower and any
Subsidiary of such Borrower which is a Borrower Party minus the then
outstanding Letter of Credit Obligations of such Borrower.
(b) The Agent may, but shall not be obligated to, rely on each
Borrowing Base Certificate and any other schedules or reports in
determining the eligibility of Accounts, Inventory, Equipment and real
property. The Agent, in the exercise of its Permitted Discretion, may
(i) establish and increase or decrease reserves against Eligible Accounts
Receivable, Eligible Inventory, Eligible Equipment and Eligible Real
Property, (ii) reduce the advance rates provided for in the definition of
"Borrowing Base", or restore such advance rates to any level equal to or
below the advance rates in effect as of the date of this Credit Agreement,
and (iii) impose additional restrictions (or eliminate the same) to the
standards of eligibility set forth in the definitions of "Eligible Accounts
Receivable" "Eligible Inventory," "Eligible Equipment" and "Eligible Real
Property".
(c) Subject to the provisions of this Credit Agreement, each
Borrower may repay any outstanding Revolving Loan made to that Borrower on
any day which is a Business Day and any amounts so repaid may be
reborrowed, up to the amount available under Section 2.1(a) at the time of
such Borrowing, to the Expiration Date.
2.2 Borrowing of Revolving Loans. It is contemplated that
Revolving Loans will be made available to each Borrower directly by the
Lenders ("Lender Advances") and, in the circumstances described in Section
2.2(b), from the Agent acting on behalf of the Lenders ("Agent Advances").
(a) Lender Advances of Revolving Loans. Subject to the
determination by the Agent and the Lenders that the conditions for
borrowing contained in Section 5.1 and 5.2 are satisfied, upon notice in
accordance with Section 2.4 from a Borrower to the Agent in the form
attached hereto as Exhibit F ("Notice of Borrowing") received by the Agent,
in accordance with Section 2.4, Lender Advances of Revolving Loans shall be
made to the extent of each Lender's Proportionate Share of the requested
Borrowing. The Notice of Borrowing shall specify whether the requested
Borrowing is of Prime Rate Loans or Eurodollar Rate Loans.
(b) Agent Advances of Revolving Loans. In addition to
Revolving Loans made pursuant to Section 2.2(a) above, the Agent is
authorized by the Lenders, but is not obligated, to make Agent Advances
upon (i) a Notice of Borrowing received by the Agent before 10:00 A.M. Los
Angeles time on a Business Day or (ii) upon advice received by the Agent on
a Business Day from the Disbursement Account Bank of the face amount of
checks drawn on the Disbursement Account of a Borrower, which have been or
will be presented for payment on that day, minus the amount of funds then
available in such Disbursement Account. All Agent Advances shall be Prime
Rate Loans. Except during the period provided in clause (ii) below, Agent
Advances will not at any time exceed the amount available for borrowing
under Section 2.1(a). Agent Advances will be subject to periodic
settlement with the Lenders under Section 2.6. Agent Advances may be made
only in the following circumstances:
(i) For administrative convenience, the Agent may, but is not
obligated to, make Agent Advances in reliance upon a Borrower's
actual or deemed representations under Section 5.2 that the
conditions for borrowing are satisfied.
(ii) If the conditions for borrowing under Section 5.2 cannot
be fulfilled, a Borrower shall in its Notice of Borrowing or
otherwise give immediate written notice thereof to the Agent, with
a copy to each of the Lenders, and the Agent may, but is not
obligated to, continue to make Agent Advances for twenty (20)
Business Days from the date the Agent first receives such notice,
or until sooner instructed by the Majority Lenders to cease. All
Agent Advances made pursuant to this clause (ii) shall be due and
payable within one Business Day after demand.
2.3 Disbursement of Revolving Loans. The proceeds of
Revolving Loans shall be transmitted by the Agent in the circumstances
described in Section 3.5, directly to the Issuing Bank and in all other
circumstances, to the applicable Borrower's Disbursement Account or as
otherwise directed by the applicable Borrower in writing.
2.4 Notices of Borrowing. Notices of Borrowing may be given
under this Section by telephone or facsimile transmission, and, if by
telephone, promptly confirmed in writing. Each Borrower shall specify in
each Notice of Borrowing whether the conditions for the requested Borrowing
are satisfied. The Borrowers may request one or more Borrowings of Prime
Rate Loans on the same Business Day by delivery of a Notice of Borrowing
<PAGE>
not later than 10:00 A.M. Los Angeles time. Notice of Borrowing for
Eurodollar Rate Loans shall be given not later than 10:00 A.M. Los Angeles
time on the third Business Day prior to the proposed Borrowing. Each
Notice of Borrowing shall, unless otherwise specifically provided herein,
consist entirely of Revolving Loans of the same Type and, if such Borrowing
is to consist of Eurodollar Rate Loans, shall be in an aggregate amount for
all Lenders of not less than $1,000,000 or an integral multiple of $100,000
in excess thereof. The right of the Borrowers to choose Eurodollar Rate
Loans is subject to the provisions of Section 4.14. Once given, a Notice
of Borrowing that requests a Lender Advance is irrevocable by and binding
on the Borrowers. The Borrowers shall provide to the Agent a certificate
of the chief executive or chief financial officer as to those officers or
other employees of a Borrower authorized to request Revolving Loans and
Letters of Credit, with specimen signatures. The Agent, the Lenders and
the Issuing Bank are entitled to rely upon such certificate until it is
replaced by the Borrowers. None of the Agent, the Lenders or the Issuing
Bank shall incur any liability to any Borrower or any other Credit Party or
any other Person in acting in good faith upon any telephonic or facsimile
notice referred to above which the Agent, such Lender, or the Issuing Bank
believes to have been given by a duly authorized officer or other person
authorized by the Borrowers as provided herein to request Revolving Loans
or Letters of Credit on behalf of a Borrower.
2.5 Same Day Settlement of Lender Advances. The Agent shall
give each Lender prompt notice by telephone or facsimile transmission of a
Notice of Borrowing that requests Lender Advances of Revolving Loans. No
later than noon, Los Angeles time on the date of receipt of the Notice of
Borrowing for Prime Rate Loans or on the proposed Borrowing date for
Eurodollar Rate Loans, each Lender shall make available to the Agent at the
Agent's address its Proportionate Share of such Borrowing in immediately
available funds. Unless the Agent receives contrary written notice prior
to the date of any such Borrowing of Revolving Loans, it is entitled to
assume that each Lender will make available its Proportionate Share of the
Borrowing and in reliance upon that assumption, but without any obligation
to do so, may advance such Proportionate Share on behalf of the Lender.
2.6 Periodic Settlement of Agent Advances and Repayments.
(a) The Settlement Date. The amount of each Lender's
Proportionate Share of Revolving Loans of a Borrower shall be computed
weekly (or more frequently in the Agent's discretion) and shall be adjusted
upward or downward based on all Revolving Loans (including Agent Advances)
and repayments received by the Agent as of noon Los Angeles time on the
last Business Day of the period specified by the Agent (such date, the
"Settlement Date").
(b) Summary Statements; Settlements of Principal. The Agent
shall deliver to each of the Lenders promptly after the Settlement Date a
summary statement of the amount of outstanding Revolving Loans (including
Agent Advances) of a Borrower for the period and the amount of repayments
received for the period. As reflected on the summary statement: (i) the
Agent shall transfer to each Lender its Proportionate Share of repayments;
and (ii) each Lender shall transfer to the Agent, or the Agent shall
transfer to each Lender, such amounts as are necessary to insure that,
after giving effect to all such transfers, the amount of Revolving Loans
made by each Lender to a Borrower shall be equal to such Lender's
Proportionate Share of the aggregate amount of Revolving Loans outstanding
to such Borrower as of such Settlement Date. If the summary statement
requires transfers to be made to the Agent by the Lenders and is received
prior to 10:00 A.M. Los Angeles time on a Business Day, such transfers
shall be made in immediately available funds no later than 2:00 P.M. Los
Angeles time that day; and, if received after 10:00 A.M. Los Angeles time,
then no later than 2:00 P.M. Los Angeles time on the next Business Day.
The obligation of each Lender to transfer such funds is irrevocable,
unconditional and without recourse to or warranty by the Agent.
(c) Distribution of Interest and Unused Line Fees. Interest
on the Revolving Loans (including Agent Advances) together with the amount
of the Unused Line Fee, shall be allocated by the Agent to each Lender in
accordance with the Proportionate Share of Revolving Loans actually
advanced by and repaid to each Lender, and shall accrue from and including
the date such Revolving Loans are so advanced and to but excluding the date
such Revolving Loans are either repaid by the applicable Borrower or
actually settled under this Section. Promptly after the end of each month,
the Agent shall distribute to each Lender its Proportionate Share of the
interest and Unused Line Fee accrued during that month. The Agent shall
distribute interest on Eurodollar Rate Loans promptly after it is received.
2.7 Sharing of Payments. If any Lender obtains any payment in
excess of its Proportionate Share of payments on account of the Revolving
Loans or Letter of Credit Obligations, it will immediately purchase from
the other Lenders portions of their Revolving Loans and Letter of Credit
participations sufficient to cause that Lender to share the excess payment
ratably with all the other Lenders.
2.8 Defaulting Lenders.
(a) A Lender who fails to pay the Agent its Proportionate
Share of any Revolving Loans (including Agent Advances) made available by
the Agent on such Lender's behalf, or who fails to pay any other amount
owing by it to the Agent, is a "Defaulting Lender." The Agent may recover
all such amounts owing by a Defaulting Lender on demand. If the Defaulting
<PAGE>
Lender does not pay such amounts on the Agent's demand, the Agent shall
promptly notify the Borrowers and the Borrowers shall pay such amounts
within five Business Days. In addition, the Defaulting Lender or the
Borrowers shall pay the Agent interest on such amount for each day from the
date it was made available by the Agent to the Borrowers to the date it is
recovered by the Agent at a rate per annum equal to (x) the overnight
Federal Funds Rate, if paid by the Defaulting Lender, or (y) the then
applicable rate of interest calculated under Section 4.1, if paid by the
Borrowers; plus, in each case, the Expenses and losses, if any, incurred as
a result of the Defaulting Lender's failure to perform its obligations.
(b) The failure of any Lender to fund its Proportionate Share
of any Revolving Loan (including Agent Advances) shall not relieve any
other Lender of its obligation to fund its Proportionate Share of such
Revolving Loan. Conversely, no Lender shall be responsible for the failure
of another Lender to fund its Proportionate Share of a Revolving Loan.
(c) The Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by the Borrowers to the Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to
the sharing of any payments hereunder. Amounts payable to a Defaulting
Lender shall instead be paid to or retained by the Agent. The Agent may
hold and, in its discretion, re-lend to the Borrowers the amount of all
such payments received or retained by it for the account of such Defaulting
Lender. For purposes of voting or consenting to matters with respect to
the Credit Documents and determining Proportionate Shares, such Defaulting
Lender shall be deemed not to be a "Lender" and such Lender's Commitment
shall be deemed to be zero (-0-). This section shall remain effective with
respect to all amounts owed to such Lender until (x) the Obligations under
this Credit Agreement shall have been declared or shall have become
immediately due and payable or (y) the Majority Lenders, the Agent and the
Borrowers shall have waived such Lender's default in writing. The
operation of this Section shall not be construed to increase or otherwise
affect the Commitment of any Lender, or relieve or excuse the performance
by the Borrowers of their duties and obligations hereunder.
ARTICLE 3.
LETTERS OF CREDIT.
3.1 Issuance of Letters of Credit. Subject to the terms and
conditions hereunder and in reliance on the representations and warranties
of the Borrowers set forth herein, the Agent may from time to time cause
the Issuing Bank to issue Letters of Credit hereunder at the request of a
Borrower and for its account, as more specifically described below. The
Agent shall not be obligated to cause the Issuing Bank to issue any Letter
of Credit if:
(a) Issuance of the requested Letter of Credit (i) would cause
the Letter of Credit Obligations then outstanding to exceed $5,000,000.00
or (ii) would cause the sum of the Revolving Loans plus the Letter of
Credit Obligations then outstanding to exceed the lesser of (x) the total
Commitments then in effect and (y) the sum of the Borrowing Bases of all
Borrowers then in effect or (iii) would cause the sum of the Revolving
Loans of a Borrower plus the Letter of Credit Obligations of a Borrower to
exceed its Borrowing Base then in effect; or
(b) Issuance of the Letter of Credit is enjoined, restrained
or prohibited by any Governmental Authority, Requirement of Law or any
request or directive of any Governmental Authority (whether or not having
the force of law) or would impose upon the Agent or the Issuing Bank any
material restriction, reserve, capital requirement, loss, cost or expense
(for which the Agent or the Issuing Bank is not otherwise compensated) not
in effect or known as of the Closing Date.
3.2 Terms of Letters of Credit. The proposed amount, terms
and conditions, and form of each Letter of Credit (and of any drafts or
acceptances thereunder) shall be subject to approval by the Agent and the
Issuing Bank. The term of each standby Letter of Credit shall not exceed
364 days, but may be subject to annual renewal. The term of each
documentary Letter of Credit shall not exceed 120 days. No standby Letter
of Credit shall have an expiry date later than the Business Day prior to
the Expiration Date and no documentary Letter of Credit shall have an
expiry date later than 90 days prior to the Expiration Date.
3.3 Notice of Issuance. A request for issuance of a Letter
of Credit shall be substantially in the form attached hereto as Exhibit P
(a "Letter of Credit Request") and may be given in writing or
electronically and, if requested by the Agent, promptly confirmed in
writing. A Letter of Credit Request must be received by the Agent no later
than 10:00 A.M. Los Angeles time at least ten (10) Business Days (or such
shorter period as may be agreed to by the Issuing Bank) in advance of the
proposed date of issuance.
3.4 Lenders' Participation. Immediately upon issuance or
amendment of any Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation
in all rights and obligations under such Letter of Credit (other than fees
and other amounts owing to the Issuing Bank) in accordance with such
Lender's Proportionate Share.
<PAGE>
3.5 Payment of Amounts Drawn Under Letters of Credit. Upon
notice from the Issuing Bank of any drawing under any Letter of Credit, the
Agent shall notify the Borrowers of such drawing not later than 10:00 A.M.
Los Angeles time on the Business Day immediately prior to the date on which
the Issuing Bank intends to honor such drawing. The applicable Borrower
will be deemed to have concurrently given a Notice of Borrowing to the
Agent for Revolving Loans to be made as Prime Rate Loans in the amount of
and at the time of such drawing. The proceeds of such Revolving Loans
shall be applied directly by the Agent to reimburse the Issuing Bank for
the amount of such drawing.
3.6 Payment by Lenders. If Revolving Loans are not made in an
amount sufficient to reimburse the Issuing Bank in full for the amount of
any draw, the Agent shall promptly notify each Lender of the unreimbursed
amount of such drawing and of such Lender's respective participation
therein. Each Lender shall make available to the Agent, for the account of
the Issuing Bank, the amount of its participation in immediately available
funds not later than 10:00 A.M. Los Angeles time on the next Business Day.
If any Lender fails to make available to the Agent the amount of such
Lender's participation, the Issuing Bank shall be entitled to recover such
amount on demand from such Lender together with interest at the Federal
Funds Rate for the first three Business Days and thereafter at the Prime
Lending Rate. For each Letter of Credit, the Agent shall promptly
distribute to each Lender which has funded the amount of its participation
its Proportionate Share of all payments subsequently received by the Agent
from the Borrowers in reimbursement of honored drawings.
3.7 Nature of Issuing Bank's Duties. In determining whether
to pay under any Letter of Credit, the Issuing Bank shall be responsible
only to determine that the documents and certificates required to be
delivered under that Letter of Credit have been delivered and that they
comply on their face with the requirements of that Letter of Credit. As
among the Borrowers, the Issuing Bank and each other Lender, the Borrowers
assume all risks of the acts and omissions of the Issuing Bank, or misuse
of the Letters of Credit by the respective beneficiaries of such Letters 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 liability to the Borrowers, the Agent or any Lender.
3.8 Obligations Absolute. The obligations of the Borrowers to
reimburse the Issuing Bank for drawings honored under the Letters of Credit
and the obligations of the Lenders under Section 3.6 hereof shall be
unconditional and irrevocable and shall be paid strictly in accordance with
the terms of this Credit Agreement under all circumstances including,
without limitation, the fact that a Default or an Event of Default shall
have occurred and be continuing.
3.9 Agent's Execution of Applications and Other Issuing Bank
Documentation; Reliance on Credit Agreement by Issuing Bank. The Agent
shall be authorized to execute, deliver and perform on behalf of the
Lenders such letter of credit applications, shipping indemnities, letter of
credit modifications and consents and other undertakings for the benefit of
the Issuing Bank as may be reasonably necessary or appropriate in
connection with the issuance or modification of Letters of Credit requested
by the Borrowers hereunder. The Lenders, the Agent and the Borrowers all
expressly agree that the terms of this Article 3 and various other
provisions of this Credit Agreement identifying the Issuing Bank are also
intended to benefit the Issuing Bank and the Issuing Bank shall be entitled
to enforce the provisions hereof which are for its benefit.
3.10 Additional Payments. If by reason of (a) any change in
any Requirement of Law or any change in the interpretation or application
by any Governmental Authority of any Requirement of Law or (b) compliance
by the Issuing Bank or any Lender with any direction, request or
requirement (whether or not having the force of law) of any Governmental
Authority or monetary authority including, without limitation, Regulation D
of the Board of Governors of the Federal Reserve System as from time to
time in effect (and any successor thereto):
(a) any reserve, deposit or similar requirement is or shall
be applicable, imposed or modified in respect of any Letters of Credit
issued by the Issuing Bank or participations therein purchased by any
Lender; or
(b) there shall be imposed on the Issuing Bank or any Lender
any other condition regarding this subsection 3.10, any Letter of Credit or
any participation therein;
and the result of the foregoing is to directly or indirectly increase the
cost to the Issuing Bank or any Lender of issuing, making or maintaining
any Letter of Credit or of purchasing or maintaining any participation
therein, or to reduce the amount receivable in respect thereof by such
Issuing Bank or any Lender, then, and in any such case, the Issuing Bank or
such Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify the
Borrowers, and the Borrowers shall pay on demand such amounts as the
Issuing Bank or such Lender may specify to be necessary to compensate the
Issuing Bank or such Lender for such additional cost or reduced receipt,
together with interest on such amount from 10 days after the date of such
demand until payment in full thereof at a rate equal at all times to the
Prime Lending Rate per annum. The determination by the Issuing Bank or any
<PAGE>
Lender, as the case may be, of any amount due pursuant to this Section, as
set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error,
be final and conclusive and binding on all of the parties hereto.
ARTICLE 4.
COMPENSATION, REPAYMENT AND REDUCTION OF COMMITMENTS.
4.1 Interest on Prime Rate Loans and other Obligations. Each
Borrower shall pay to the Lenders on the first Business Day of each month
interest on outstanding Prime Rate Loans and any other outstanding
Obligations of such Borrower (other than Eurodollar Rate Loans), calculated
monthly in arrears at an interest rate per annum equal to the Prime Lending
Rate plus the Applicable Prime Rate Margin on the average net balances of
such Prime Rate Loans or other Obligations owing to the Agent and the
Lenders at the close of business each day during such month. The rate
hereunder shall change each day the Prime Lending Rate changes.
4.2 Interest on Eurodollar Rate Loans. Interest on
outstanding Eurodollar Rate Loans of each Borrower shall be payable on the
last day of each Interest Period with respect to such Eurodollar Rate Loans
(and, in the case of any Eurodollar Rate Loan with an Interest Period of
six months, on the three-month anniversary of the commencement of that
Interest Period), at the date of conversion of such Eurodollar Rate Loans
(or a portion thereof) to a Prime Rate Loan and at maturity of such
Eurodollar Rate Loans at an interest rate per annum equal during the
Interest Period for such Eurodollar Rate Loans to the Adjusted Eurodollar
Rate for the Interest Period in effect for such Eurodollar Rate Loans plus
the Applicable Eurodollar Rate Margin. After maturity of such Eurodollar
Rate Loans (whether by acceleration or otherwise), interest shall be
payable upon demand. The Agent upon determining the Adjusted Eurodollar
Rate for any Interest Period shall promptly notify the applicable Borrower
and the Lenders by telephone (confirmed promptly in writing) or in writing
thereof. Each determination by the Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
4.3 Unused Line Fee. The Borrowers shall pay to the Lenders
on the first Business Day of each month and on the Expiration Date a fee
equal to 0.375% per annum calculated monthly in arrears on the average
unused portion of the total Commitments at the close of business each day
during such month or occurring prior to the Expiration Date (the "Unused
Line Fee").
4.4 Letter of Credit Fees.
(a) The Borrowers shall pay to the Lenders on the first
Business Day of each month a fee, in an amount equal to the rate per annum
equal to the Applicable Eurodollar Rate Margin of the daily weighted
average amount of Letter of Credit Obligations outstanding during the
immediately preceding month. In addition, the Borrowers shall pay the
Agent, for its own benefit, on the date of issuance of any standby Letter
of Credit, a facing fee in the amount specified in the Fee Letter (the "L/C
Facing Fee"). With respect to each documentary letter of credit the
Borrower shall pay the Agent for its own benefit a fee on the first
Business Day of each month (i) an opening fee equal to 0.125% of the
initial face amount of each documentary Letter of Credit issued for the
account of any Borrower during the immediately preceding month, (ii) a
negotiation fee equal to 0.125% of the amount drawn under each documentary
Letter of Credit issued for the account of any Borrower during the
immediately preceding month and (iii) a guaranty fee equal to 0.125% of the
daily weighted average of the maximum amount available to be drawn under
each documentary Letter of Credit guaranteed for the account of any
Borrower hereunder and outstanding during the immediately preceding month.
The fees payable under this Section 4.4(a) are collectively referred to as
the "Letter of Credit Fees." Notwithstanding the foregoing, Letter of
Credit Fees on Letter of Credit Obligations outstanding after the
occurrence and during the continuance of an Event of Default shall be
payable on demand at a rate equal to the rate at which the Letter of Credit
Fees are charged pursuant to the first sentence of this Section 4.4(a),
plus 2.0%.
(b) The Borrowers shall also pay the customary charges, fees
and expenses of the Issuing Bank for the issuance, administration and
negotiation of each Letter of Credit and the Agent shall be entitled to
charge to the Loan Account such fees, charges and expenses of the Issuing
Bank as and when incurred by the Agent or any Lender (in each case, the
"Issuing Bank Fees") (but not duplicating the fees payable under 4.4(a)
above). Each determination by the Agent of Letter of Credit Fees, L/C
Facing Fees, Issuing Bank Fees and other fees, charges and expenses under
this Section shall be conclusive and binding for all purposes, absent
manifest error.
4.5 Interest After Event of Default. From the date of
occurrence of an Event of Default until the earlier of (i) the date all
Obligations have been paid and satisfied in full or (ii) the date such
Event of Default is waived, the Borrowers shall be obligated to pay to the
Lenders interest on the Revolving Loans and on other Obligations calculated
at rates per annum equal to the rates in effect under Sections 4.1 and 4.2
plus in each case 2.0%. Upon the expiration of any Interest Period in
effect for Eurodollar Rate Loans, such Revolving Loans shall thereafter
become Prime Rate Loans.
<PAGE>
4.6 Expenses; Fees. The Borrowers shall be obligated to
reimburse the Agent's Expenses promptly upon demand and to pay the fees
provided in the Fee Letter in accordance therewith.
4.7 Mandatory Payment; Reduction of Commitments.
(a) Mandatory Payment. (i) Except during the period described
in Section 2.2(b)(ii), the aggregate balance of all Revolving Loans to a
Borrower and all Letter of Credit Obligations of such Borrower outstanding
at any time in excess of the Borrowing Base of such Borrower and any of its
Subsidiaries which is a Borrower Party then in effect shall be immediately
due and payable without the necessity of any demand.
(ii) If any Credit Party issues Subordinated Debt to
refinance or repay the Bridge Loan, all net proceeds thereof in excess of
the repayment amount shall be applied to the Revolving Loans on the
Business Day received, but without reduction of the Commitments.
(iii) All proceeds of any Casualty Loss shall be applied to
the Revolving Loans on the Business Day received, but without reduction of
the Commitments; provided, however, that the Agent, in the exercise of its
Permitted Discretion, in accordance with Section 2.1(b) may establish
reserves for repair or replacement of the property subject to such Casualty
Loss.
(b) Reduction of Commitments. On the Expiration Date, the
Commitment of each Lender shall automatically reduce to zero and may not be
reinstated. The Borrowers may reduce or terminate the Commitments on a pro
rata basis among all Lenders at any time and from time to time in whole or
in part. Each such reduction must be in an aggregate amount for all the
Lenders of not less than $5,000,000 (and in increments of $1,000,000
thereafter). Once reduced, no portion of the Commitments may be
reinstated.
4.8 Several Obligations. The obligations of each Borrower
hereunder to repay the outstanding principal of and interest on its
Revolving Loans and Letter of Credit Obligations are several. All other
Obligations of Borrowers shall be joint and several.
4.9 Maintenance of Loan Account; Statements of Account. The
Agent shall maintain an account on its books in the name of each Borrower
(each, a "Loan Account") in which the Borrower will be charged with all
loans and advances made by the Lenders to such Borrower or for such
Borrower's account, including the Revolving Loans, and all Letter of Credit
Obligations, the Fees, the Expenses and any other Obligations of such
Borrower. Each Loan Account will be credited with all payments received by
the Agent from such Borrower or for such Borrower's account, including all
amounts received in such Borrower's Concentration Account from any Lockbox
Bank. The Agent shall send the Borrowers a monthly statement reflecting
the activity in the Loan Accounts. Absent manifest error, each monthly
statement shall be an account stated and shall be final, conclusive and
binding on the Borrowers.
4.10 Payment Procedures. Each Borrower hereby authorizes the
Agent to charge its Loan Account with the amount of all interest, Fees and
Expenses and other payments to be made by it hereunder and under the other
Credit Documents. Each Borrower's obligations to the Agent and the Lenders
with respect to such payments shall be discharged by the Agent's charging
the Loan Account as provided herein.
4.11 Collection of Accounts. By no later than March 31, 1998
and at all times thereafter, each Borrower Party shall maintain lockboxes
(the "Lockboxes") and shall instruct all account debtors on the Accounts of
such Borrower Party to remit all Collections to such Lockboxes. The
applicable Borrower Parties, the Agent and financial institutions selected
by the Borrowers and acceptable to the Agent (the "Lockbox Banks") shall
enter into lockbox agreements or blocked account agreements, as required by
the Agent, substantially in the form attached hereto as Exhibit C or in
such other form satisfactory to the Agent (a "Lockbox Agreement" or
"Blocked Account Agreement," as applicable), which among other things shall
provide for the opening of an account for the deposit of Collections (a
"Collection Account") at a Lockbox Bank. All Collections and other amounts
received by the Borrower Parties from any account debtor, in addition to
all other cash received from any other source, shall upon receipt be
deposited into a Collection Account. Termination of such arrangements
shall also be subject to approval by the Agent. Upon the terms and subject
to the conditions set forth in the Lockbox Agreements, all available
amounts held in each Collection Account shall be wired each Business Day
into an account for each Borrower Party (each, a "Concentration Account")
maintained by the Agent at Bankers Trust (Delaware).
4.12 Application of Payments. All amounts received in its
Concentration Account of a Borrower from the Lockbox Banks shall be
credited to the Loan Account daily. All amounts received in the
Concentration Account of any Subsidiary which is a Borrower Party (but not
a Borrower) shall be transferred to the Concentration Account of its direct
or indirect parent corporation which is a Borrower and credited by the
applicable Borrower to the outstanding balance of the Indebtedness of such
Borrower Party to the Borrower. If no Revolving Loans are then outstanding
and no other Obligations are then due, amounts received in a Concentration
Account in accordance with the preceding sentences shall be transmitted to
<PAGE>
the applicable Borrower's Disbursement Account or as otherwise directed by
the applicable Borrower in writing. Except as provided in Section 9.5,
after the occurrence of an Event of Default, and until it is waived, all
amounts received by the Agent from the Lockbox Banks, from liquidation of
Collateral or otherwise, shall be applied in the following order: first,
to the payment of any Fees, Expenses or other Obligations due and payable
to the Agent under any of the Credit Documents, including Agent Advances
and any other amounts advanced by the Agent on behalf of the Lenders;
second, to the payment of any Fees, expenses or other Obligations due and
payable to the Issuing Bank under any of the Credit Documents; third, to
the ratable payment of any Fees, Expenses or other Obligations due and
payable to the Lenders under any of the Credit Documents other than those
Obligations specifically referred to in this Section; fourth, to the
ratable payment of interest due on the Revolving Loans; and, fifth, to the
ratable payment of principal due on the Revolving Loans.
4.13 Calculations. All calculations of (i) interest hereunder
and (ii) Fees, including, without limitation, Unused Line Fees and Letter
of Credit Fees, shall be made by the Agent, on the basis of a year of 360
days for the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which such interest or
Fees are payable. Each determination by the Agent of an interest rate, Fee
or other payment hereunder shall be conclusive and binding for all
purposes, absent manifest error.
4.14 Special Provisions Relating to Eurodollar Rate Loans.
(a) Continuation. With respect to any Borrowing consisting of
Eurodollar Rate Loans, the Borrowers may (so long as no Default or Event of
Default has occurred and is continuing), subject to the provisions of
Section 4.14(c), elect to maintain such Borrowing or any portion thereof as
consisting of Eurodollar Rate Loans by selecting a new Interest Period for
such Borrowing, which new Interest Period shall commence on the last day of
the immediately preceding Interest Period. Each selection of a new
Interest Period shall be made by notice given not later than 10:00 A.M. Los
Angeles time on the third Business Day prior to the date of any such
continuation relating to Eurodollar Rate Loans, by the applicable Borrower
to the Agent. Such notice by a Borrower of a continuation (a "Notice of
Continuation") shall be by telephone or facsimile transmission, and if by
telephone, promptly confirmed in writing substantially in the form of
Exhibit I, in each case specifying (i) the date of such continuation,
(ii) the Type of Loans subject to such continuation, (iii) the aggregate
amount of Loans subject to such continuation and (iv) the duration of the
selected Interest Period. A Borrower may elect to maintain more than one
Borrowing consisting of Eurodollar Rate Loans by combining such Borrowings
into one Borrowing and selecting a new Interest Period pursuant to this
Section 4.14(a). If Borrower shall fail to select a new Interest Period
for any Borrowing consisting of Eurodollar Rate Loans in accordance with
this Section 4.14(a), such Revolving Loans will automatically, on the last
day of the then existing Interest Period therefore, convert into Prime Rate
Loans. The Agent shall give each Lender prompt notice by telephone or
facsimile transmission of each Notice of Continuation.
(b) Conversion. A Borrower may on any Business Day (so long
as no Default or Event of Default has occurred and is continuing), upon
notice (each such notice, a "Notice of Conversion") given to the Agent, and
subject to the provisions of Section 4.14(c), convert the entire amount of
or a portion of all Loans of one Type comprising the same Borrowing into
Loans of another Type; provided, however, that any conversion of any
Eurodollar Rate Loans into Loans of another Type shall be made on, and only
on, the last day of an Interest Period for such Eurodollar Rate Loans and,
upon conversion of any Prime Rate Loans into Loans of another Type, the
applicable Borrower shall pay accrued interest to the date of conversion on
the principal amount converted. Each such Notice of Conversion shall be
given not later than 10:00 A.M. Los Angeles time on the Business Day prior
to the date of any proposed conversion into Prime Rate Loans and on the
third Business Day prior to the date of any proposed conversion into
Eurodollar Rate Loans. Subject to the restrictions specified above, each
Notice of Conversion shall be by telephone or facsimile transmission, and
if by telephone, promptly confirmed in writing substantially in the form of
Exhibit J, in each case specifying (i) the requested date of such
conversion, (ii) the Type of Loans to be converted, (iii) the portion of
such Type of Loan to be converted, (iv) the Type of Loan such Loans are to
be converted into and (v) if such conversion is into Eurodollar Rate Loans,
the duration of the Interest Period of such Loan. Each conversion shall be
in an aggregate amount for the Loans of all Lenders of not less than
$2,000,000 or an integral multiple of $100,000 in excess thereof. A
Borrower may elect to convert the entire amount of or a portion of all
Loans of one Type comprising more than one Borrowing into Loans of another
Type by combining such Borrowings into one Borrowing; provided, however,
that if the Borrowings so combined consist of Eurodollar Rate Loans, such
Loans shall have Interest Periods ending on the same date.
(c) Certain Limitations on Eurodollar Rate Loans. The right
of the Borrowers to maintain, select, continue or convert Eurodollar Rate
Loans shall be limited as follows:
(i) If the Agent is advised by Bankers Trust Company that
it is not offering U.S. dollar deposits (in the applicable
amounts) in the London interbank market, or the Agent determines
that adequate and fair means do not otherwise exist for
ascertaining the Eurodollar Rate for Eurodollar Rate Loans
<PAGE>
comprising any requested Borrowing, continuation or conversion,
the right of the Borrowers to select or maintain Eurodollar Rate
Loans for such Borrowing or any subsequent Borrowing shall be
suspended until the Agent shall notify the Borrowers and the
Lenders that the circumstances causing such suspension no longer
exist, and each Loan comprising such Borrowing shall be made as a
Prime Rate Loan.
(ii) If the Majority Lenders shall, at least one Business
Day before the date of any requested Borrowing, continuation or
conversion, notify the Agent that the Eurodollar Rate for Loans
comprising such Borrowing will not adequately reflect the cost to
such Lenders of making or funding their respective Loans for such
Borrowing, the right of the Borrowers to select Eurodollar Rate
Loans for such Borrowing shall be suspended until the Agent shall
notify the Borrowers and the Lenders that the circumstances
causing such suspension no longer exist, and each Loan comprising
such Borrowing shall be made as a Prime Rate Loan.
(iii) If at any time any Lender determines (which
determination shall, absent manifest error, be conclusive and
binding on all parties) that the making, continuation or
conversion of any Loan as a Eurodollar Rate Loan has become
unlawful or impermissible by reason of compliance by that Lender
with any law, governmental rule, regulation or order of any
Governmental Authority (whether or not having the force of law or
would result in costs or penalties), then, and in any such event,
such Lender may give notice of that determination in writing, to
the Borrowers and the Agent and the Agent shall promptly transmit
the notice to each other Lender. Until such Lender gives notice
otherwise, the right of the Borrowers to select Eurodollar Rate
Loans from that Lender shall be suspended and each Eurodollar Rate
Loan outstanding from that Lender shall automatically and
immediately convert to a Prime Rate Loan.
(iv) The right of the Borrowers to select Eurodollar Rate
Loans for any Borrowing is suspended until the first Business Day
following the Syndication Date.
(v) There shall not be outstanding at any one time for each
Borrower more than an aggregate of 3 Borrowings of Loans which
consist of Eurodollar Rate Loans, or for all Borrowers more than
an aggregate of 12 Borrowings of Loans which consist of Eurodollar
Rate Loans.
(vi) No Agent Advance shall be made as a Eurodollar Rate
Loan.
(d) Compensation. (i) Each Notice of Continuation and Notice
of Conversion shall be irrevocable by and binding on the Borrowers. In the
case of any Borrowing, continuation or conversion that the related Notice
of Borrowing, Notice of Continuation or Notice of Conversion specifies is
to be comprised of Eurodollar Rate Loans, the Borrowers shall indemnify
each Lender against any loss, cost or expense incurred by such Lender as a
result of any failure to fulfill, on or before the date for such Borrowing,
continuation or conversion specified in such Notice of Borrowing, Notice of
Continuation or Notice of Conversion, the applicable conditions set forth
in Article 5, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation
or re-employment of deposits or other funds acquired by such Lender to fund
the Loan to be made by such Lender as part of such Borrowing, continuation
or conversion.
(ii) If any payment of principal of, or conversion or
continuation of, any Eurodollar Rate Loan is made other than on the last
day of the Interest Period for such Loan as a result of a payment,
prepayment, conversion or continuation of such Loan or acceleration of the
maturity of the Revolving Notes pursuant to Article 9 hereof or for any
other reason, the Borrowers shall, upon demand by any Lender (with a copy
of such demand to the Agent), pay to the Agent for the account of such
Lender any amounts required to compensate such Lender for any additional
losses, costs or expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by any Lender to fund
or maintain such Loan.
(iii) Calculation of all amounts payable to a Lender under
this Section 4.14(d) shall be made as though such Lender elected to fund
all Eurodollar Rate Loans by purchasing U.S. dollar deposits in its
Eurodollar Lending Office's interbank eurodollar market.
4.15 Indemnification in Certain Events. If after the Closing
Date, either (i) any change in or in the interpretation of any law or
regulation is introduced, including, without limitation, with respect to
reserve requirements, applicable to the Agent, to any of the Lenders, or to
Bankers Trust Company, BT Delaware or any other banking or financial
institution from whom any of the Lenders borrows funds or obtains credit (a
"Funding Bank"), or (ii) the Agent, a Funding Bank or any of the Lenders
complies with any future guideline or request from any central bank or
other Governmental Authority or (iii) the Agent, a Funding Bank or any of
the Lenders determines that the adoption of any applicable law, rule or
<PAGE>
regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect
described below, or the Agent, a Funding Bank or any of the Lenders
complies with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, and in the case of any event set forth in this
clause (iii), such adoption, change or compliance has or would have the
direct or indirect effect of reducing the rate of return on any of the
Lenders' capital as a consequence of its obligations hereunder to a level
below that which such Lender could have achieved but for such adoption,
change or compliance (taking into consideration the Agent's or such Funding
Bank's or Lender's policies as the case may be with respect to capital
adequacy) by an amount deemed by such Lender to be material, and any of the
foregoing events described in clauses (i), (ii) or (iii) increases the cost
to the Agent, the Issuing Bank or any of the Lenders of (A) funding or
maintaining the Commitments or (B) issuing, making or maintaining any
Letter of Credit or of purchasing or maintaining any participation therein,
or reduces the amount receivable in respect thereof by the Agent, the
Issuing Bank or any Lender, then the Borrowers shall upon demand by the
Agent, pay to the Agent, for the account of each applicable Lender or, as
applicable, the Issuing Bank or a Funding Bank, additional amounts
sufficient to indemnify the Lenders against such increase in cost or
reduction in amount receivable. A certificate as to the amount of such
increased cost and setting forth in reasonable detail the calculation
thereof shall be submitted to the Borrowers by the Agent, or the applicable
Lender, Issuing Bank or Funding Bank, and shall be conclusive absent
manifest error.
4.16 Taxes.
(a) Payment of Taxes. Except as specifically provided
to the contrary in Section 4.16(b) or Section 4.16(d)(iii), any and all
payments by a Credit Party hereunder or under any Revolving Note or other
document evidencing any Obligations shall be made free and clear of, and
without reduction for, any and all present or future taxes, levies,
imposts, deductions, charges, withholdings, and all stamp or documentary
taxes, excise taxes, ad valorem taxes and other taxes imposed on the value
of the assets of any Credit Party or any Subsidiary of a Credit Party,
charges or levies which arise from the execution, delivery or registration,
or from payment or performance under, or otherwise with respect to, any of
the Credit Documents or the Commitments and all other liabilities with
respect thereto excluding, in the case of each Lender, the Issuing Bank and
the Agent, taxes imposed on or measured by net income or overall gross
receipts and capital and franchise taxes imposed on it by (i) the United
States, (ii) the Governmental Authority of the jurisdiction in which such
Lender's Domestic Lending Office or Eurodollar Lending Office, as
applicable, is located or any political subdivision thereof or (iii) the
Governmental Authority in which such Person is organized, managed and
controlled or is otherwise doing business or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges
and withholdings being hereinafter referred to as "Taxes"). If a Credit
Party shall be required by law to withhold or deduct any Taxes from or in
respect of any sum payable hereunder or under any such Revolving Note or
document to any Lender, the Issuing Bank or the Agent, (x) the sum payable
to such Lender, the Issuing Bank, or the Agent shall be increased as may be
necessary so that after making all required withholding or deductions
(including withholding or deductions applicable to additional sums payable
under this Section 4.16) such Lender, the Issuing Bank or the Agent (as the
case may be) receives an amount equal to the sum it would have received had
no such withholding or deductions been made, (y) the Credit Parties shall
make such withholding or deductions, and (z) the Credit Parties shall pay
the full amount withheld or deducted to the relevant taxation authority or
other authority in accordance with applicable law.
(b) Indemnification. The Borrowers jointly and severally
agree (and, in the case of payments made by OSG under the OSG Guaranty, OSG
agrees) to indemnify each Lender, the Issuing Bank and the Agent against,
and reimburse each on demand for, the full amount of all Taxes imposed
because of any change in any Requirement of Law or any change in the
interpretation, administration or application by any Governmental Authority
of any Requirement of Law arising after the date hereof (in the case of the
Agent and any Lender or Issuing Bank listed on the signature pages hereof)
or the date of the Assignment and Assumption Agreement pursuant to which
such other Lender or Issuing Bank became a Lender or Issuing Bank (in the
case of each other Lender or Issuing Bank), including, without limitation,
any Taxes imposed by any Governmental Authority or amounts payable under
this Section 4.16 and any additional income, capital or franchise taxes
resulting therefrom actually incurred or paid by such Lender, the Issuing
Bank or the Agent (as the case may be) or any of their respective
Affiliates and any liability (including penalties, interest, and reasonable
out-of-pocket expenses paid to third parties) arising therefrom or with
respect thereto; provided, that the calculation of such amount is set forth
in reasonable detail in a written statement delivered to the Borrowers (or,
if applicable, OSG) by the Agent or such Lender or Issuing Bank, which
statement shall, absent manifest error, be final, conclusive and binding
upon all parties hereto.
(c) Receipts. Promptly upon the request of the Agent
therefor, each Credit Party will furnish to the Agent the original or a
certified copy of a receipt evidencing payment of Taxes by such Credit
<PAGE>
Party.
(d) Foreign Bank Certifications.
(i) Each Lender that is not created or organized
under the laws of the United States or a political subdivision thereof (a
"Foreign Lender") shall deliver to the Borrowers and the Agent on the
Effective Date (or the date on which such Foreign Lender becomes a Lender
pursuant to Section 11.8) a true and accurate certificate executed in
duplicate by a duly authorized officer of such Foreign Lender to the effect
that such Foreign Lender is eligible to receive payments hereunder and
under the Revolving Notes without deduction or withholding of United States
federal income tax (A) under the provisions of an applicable tax treaty
concluded by the United States (in which case the certificate shall be
accompanied by two duly completed copies of IRS Form 1001 (or any successor
or substitute form or forms)), (B) under Sections 1442(c)(1) and 1442(a) of
the Internal Revenue Code (in which case the certificate shall be
accompanied by two duly completed copies of IRS Form 4224 (or any successor
or substitute form or forms)), or (C) due to such Foreign Lender's not
being a "bank" as such term is used in Section 881(c)(3)(A) of the Internal
Revenue Code (in which case, the certificate shall be accompanied by two
accurate and complete original signed copies of IRS Form W-8 (or any
successor substitute form or forms)).
(ii) Each Foreign Lender further agrees to deliver
to the Borrowers and the Agent, from time to time, a true and accurate
certificate executed in duplicate by a duly authorized officer of such
Foreign Lender before or promptly upon the occurrence of any event
requiring a change in the most recent certificate previously delivered by
it to the Borrowers and the Agent pursuant to this Section 4.16(d). Each
certificate required to be delivered pursuant to this Section 4.16(d)(ii)
shall certify as to one of the following:
(A) that such Foreign Lender can continue to
receive payments hereunder and under the Revolving Notes without
deduction or withholding of United States federal income tax;
(B) that such Foreign Lender cannot continue to
receive payments hereunder and under the Revolving Notes without
deduction or withholding of United States federal income tax as
specified therein but does not require additional payments
pursuant to Section 4.16(a) because it is entitled to recover the
full amount of any such deduction or withholding from a source
other than the Borrowers; or
(C) that such Foreign Lender is no longer capable
of receiving payments hereunder and under the Revolving Notes
without deduction or withholding of United States federal income
tax as specified therein and that it is not capable of recovering
the full amount of the same from a source other than the
Borrowers.
Each Foreign Lender agrees to deliver to the Borrowers and the Agent
further duly completed copies of the above-mentioned IRS forms on or before
the earlier of (x) the date that any such form expires or becomes obsolete
or otherwise is required to be resubmitted as a condition to obtaining an
exemption from withholding from United States federal income tax and (y)
fifteen (15) days after the occurrence of any event requiring a change in
the most recent form previously delivered by such Foreign Lender to the
Borrowers and Agent, unless any change in any Requirement of Law, or
official interpretation thereof which would render such form inapplicable
or which would prevent the Foreign Lender from duly completing and
delivering such form has occurred prior to the date on which any such
delivery would otherwise be required and the Foreign Lender promptly
advised the Borrowers that it is not capable of receiving payments
hereunder and under the Revolving Notes without any deduction or
withholding of United States federal income tax.
(iii) The Credit Parties shall not be required to pay
any additional amount to any Foreign Lender under Section 4.16(b) if such
Foreign Lender shall have failed to satisfy the requirements of Section
4.16(d)(i), it being agreed and understood that nothing in this Section
4.16(d)(iii) shall relieve the Credit Parties of their obligations to pay
any additional amounts pursuant to Section 4.16(b) in the event that, as a
result of any change after the date of such satisfaction in any Requirement
of Law or any change after the date of such satisfaction in the
interpretation, administration or application by any Governmental Authority
of any Requirement of Law, such Foreign Lender is no longer capable of
receiving payments hereunder and under the Revolving Notes without any
deduction or withholding of United States federal income tax.
ARTICLE 5.
CONDITIONS PRECEDENT
5.1 Conditions to Initial Loans and Letters of Credit. The
obligation of each Lender to fund its Proportionate Share of the initial
Revolving Loans, and the obligation of the Agent to cause the Issuing Bank
to issue the initial Letter of Credit, is subject to the satisfaction or
waiver of the following conditions precedent on or before January 31, 1998:
(a) Closing Document List. The Agent and the Lenders shall
<PAGE>
have received this Credit Agreement, the Revolving Notes, the other Credit
Documents and each of the other agreements, opinions, reports, approvals,
consents, certificates and other documents set forth on the "Closing
Document List" attached hereto as Schedule A, each duly executed by all
applicable parties.
(b) Material Adverse Change. (i) No change, occurrence,
event or development or event involving a prospective change that is
reasonably likely to have a Material Adverse Effect shall have occurred and
be continuing, and (ii) there shall not have occurred a substantial
impairment of the financial markets generally that is reasonably likely to
materially and adversely affect the transactions contemplated hereby, in
each case as determined by the Agent and each Lender in its sole
discretion.
(c) Fees and Expenses. All Fees and Expenses payable on or
before the Closing Date shall have been paid.
(d) Borrowing Base; Unused Availability. The Borrowing Base
of the Borrowers and any Subsidiary which is a Borrower Party shall be
appropriate, in the Agent's Permitted Discretion, for Borrowers' overall
business and working capital requirements. On the Closing Date, after
giving effect to the consummation of the Kolmar Acquisition and the
repayment of Indebtedness, Borrowers shall have an aggregate Excess
Availability of not less than $5,000,000.
(e) Kolmar Acquisition; Bridge Loans; Stock Issuance. OSG
shall have received at least $70,000,000 in gross proceeds from the
issuance of the Bridge Loan and at least $20,900,000 from the issuance of
OSG's common stock to G+M and other Persons acceptable to the Agent and the
Majority Lenders, and all Transaction Documents related thereto shall be in
form and substance satisfactory to the Agent and the Majority Lenders. The
Kolmar Acquisition shall be consummated concurrently with the initial
Revolving Loans in accordance with all applicable Requirements of Law on
the terms and conditions set forth in the Acquisition Documents, each of
which shall be satisfactory in form and substance to the Agent and the
Majority Lenders, with no amendments or waivers thereto except as approved
by the Agent and the Majority Lenders.
(f) Perfection of Liens. The Liens and all other security
interests in favor of the Agent for the benefit of the Lenders and the
Issuing Bank on the assets of the Credit Parties shall have been duly
perfected and shall constitute first and prior Liens, except as otherwise
permitted hereunder. The Borrowers shall have delivered payoff demands
with respect to all Indebtedness to be repaid, together with releases of
all Liens with respect thereto, and all such Indebtedness shall be repaid
in full from the proceeds of the initial Revolving Loans.
(g) Completion of Due Diligence. The Agent and the Lenders
and counsel to the Agent shall have completed their due diligence
investigation of the Credit Parties and the Collateral (including all
appraisals) and shall be satisfied with the results thereof.
(h) Capitalization and Corporate Structure. The capital and
corporate structure of OSG and its Subsidiaries, after giving effect to the
Kolmar Acquisition, and all Governing Documents shall be acceptable to the
Agent and the Lenders in all respects.
(i) Consents and Approvals. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 or other applicable
Requirements of Law shall have expired without any adverse action and
Borrowers and Sellers shall have obtained and delivered to the Agent all
consents and approvals of all Governmental Authorities or parties to
Contractual Obligations required to consummate the Kolmar Acquisition, to
incur the Obligations, to grant Liens to the Agent, and to consummate the
Transactions.
(j) Litigation. There shall not be pending or, to the best
knowledge of any Borrower, threatened any litigation, proceeding,
investigation or other action seeking an injunction or other restraining
order, damages or other relief with respect to the Transactions, the
Transaction Documents, the transactions contemplated by this Credit
Agreement or the other Credit Documents or the business activities of any
Credit Party. No Requirement of Law shall prohibit, enjoin or restrain the
consummation of the Transactions.
(k) Solvency. The Agent shall have received a certificate of
the chief financial officer of each Borrower and the opinion of Houlihan
Lokey Howard & Zukin and addressed to the Agent and the Lenders in form and
substance satisfactory to the Agent and the Lenders, attesting that, on a
pro forma basis, after giving effect to the Kolmar Acquisition and the
Transactions, each Borrower shall not be insolvent or rendered insolvent,
be left with an unreasonably small capital with which to engage in its
business or have incurred debts beyond its ability to pay as such debts
mature.
(l) Appraisals. The Agent and the Lenders shall have
received appraisals of the Mortgaged Properties satisfying the requirements
of Regulation Y of the Board of Governors of the Federal Reserve System and
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and
appraisals of the Equipment of each Borrower Party, in each case from firms
and in form, scope and substance acceptable to the Agent and Lenders.
<PAGE>
(m) Insurance and Title Insurance. The Agent shall have
received evidence satisfactory to it that the Credit Parties maintain
insurance meeting the requirements of the Credit Documents and that the
Agent, for the benefit of the Lenders and the Issuing Bank, has been named
loss payee for all property insurance and additional insured for all
liability insurance (including any environmental liability insurance), and,
except as agreed by the Agent, shall have received ALTA extended coverage
mortgagee policies of title insurance (or commitments therefor) for the
Mortgaged Properties from an insurer, in amounts, and in form and substance
satisfactory to Agent.
(n) Environmental Reports. The Agent shall have received the
Environmental Reports, in scope and substance satisfactory to the Agent,
concerning the properties and businesses of the Borrowers and their
Subsidiaries, including all properties acquired in the Kolmar Acquisition
and all Mortgaged Properties.
(o) Opinions of Counsel. The Agent and the Lenders shall
have received favorable legal opinions from Paul, Hastings, Janofsky &
Walker, counsel to the Credit Parties, and from such local counsel as the
Agent may reasonably request, covering such matters as may be reasonably
requested by the Agent or the Lenders in connection with the Kolmar
Acquisition, the Credit Documents and the Transactions. The Agent shall
have received a reliance letter from counsel to the Sellers with respect to
the opinions delivered in connection with the Kolmar Acquisition.
(p) Financial Statements and Projections. The Agent and the
Lenders shall have received and approved (i) the audited Financial
Statements of each of ASC and PLI for the Fiscal Year ended December 31,
1996, together with the unqualified opinions of Deloitte & Touche LLP
thereon, (ii) the audited combined financial statements of Kolmar and its
Subsidiaries and the assets to be acquired by Kolmar Canada for the fiscal
year ended December 31, 1996, together with the unqualified opinion of KPMG
Peat Marwick thereon; (iii) interim Financial Statements for OSG and its
Subsidiaries for the nine months ending September 30, 1997 and Kolmar and
its Subsidiaries for the nine months ending September 27, 1997; each
reviewed by the Auditors in scope and substance satisfactory to the Agent
and the Lenders; (iv) the Pro Forma; and (v) Projections; and the Agent and
the Lenders shall have determined that the financial condition of the
Credit Parties does not differ in any material adverse respect from the
financial condition existing prior to October 30, 1997 and that the Credit
Parties will be able to comply with the financial covenants set forth in
this Credit Agreement.
(q) Closing Certificate. The Borrowers shall deliver a
certificate of their chief executive officer or chief financial officer
certifying that (i) all conditions to the closing have been satisfied, and
(ii) no change, occurrence, event or development or event involving a
prospective change that is reasonably likely to have a Material Adverse
Effect has occurred and is continuing.
(r) Borrowing Base Certificates, etc. The Agent shall have
received from Borrowers a consolidating and consolidated Borrowing Base
Certificate for each Borrower and its Subsidiaries which are Borrower
Parties (but not Borrowers) and a Notice of Borrowing for all Revolving
Loans to be made on the Closing Date, together with wire transfer
instructions for all disbursements to be made on such date.
(s) Amendments to Transaction Documents. The amendments to
the Management Agreement and the Stockholder Agreement shall be in form and
substance satisfactory to the Agent and the Lenders.
(t) Additional Documents. The Credit Parties shall have
executed and delivered to the Agent and the Lenders all documents which the
Agent determines are reasonably necessary to consummate the transactions
contemplated hereby.
5.2 Conditions Precedent to All Revolving Loans and Letters of
Credit. The obligation of each Lender to fund its Proportionate Share of
any requested Revolving Loan, of the Agent to make Agent Advances or of the
Agent to cause the Issuing Bank to issue any requested Letter of Credit is
subject to the conditions precedent set forth below. Each Notice of
Borrowing and each Letter of Credit Request shall constitute a
representation and warranty that such conditions are satisfied.
(a) All representations and warranties of any Credit Party
contained in this Credit Agreement and the other Credit Documents shall be
true and correct on and as of the date of such Notice of Borrowing or
Letter of Credit Request or issuance of a check drawn against or request
for transfer from any Disbursement Account, as if then made, other than
representations and warranties that relate solely to an earlier date;
(b) No Default or Event of Default shall have occurred, or
would result from the making of the requested Revolving Loan or the
issuance of the requested Letter of Credit, which has not been waived; and
(c) No event has occurred which has had or could reasonably be
expected to have a Material Adverse Effect.
ARTICLE 6.
<PAGE>
REPRESENTATIONS AND WARRANTIES.
To induce the Agent and the Lenders to enter into this Credit
Agreement and to make the Revolving Loans and other financial
accommodations described herein, and to induce the Issuing Bank to issue
Letters of Credit, OSG and the Borrowers hereby jointly and severally
represent and warrant to the Agent, the Lenders and the Issuing Bank that
the following are true, correct and complete, both before and after giving
effect to the Acquisition and any other Permitted Acquisition. Such
representations and warranties, and all other representations and
warranties made by the Credit Parties in any other Credit Document, shall
survive the execution and delivery of the Credit Documents.
6.1 Organization and Qualification. Each Credit Party (i) is
a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) has the power and
authority to own its properties and assets and to transact the businesses
in which it presently is, or proposes to be, engaged and (iii) is duly
qualified and is authorized to do business and is in good standing in each
jurisdiction where it presently is, or proposes to be, engaged in business.
Schedule B, Part 6.1 lists all jurisdictions in which the Credit Parties
are qualified to do business as foreign corporations.
6.2 Authority. Each Credit Party has the requisite corporate
power and authority to execute, deliver and perform each of the Credit
Documents and Transaction Documents to which it is a party. All corporate
action necessary for the execution, delivery and performance of any of the
Credit Documents and Transaction Documents has been taken.
6.3 Enforceability. This Credit Agreement and each other
Credit Document, each Transaction Document and each Acquisition Document is
(or will upon due execution be) the legal, valid and binding obligation of
each Credit Party which is a party thereto, enforceable in accordance with
its terms, except as enforceability may be affected by bankruptcy,
insolvency or similar proceedings affecting the rights of creditors
generally.
6.4 No Conflict. The execution, delivery and performance of
each Credit Document, Transaction Document and Acquisition Document by the
Credit Parties are not in contravention of any Requirement of Law material
to any Credit Party or any material Contractual Obligation to which it is a
party or by which it or any of its properties are bound and will not,
except as contemplated herein, result in the imposition of any Liens upon
any of its properties.
6.5 Consents and Filings. No consent, authorization, permit
or filing with any Government Authority or under any Contractual Obligation
is required in connection with the execution, delivery and performance of
this Credit Agreement or any Credit Document or Transaction Document or
Acquisition Document, or the continuing operations of the Credit Parties,
except (i) those that have been obtained or made prior to the date hereof
or, with respect to any Permitted Acquisition, prior to its consummation,
(ii) filings necessary to create, perfect or retain the perfection of Liens
of the Agent against the Collateral, (iii) filings in respect of the Kolmar
Acquisition which will be made promptly after the Closing Date which will
not create a Material Adverse Effect if not so made or approved, and (iv)
filings in respect of any other Permitted Acquisition which will be made
promptly after the closing of each such Permitted Acquisition which will
not create a Material Adverse Effect if not so made or approved.
6.6 Government Regulation. Neither OSG nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
the Investment Company Act of 1940, or any other Requirement of Law that
limits its ability to incur indebtedness or its ability to consummate the
transactions contemplated in this Credit Agreement and the other Credit
Documents and Transaction Documents.
6.7 Solvency. Before and after giving effect to the
Transactions and any Permitted Acquisition, (i) the fair saleable value of
the assets of each Credit Party exceeds all its probable liabilities,
including those to be incurred pursuant to this Credit Agreement and the
other Credit Documents and Transaction Documents; (ii) no Credit Party has
unreasonably small capital in relation to the business in which it is or
proposes to be engaged; (iii) no Credit Party has incurred, nor does it
believe that it will incur debts beyond its ability to pay as such debts
become due; and (iv) no Credit Party believes that it will be unable to
satisfy any final judgment against it in accordance with its terms.
6.8 Rights in Collateral; Priority of Liens. Each Credit
Party has good and marketable title to all property which constitutes part
of the Collateral, free and clear of any and all Liens in favor of third
parties except Permitted Encumbrances. Upon the proper filing of the UCC
financing statements, filings under the Ontario and any other applicable
Requirements of Law and the Intellectual Property Security Agreements and
recordation or registration, as applicable, of the Mortgages listed in the
Closing Document List or delivered in connection with any Permitted
Acquisition, the security interests granted pursuant to the Credit
Documents constitute valid and enforceable first, prior and perfected Liens
on the Collateral, to the extent such Liens can be perfected by the filing
of such financing statements filings and Intellectual Property Security
Agreements or recordation of such Mortgages.
<PAGE>
6.9 Financial Data. OSG has provided to the Agent and each of
the Lenders complete and accurate copies of (i) annual audited Financial
Statements of each of ASC and PLI for the Fiscal Year ended December 31,
1996 and unaudited consolidated and consolidating Financial Statements of
OSG and its Subsidiaries for the nine months ended September 30, 1997 and
(ii) audited combined Financial Statements of Kolmar and its Subsidiaries
(including the assets to be acquired by Kolmar Canada) for the fiscal year
ended December 31, 1996 and audited combined and unaudited consolidating
Financial Statements of Kolmar and its Subsidiaries for the nine months
ended September 27, 1997. Such Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods involved
and fairly present the respective financial positions, results of
operations and cash flows of the applicable Persons for each of the periods
covered (subject in the case of interim statements, to normal year-end
audit adjustments and the absence of footnotes). The Projections have been
made in good faith, based upon assumptions which the Borrowers believe to
be reasonable. Except as set forth on Schedule B, Part 6.9, to the best of
Borrowers' knowledge (after due inquiry), no Credit Party has any
Contingent Obligation, contingent liability or liability for taxes, long-
term leases or commitments, which is not reflected in such Financial
Statements or the most recent Financial Statements delivered under Section
7.1 hereof.
6.10 FEIN; Locations of Offices, Records and Inventory. The
Federal Employee Identification Number (if applicable), the comparable
identification number in Canada and the address of the principal place of
business and chief executive office of each Credit Party and all locations
of Collateral is set forth on Schedule B, Part 6.10. The books and records
of the Credit Parties, and all their chattel paper and records of Accounts,
are maintained exclusively at such locations. There is no jurisdiction in
which the Credit Parties have any Collateral (except for vehicles and
Inventory in transit for processing or to customers) other than those
jurisdictions identified on Schedule B, Part 6.10. A complete list of the
name of the lessor or warehouse company and address of each leased premises
or warehouse not owned by a Credit Party at which Inventory is stored is
set forth on Schedule B, Part 6.10. None of the receipts received and to
be received by any Credit Party from any warehouseman state that the
Inventory covered thereby is to be delivered to bearer or to the order of a
named person or to a named person and such named person's assigns.
6.11 Subsidiaries; Ownership of Stock. After giving effect to
the Kolmar Acquisition, the only direct or indirect Subsidiaries of OSG are
those listed on Schedule B, Part 6.11. OSG or its Subsidiary specified in
Schedule B, Part 6.11 is the record and beneficial owner of all of the
shares of capital stock of each of the Subsidiaries listed on Schedule B,
Part 6.11, except as set forth on such Schedule. There are no proxies,
irrevocable or otherwise, with respect to such shares, and no equity
securities of any of such Subsidiaries are or may become required to be
issued by reason of any options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of any capital stock
of any such Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any such Subsidiary is or may
become bound to issue additional shares of its capital stock or securities
convertible into or exchangeable for such shares. All of such shares so
owned by the Credit Parties are owned by the Credit Parties free and clear
of any Liens.
6.12 No Judgments or Litigation. Except as set forth on
Schedule B, Part 6.12, no judgments, orders, writs or decrees are
outstanding against any Credit Party nor is there now pending or, to the
best of the Borrowers' knowledge after diligent inquiry, threatened, any
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against any Credit Party, which could reasonably be
expected to have a Material Adverse Effect.
6.13 No Defaults. No Credit Party is in default under any
term of any Contractual Obligation to which any of them is a party or by
which any of them is bound, which could, individually or in the aggregate,
have a Material Adverse Effect. Neither OSG nor the Borrower know of any
material dispute regarding any such Contractual Obligation.
6.14 Labor Matters. Schedule B, Part 6.14 accurately sets
forth all labor contracts to which any Credit Party is a party and their
dates of expiration. There are no existing or threatened strikes, lockouts
or other disputes relating to any collective bargaining or similar
agreement to which any Credit Party is a party.
6.15 Compliance with Law. No Credit Party has violated or
failed to comply with any Requirement of Law, including, without
limitation, ERISA, Environmental Laws or the regulations of the United
States Food and Drug Administration or its equivalent is foreign countries,
which could, individually or in the aggregate, have a Material Adverse
Effect.
6.16 ERISA. Schedule B, Part 6.16 provides a complete list of
the pension, retirement, profit sharing and other employee benefit and
fringe benefit plans, including medical and life insurance, workers'
compensation, and vacation benefits, that cover employees of OSG or any
Subsidiary of OSG (collectively the "Employee Plans").
<PAGE>
(a) Each Employee Plan is in compliance with all
applicable Requirements of Law and has been maintained
in compliance with the terms of such Plan. Full and
timely payment has been made of all amounts required
to be contributed under the terms of each Employee
Plan and applicable law or required to be paid as
expenses under such Employee Plan. Each Employee Plan
intended to be qualified under Code Section 401(a) has
received a determination letter to that effect from
the Internal Revenue Service and no event has occurred
and no amendment has been made that would adversely
affect such qualified status.
(b) The current value of the assets of each Employee Plan
subject to Title IV of ERISA, based on the actuarial
assumptions presently used by the Employee Plan,
exceeds the present value of the accrued benefits
under such Plan. No Employee Plan subject to Title IV
of ERISA or to Code Section 412 has incurred any
accumulated funding deficiency, whether or not waived,
and no other actual or contingent liability for any
other expenses or obligations of any Employee Plan
exists.
(c) Neither OSG nor any ERISA Affiliate is making
contributions, obligated to make contributions, or
within the six calendar years prior to the closing
date, made or been obligated to make contributions to
any multiemployer plan within the meaning of Section
4001(a)(3) of ERISA.
(d) Neither any Employee Plan nor any fiduciary for any
Employee Plan has participated in, engaged in or been
a party to any non-exempt Prohibited Transaction, and
neither OSG, or any of its Subsidiaries nor any
Employee Plan has had asserted against it any claim
for taxes under Chapter 43 Subtitle D or Section 5000
of the Code or for penalties under ERISA Section
502(c), (i) or (l), with respect to any Employee Plan,
nor is there a basis for any such claim. No officer,
director or employee of OSG or any of its Subsidiaries
has committed a material breach of any responsibility
or obligation imposed on fiduciaries by Title I of
ERISA with respect to any Employee Plan. As to Plans
not subject to ERISA, no conduct has occurred that
would constitute a material breach of those provisions
if the Plan were subject to those requirements.
(e) Other than routine claims for benefits, there is no
claim pending, or, to the knowledge of OSG or any
Borrower, threatened, involving any Employee Plan.
There is no proceeding pending, or, to the knowledge
of OSG or any Borrower, threatened, involving any
Employee Plan before the Internal Revenue Service, the
U.S. Department of Labor, the Pension Benefit Guaranty
Corporation, or any other Governmental Authority,
domestic or foreign. No proceedings have been
instituted by any Governmental Authority to terminate
any Plan in a manner that could create a liability or
obligation of OSG, any of its Subsidiaries or any
ERISA Affiliate, and no condition exists that presents
a material risk that such proceedings will be
instituted. No Termination Event has occurred and no
other event on circumstance has occurred that may
result in a Termination Event.
(f) No reporting or disclosure requirement imposed by
ERISA, the Code, or any other law, has been violated
with respect to any Employee Plan.
(g) With respect to each Plan that is a welfare plan (as
defined in ERISA section 3(1), OSG, each of its
Subsidiaries and each ERISA Affiliate has complied in
all material respects with the provisions of Sections
601-734 of ERISA and their Code counterparts. Neither
OSG, nor any of its Subsidiaries nor any ERISA
Affiliate is obligated to provide health care benefits
of any kind to retired employees pursuant to any
Employee Plan or any agreement or understanding. [The
Accumulated Post-Retirement Benefit Obligation (as
defined in Statement of Financial Accounting Standards
No. 106) as of [_____________] with respect to post-
retirement health and life benefits is estimated by
the independent actuary to be $___________, calculated
using the actuarial assumptions used for the last
available financial reporting period.]
(h) Schedule B, Part 6.16 lists all Employee Plans subject
to laws of a country or jurisdiction other than the
United States (the "Foreign Plans"). All
contributions required to be made to each Foreign Plan
for all prior plan years in order for each Foreign
<PAGE>
Plans to comply with the minimum funding standards
imposed by applicable law have been made or properly
accrued and all employee contributions to the Foreign
Plans for all prior plan years have been properly
withheld any fully paid into the applicable funding
arrangements. There has been no withdrawal of assets
from the Foreign Plans and no application for approval
of a withdrawal of assets has been made to any
Governmental Authority. Each of the Foreign Plans is
registered or qualified within the meaning of
applicable law and nothing has occurred which would
result in the revocation of the registration or
qualification of such Plans. The representations and
warranties contained in this subsection (h) are in
addition to each of the other representations and
warranties contained in Section 6.16 that are
applicable to the Foreign Plans.
(i) Agent has received a copy of the three most recently
filed Internal Revenue Service Form 5500 series and
accountant's opinions, if applicable, for each
Employee Plan, all applicable Internal Revenue Service
determination letters, and all applicable foreign
registration documents.
(j) Neither OSG nor any ERISA Affiliate is required to
provide security to any Plan under Section 401(a)(2a)
of the Internal Revenue Code.
6.17 Compliance with Environmental Laws. Except as disclosed
on Schedule B, Part 6.17, (i) none of the Credit Parties is the subject of
a judicial or administrative proceeding or investigation relating to the
violation of any Environmental Law, or asserting potential liability
arising from the disposal by any Person of any Hazardous Material;
(ii) none of the Credit Parties has filed or received any notice under any
Requirement of Law of treatment, storage, disposal, spill or release or
threatened release, at any property owned or leased or formerly owned or
leased by any Credit Party or at any other location, of any Hazardous
Material generated, used, stored, treated, transported or released by or on
behalf of any Credit Party which, individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse Effect; and
(iii) none of the Credit Parties has knowledge of any contingent liability
for any release of any Hazardous Material which, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect.
6.18 Intellectual Property. The Credit Parties possess such
assets, licenses, patents, patent applications, copyrights, service marks,
trademarks and trade names as are necessary or advisable to continue to
conduct their present and proposed business activities.
6.19 Licenses and Permits. Each of the Credit Parties has
obtained and holds in full force and effect, all franchises, licenses,
leases, permits, certificates, authorizations, qualifications, easements,
rights of way and other rights and approvals which are necessary or
advisable for the operation of its business as presently conducted and as
proposed to be conducted, except such permits, etc. for which transfer
approvals may, in accordance with Requirements of Law, and will be obtained
promptly after consummation of the Kolmar Acquisition or any Permitted
Acquisition.
6.20 Taxes and Tax Returns.
(a) Except as set forth on Schedule B, Part 6.20, the Credit
Parties have timely filed, without request for extension, all income tax
returns required to be filed. The information filed is complete and
accurate in all material respects. All deductions taken in such income tax
returns are appropriate and in accordance with applicable laws and
regulations, except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made in
accordance with GAAP.
(b) All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date hereof, have been timely
paid and no Credit Party has any liability for taxes in excess of the
amounts so paid or reserves so established.
(c) Except as set forth in Schedule B, Part 6.20, no
deficiencies for taxes have been claimed, proposed or assessed by any
taxing or other Governmental Authority against any Credit Party and no tax
liens have been filed. Except as set forth in Schedule B, Part 6.20, there
are no pending or threatened audits, investigations or claims for or
relating to any liability for taxes and there are no matters under
discussion with any Governmental Authority which could reasonably be
expected to result in a material additional liability for taxes. Either
the federal income tax returns of the Credit Parties have been audited by
the Internal Revenue Service or other applicable Governmental Authority and
such audits have been closed, or the period during which any assessments
may be made by the Internal Revenue Service or other applicable
Governmental Authority has expired without waiver or extension for all
years up to and including the fiscal year of the Credit Parties ended as
set forth on Schedule B, Part 6.20. Except as set forth in Schedule B,
<PAGE>
Part 6.20, no extension of a statute of limitations relating to taxes,
assessments, fees or other governmental charges is in effect with respect
to the Credit Parties.
(d) Except as set forth on Schedule B, Part 6.20, no Credit
Party has any obligation under any written tax sharing agreement or
agreement regarding payments in lieu of taxes.
6.21 Material Contracts. Schedule B, Part 6.21, contains a
true, correct and complete list of all the Material Contracts currently in
effect on the date hereof. Except as described on Schedule B, Part 6.21,
none of the Material Contracts contains any burdensome restrictions on the
Credit Parties or any of their respective properties, all of the Material
Contracts are in full force and effect, and no defaults currently exist
thereunder.
6.22 Accuracy and Completeness of Information. All factual
information furnished by or on behalf of the Credit Parties in writing to
the Agent, any Lender, or the Auditors for purposes of or in connection
with this Credit Agreement or any Credit Documents or the Transactions, or
any transaction contemplated hereby or thereby is or will be true and
accurate in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any material
fact necessary to make such information not misleading at such time.
6.23 No Change. Since December 31, 1996, there has been no
development or event nor any prospective development or event, which has
had or could reasonably be expected to have a Material Adverse Effect.
6.24 Representations in Acquisition Documents. Each of the
representations and warranties of the parties to any Acquisition Document
is true and correct in all material respects, and is incorporated herein by
reference.
ARTICLE 7.
AFFIRMATIVE COVENANTS.
Until termination of this Credit Agreement and payment and
satisfaction of all Obligations due hereunder and under the other Credit
Documents:
7.1 Financial Reporting. OSG and the Borrowers shall timely
deliver to each Lender the following information:
(a) Annual Financial Statements. As soon as available, but not
later than 120 days after each Fiscal Year end: (i) the annual audited
Financial Statements of OSG and its Subsidiaries; (ii) a comparison in
reasonable detail to the prior year audited Financial Statements; (iii) the
Auditors' unqualified opinion, "Management Letter" and statement indicating
that the Auditors have not obtained knowledge of the existence of any
Default or Event of Default during their audit; (iv) a narrative discussion
of the consolidated financial condition and results of operations and the
consolidated liquidity and capital resources of OSG and its Subsidiaries
for such Fiscal Year, prepared by the chief financial officer of OSG; and
(v) a Compliance Certificate substantially in the form of Exhibit D with an
attached schedule of calculations demonstrating compliance with the Article
8 covenants.
(b) Projections. Not later than 45 days after each Fiscal
Year end, beginning with the Fiscal Year ended December 31, 1997,
projections of the financial condition and results of operations of OSG and
its Subsidiaries for the next three years, containing projected
consolidating balance sheets, statements of operations, statements of cash
flows and statements of changes in shareholders equity on a monthly basis
for the first of the three years and annually for the second and third.
(c) Quarterly Financial Statements. As soon as available, but
not later than 60 days after each end of each of the first three fiscal
quarters, and 120 days after end of the last fiscal quarter: (i) Financial
Statements of OSG and its Subsidiaries as of the fiscal quarter then ended,
and for the Fiscal Year to date; (ii) a comparison in reasonable detail to
the Financial Statements for the corresponding periods of the prior Fiscal
Year; (iii) the certification of the chief executive officer or chief
financial officer of OSG that such Financial Statements have been prepared
in accordance with GAAP (subject to year-end audit adjustments); (iv) a
narrative discussion of the consolidated financial condition and results of
operations and the consolidated liquidity and capital resources of OSG and
its Subsidiaries for such fiscal quarter and Fiscal Year to date, prepared
by the chief financial officer of OSG; and (v) a Compliance Certificate
substantially in the form of Exhibit D with an attached schedule of
calculations demonstrating compliance with the Article 8 covenants.
(d) Monthly Financial Statements. As soon as available, but
not later than 45 days after the end of each month: (i) a consolidated and
consolidating balance sheet for OSG and its Subsidiaries as at the end of
such month and for the Fiscal Year to date and consolidated and
consolidating statements of operations and cash flows for such month and
for the Fiscal Year to date; (ii) a comparison to the balance sheet,
statement of operations and statement of cash flows for the same year to
date period in the prior year; (iii) a certification by the chief financial
officer of OSG that such balance sheet, statement of operations and
<PAGE>
statement of cash flows have been prepared in accordance with GAAP (subject
to year-end audit adjustments); and (iv) a Compliance Certificate
substantially in the form of Exhibit D with an attached schedule of
calculations demonstrating compliance the Article 8 covenants.
(e) Monthly Comparison to Prior Projections. As soon as
available, but not later than 45 days after the end of each month, a
comparison of actual results of operations for OSG and its Subsidiaries for
such month and for the period from the beginning of the current Fiscal Year
through the end of such month with amounts previously projected for those
periods (see Section 7.1(b)) and with actual results for corresponding
periods in the previous Fiscal Year.
(f) Purchase Price Adjustments. Promptly after receipt
thereof, all schedules, financial statements or documents evidencing the
calculation of any purchase price adjustment under any Acquisition
Documents.
7.2 Collateral Reporting. The Borrowers shall timely deliver
to the Agent the following certificates and reports:
(a) Monthly Borrowing Base Certificates. At the times and for
the periods set forth below, a borrowing base certificate (the "Borrowing
Base Certificate"), which shall be: (i) completed substantially in the form
of Exhibit E, detailing each Borrower Party's Eligible Accounts Receivable,
Eligible Inventory and Eligible Equipment as of the last day of the
applicable period (or as of such other date as the Agent may reasonably
request) and the Real Property Value; (ii) prepared by or under the
supervision of such Borrower's chief executive officer or chief financial
officer and certified by such officer subject only to adjustment upon
completion of the normal year-end audit; and (iii) attached to such
additional schedules and other information as the Agent may reasonably
request. The Borrowing Base Certificate shall be delivered monthly for
each month from the Closing Date until March 31, 1998, within thirty (30)
calendar days after the end of each month, calculating the Borrowing Base
as of the last day of each such month and thereafter, (A) for any month for
which the Excess Availability (determined as of the last day of such month)
is more than $10,000,000, within thirty (30) calendar days after the end of
such month, calculating the Borrowing Base as of the last day of each such
month; (B) for any month for which the Excess Availability (determined as
of the last day of such month) is in excess of $5,000,000 but less than or
equal to $10,000,000, within ten (10) Business Days after the end of such
month, calculating the Borrowing Base as of the last day of each such month
and (C) for any month for which the Excess Availability (determined as of
the end of each month for the month then ended) is $5,000,000 or less,
within five (5) Business Days after the end of each week, commencing with
the first week after the date of determination.
(b) Inventory Report. A report of Inventory of each Borrower
Party, based upon a physical count, which shall describe the Borrower
Party's Inventory by category and by item (in reasonable detail) and report
of the value (at lower of cost or market) of such Inventory; provided that
so long as no Event of Default has occurred and is continuing, such report
shall be required no more than once a year.
(c) Appraisals.
(i) At least once during each Fiscal Year, an appraisal
of the orderly liquidation value of all Equipment of the Borrower Parties,
prepared by an appraisal firm satisfactory to the Agent and in scope and
substance satisfactory to the Agent; provided that so long as no Event of
Default has occurred and is continuing, such appraisal shall be required no
more than once a year.
(ii) When required under applicable Requirements of Law,
an appraisal of any Mortgaged Property, meeting the requirements of such
Requirements of Law.
(d) Further Assurances. When reasonably requested by the
Agent or any Lender, any further information regarding the Collateral,
business affairs and financial condition of OSG or any of its Subsidiaries.
7.3 Notification Requirements. The Borrowers shall timely
give the Agent and each of the Lenders the following notices:
(a) Notice of Defaults. Promptly, and in any event within two
(2) Business Days after becoming aware of the occurrence of a Default or
Event of Default, a certificate of the chief executive officer or chief
financial officer of OSG or a Borrower specifying the nature thereof and
the Borrowers' proposed response thereto, each in reasonable detail.
(b) Proceedings or Adverse Changes. Promptly, and in any
event within five (5) Business Days after OSG or any Borrower becomes aware
of (i) any proceeding being instituted by or against any Credit Party in
any federal, state, local or foreign court or before any commission or
other regulatory body (federal, state, local or foreign) seeking an
injunction or any such proceeding being instituted or threatened which, if
adversely determined, could have a Material Adverse Effect, (ii) any order,
judgment or decree in excess of $750,000 being entered against any Credit
Party or any of their respective properties or assets or (iii) any actual
or prospective change, development or event which has had or could
reasonably be expected to have a Material Adverse Effect, a written
<PAGE>
statement describing such proceeding, order, judgment, decree, change,
development or event and any action being taken with respect thereto by any
Credit Party.
(c) ERISA Notices. (i) Promptly, and in any event within ten
(10) Business Days after OSG, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a Termination Event has
occurred, a written statement of the chief financial officer of OSG
describing such Termination Event and any action that is being taking with
respect thereto by OSG, any such Subsidiary or ERISA Affiliate, and any
action taken or threatened by the Internal Revenue Service, Department of
Labor or Pension Benefit Guaranty Corporation. OSG, such Subsidiary and
the ERISA Affiliate shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor; (ii)
promptly, and in any event within three (3) Business Days after the filing
thereof with the Internal Revenue Service, a copy of each funding waiver
request filed with respect to any Benefit Plan and all communications
received by OSG, any of its Subsidiaries or any ERISA Affiliate with
respect to such request; and (iii) promptly, and in any event within three
(3) Business Days after receipt by OSG, any of its Subsidiaries or any
ERISA Affiliate, of the PBGC's intention to terminate a Benefit Plan or to
have a trustee appointed to administer a Benefit Plan, copies of each such
notice.
(d) Environmental and Health and Safety Notices. Promptly,
and in any event within ten (10) Business Days after receipt by any Credit
Party of any notice, complaint or order alleging actual or prospective
violation in any material respect of any environmental, health or safety
Requirement of Law or alleging responsibility for costs of a cleanup,
together with a copy of such notice, complaint, or order and a written
statement describing any action being taken with respect thereto by any
Credit Party.
(e) Material Contracts. Promptly, and in any event within ten
(10) Business Days after any Material Contract or the Management Agreement
is terminated or amended or any new Material Contract is entered into, a
written statement describing such event, with copies of amendments or new
contracts, and an explanation of any actions being taken with respect
thereto.
(f) Collateral Matters. At least thirty (30) Business Days
prior written notice to the Agent of any change in the name, identity or
corporate structure of any Credit Party, the location of any Collateral
(other than with respect to the Collateral located in the ordinary course
of business on property owned or leased by an outside processor) or in the
location of the chief executive office or place of business of any Credit
Party from the locations specified in Schedule B, Part 6.10. At least
twenty (20) Business Days prior to any such change, the Borrowers shall
cause to be executed and delivered to the Agent any financing statements,
Collateral Access Agreements or other documents required by the Agent, all
in form and substance reasonably satisfactory to the Agent.
7.4 Corporate Existence. OSG shall, and shall cause each of
its Subsidiaries to, (a) maintain its corporate existence (except that any
Borrower's Subsidiaries may merge with each other and with such Borrower
(provided that the Borrower shall be the surviving corporation), provided
the Agent receives five (5) Business Days prior written notice thereof),
(b) maintain in full force and effect all licenses, bonds, franchises,
leases, trademarks and qualifications to do business, and all patents,
contracts and other rights necessary or advisable to the profitable conduct
of their businesses except where failure to do so could not reasonably be
expected to have a Material Adverse Effect, and (c) continue in, and limit
their operations to, the same general lines of business as presently
conducted by them (after giving effect to the Kolmar Acquisition) and those
reasonably related thereto.
7.5 Books and Records; Inspections. OSG agrees to maintain,
and to cause each of its Subsidiaries to maintain, books and records
pertaining to the Collateral in such detail, form and scope as is
consistent with good business practice. OSG and the Borrowers agree that
the Agent or its agents may enter upon the premises of OSG or any of its
Subsidiaries at any time and from time to time, during normal business
hours and upon reasonable notice under the circumstances, and at any time
at all on and after the occurrence of a Default which continues beyond the
expiration of any grace or cure period applicable thereto, and which has
not otherwise been waived by the Agent, for the purposes of (a) inspecting
and verifying the Collateral, (b) inspecting and/or copying (at the
Borrowers' expense) any and all records pertaining thereto, and
(c) discussing the affairs, finances and business of the Credit Parties
with any officers, employees and directors of any Credit Party or with the
Auditors.
7.6 Insurance. OSG agrees to maintain, and to cause each of
its Subsidiaries to maintain, public liability insurance, third party
property damage insurance, business interruption insurance and replacement
value insurance on the Collateral under such policies of insurance, with
such insurance companies, in such amounts and covering such risks as are at
all times satisfactory to the Agent in its commercially reasonable
judgment. All policies covering the Collateral are to name the Agent as an
additional insured and the loss payee in case of loss, and are to contain
such other provisions as the Agent may reasonably require to fully protect
the Agent's interest in the Collateral and to any payments to be made under
<PAGE>
such policies. All policies shall also contain an agreement of the issuer
requiring that the coverages evidenced thereby may not be cancelled,
terminated or modified without endeavoring to give at least thirty (30)
days prior written notice to the Agent. Borrowers shall deliver all
original policies, including additional and renewal policies, to the Agent
and, in the case of insurance about to expire, shall deliver renewal
policies not less than ten (10) days prior to their respective dates of
expiration. In case of loss or damage by fire or other casualty, the Agent
is authorized: (a) to settle and adjust any claim under insurance policies
that insure against such risks; or (b) to allow the applicable Credit Party
to agree with the insurance company or companies on the amount to be paid
in regard to such loss. In either case, the Agent is authorized to collect
and receive any insurance proceeds payable with respect to any property of
any Credit Party, which shall be applied to the Revolving Loans in
accordance with Section 4.7(a). If the Agent makes such proceeds available
to reimburse any Credit Party or any lessee for the cost of repair,
rebuilding or restoration any Collateral, such proceeds shall be made
available in the manner and under the conditions that the Agent may
reasonably require.
7.7 Taxes. OSG agrees to pay when due, and to cause each of
its Subsidiaries to pay when due, all taxes lawfully levied or assessed
against OSG, any of its Subsidiaries or any of the Collateral before any
penalty or interest accrues thereon; provided, however, that, unless such
taxes have become a federal tax or ERISA Lien on any of the assets of the
Credit Parties, no such tax need be paid if the same is being contested, in
good faith, by appropriate proceedings promptly instituted and diligently
conducted and if an adequate reserve or other appropriate provision shall
have been made therefor as required in order to be in conformity with GAAP.
7.8 Compliance With Laws. OSG agrees to comply, and to cause
each of its Subsidiaries to comply in all material respects, with all
Requirements of Law applicable to the Collateral or any part thereof, or to
the operation of its business or its assets generally, unless the
applicable Credit Party contests any such Requirements of Law in a
reasonable manner and in good faith.
7.9 Use of Proceeds. The initial Revolving Loans made to the
Borrowers hereunder shall be used by the Borrowers to pay the costs and
expenses of the Transactions contemplated by this Credit Agreement which
are due and payable on the Closing Date, including without limitation the
Fees and Expenses due on the Closing Date pursuant to Article 4 hereof, and
to repay Indebtedness; and the proceeds of any subsequent Revolving Loans
made hereunder shall be used by the Borrowers solely for ongoing working
capital requirements, other corporate purposes permitted hereunder and for
Permitted Acquisitions. The Borrowers shall not use any portion of the
proceeds of any such Revolving Loans for the purpose of purchasing or
carrying any "margin stock" (as defined in Regulation G of the Board of
Governors of the Federal Reserve System) in any manner which violates the
provisions of Regulation G or X of said Board of Governors or for any other
purpose in violation of any applicable statute or regulation, or of the
terms and conditions of this Credit Agreement.
7.10 Fiscal Year. OSG agrees to maintain its Fiscal Year and
that of its Subsidiaries as a year ending December 31.
7.11 Maintenance of Property. OSG agrees to keep, and to
cause each of its Subsidiaries to keep, all property useful and necessary
to their respective businesses in good working order and condition
(ordinary wear and tear excepted) in accordance with their past operating
practices and not to commit or suffer any waste with respect to any of
their properties.
7.12 ERISA Documents. The Borrowers will cause to be
delivered to the Agent, upon the Agent's request, each of the following:
(a) a copy of each Plan (or, where any such plan is not in writing,
complete description thereof) (and if applicable, related trust agreements
or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of the OSG or its
Subsidiaries; (b) the most recent determination letter issued by the
Internal Revenue Service with respect to each Benefit Plan; (c) for the
three most recent plan years, Annual Reports on Form 5500 Series required
to be filed with any governmental agency for each Benefit Plan; (d) all
actuarial reports prepared for the last three plan years for each Benefit
Plan; (e) a listing of all Multiemployer Plans, with the aggregate amount
of the most recent annual contributions required to be made by OSG or any
ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (f) any information that has been
provided to OSG or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (g) the aggregate amount of the most recent
annual payments made to former employees of OSG or any ERISA Affiliate
under any Retiree Health Plan.
7.13 Further Assurances. OSG shall take, and shall cause each
of its Subsidiaries to take, all such further actions and execute all such
further documents and instruments as the Agent or the Majority Lenders may
at any time reasonably determine in its or their sole discretion to be
necessary or desirable to further carry out and consummate the transactions
contemplated by the Credit Documents, to cause the execution, delivery and
performance of the Credit Documents to be duly authorized and to perfect or
protect the Liens (and the priority status thereof) of the Agent on the
<PAGE>
Collateral.
7.14 Environmental and Other Matters. The Credit Parties will
conduct their businesses so as to comply in all material respects with all
applicable Environmental Laws, in all jurisdictions in which any of them is
doing business, including, without limitation, compliance in all material
respects with the terms and conditions of all permits and governmental
authorizations, except to the extent that the Credit Parties are
contesting, in good faith by appropriate legal proceedings, any such
Environmental Law or interpretation thereof or application thereof;
provided, that the Credit Parties shall comply in all material respects
with the applicable order of any court or other governmental agency
relating to such Environmental Laws unless the Credit Parties shall
currently be prosecuting an appeal or proceedings for review and shall have
secured a stay of enforcement or execution or other arrangement postponing
enforcement or execution pending such appeal or proceedings for review. If
any Credit Party shall (a) receive written notice that any material
violation of any Environmental Law may have been committed or is about to
be committed by any Credit Party, (b) receive written notice that any
administrative or judicial complaint or order has been filed or is about to
be filed against any Credit Party alleging material violations of any
Environmental Law, or requiring any Credit Party to take any action in
connection with the release or threatened release of Hazardous Materials or
(c) receive any written notice from a Governmental Authority or any other
Person alleging that any Credit Party may be liable or responsible for
material costs associated with a response to or cleanup of a release of
Hazardous Materials or any damages caused thereby, the Borrowers shall
provide the Agent and the Lenders with a copy of such notice within ten
(10) days after the receipt thereof. Within ten (10) days after a Borrower
learns of the enactment or promulgation of any federal, state, local or
foreign Environmental Law which reasonably could be expected to have a
Material Adverse Effect, the Borrower shall provide the Agent and the
Lenders with notice thereof. The Borrowers shall promptly take all
reasonable action necessary to prevent the imposition of any Liens on any
of properties of any Credit Party arising out of or related to any
environmental matters. At the written request of the Agent (which request
will not be made unless (i) the Agent received a notice under Section
7.3(d), (ii) the Agent receives notice from a Credit Party pursuant to this
Section 7.14, (iii) the Agent otherwise reasonably believes a Credit Party
may be in violation of an Environmental Law or (iv) an Event of Default has
occurred and is continuing), at the sole cost and expense of the Borrowers,
the Borrowers shall retain an environmental consulting firm, satisfactory
to the Agent, to conduct an environmental review, audit or investigation of
the specific items as requested by the Agent relating to the properties of
the Credit Parties and provide to the Agent and each Lender a copy of any
reports delivered in connection therewith. At the request of the Agent,
the Borrowers shall provide the Agent with any additional information
relating to environmental matters and any potential related liability
resulting therefrom as the Agent may reasonably request. It is
contemplated that such review, audit, investigation or information shall be
provided on a confidential and privileged basis in connection with the
common interests of the Agent, Lenders and Credit Parties, subject to the
provisions of Section 11.9.
7.15 Kolmar. Immediately following consummation of the Kolmar
Acquisition, OSG shall cause Kolmar to become a Borrower under this Credit
Agreement and a party to the other Credit Documents to which Borrowers are
a party, by executing and delivering a Joinder Agreement and the other
documents and instruments set forth on the Closing Document List, shall
cause Kolmar Canada to execute and deliver a Joinder Agreement and the
other documents and instruments set forth on the Closing Document List and,
in each case, OSG shall cause Kolmar and Kolmar Canada to execute and
deliver such other documents and instruments as are otherwise necessary (or
advisable in the Agent's judgment) in order to grant the Agent a perfected
first priority security interest and Lien (subject only to Permitted
Encumbrances) in the assets of Kolmar and Kolmar Canada.
7.16 Enforcement of Purchase Agreement. The Credit Parties
will enforce their rights or claims under the Purchase Agreement against
Sellers and Sellers' obligations thereunder diligently and in good faith in
accordance with reasonable business practices; provided however that
following the occurrence and during the continuance of a Default or an
Event of Default, the Credit Parties will enforce such rights, claims and
obligations as directed by the Agent in its sole discretion. The Credit
Parties will keep the Agent informed of any such claims against Sellers or
any of them, and the enforcement thereof, and will not waive any material
right or remedy under the Purchase Agreement or modify any provisions of
the Purchase Agreement relating thereto without the prior written consent
of Majority Lenders. Following the occurrence and during the continuance
of a Default or Event of Default, all enforcement actions shall be
reasonably satisfactory to the Majority Lenders.
ARTICLE 8.
NEGATIVE COVENANTS.
Until termination of this Credit Agreement and payment and
satisfaction of all Obligations due hereunder and under the other Credit
Documents, OSG and the Borrowers shall comply with, and, where required,
shall cause each of their Subsidiaries to comply with, the following
covenants:
<PAGE>
8.1 Minimum EBITDA. OSG and its Subsidiaries shall maintain
as of the end of each Test Period ending on the last day of each fiscal
quarter set forth below consolidated EBITDA of not less than the amount set
forth below:
<TABLE>
<CAPTION>
AMOUNT
QUARTER (expressed in thousands)
------- ------------------------
<S> <C>
March 31, 1998 $ 3,250
June 30, 1998 8,800
September 30, 1998 15,000
December 31, 1998 19,200
March 31, 1999 20,700
June 30, 1999 20,300
September 30, 1999 20,200
December 31, 1999 21,800
March 31, 2000 22,300
June 30, 2000 22,700
September 30, 2000 23,200
December 31, 2000 23,600
March 31, 2001 22,500
June 30, 2001 22,900
September 30, 2001 23,300
December 31, 2001 23,700
March 31, 2002 24,000
June 30, 2002 24,300
September 30, 2002 24,500
December 31, 2002 24,800
</TABLE>
8.2 Fixed Charge Coverage. OSG and its Subsidiaries shall
maintain a ratio of consolidated EBITDA to consolidated Fixed Charges for
each Test Period ending on the last day of any fiscal quarter set forth
below of not less than the ratio set forth below:
<TABLE>
<CAPTION>
QUARTER RATIO
------- -----
<S> <C>
March 31, 1998 0.90:1.00
June 30, 1998 1.00:1.00
September 30, 1998 1.00:1.00
December 31, 1998 1.10:1.00
March 31, 1999 1.10:1.00
June 30, 1999 1.10:1.00
September 30, 1999 1.10:1.00
December 31, 1999 1.10:1.00
March 31, 2000 1.10:1.00
June 30, 2000 1.10:1.00
September 30, 2000 1.10:1.00
December 31, 2000 1.20:1.00
and thereafter
</TABLE>
8.3 Funded Debt Coverage. OSG and its Subsidiaries shall
maintain a Funded Debt Ratio for any Test Period ending on the last day of
any fiscal quarter set forth below of not greater than the ratio set forth
below:
<TABLE>
<CAPTION>
QUARTER RATIO
------- -----
<S> <C>
March 31, 1998 8.0:1.00
June 30, 1998 6.0:1.00
September 30, 1998 5.6:1.00
December 31, 1998 5.5:1.00
March 31, 1999 5.3:1.00
June 30, 1999 5.20:1.00
September 30, 1999 5.10:1.00
December 31, 1999 4.80:1.00
March 31, 2000 4.70:1.00
June 30, 2000 4.60:1.00
September 30, 2000 4.50:1.00
December 31, 2000 4.40:1.00
March 31, 2001 4.40:1.00
June 30, 2001 4.30:1.00
September 30, 2001 4.20:1.00
December 31, 2001 4.10:1.00
March 31, 2002 4.10:1.00
June 30, 2002 4.00:1.00
and thereafter
</TABLE>
8.4 [Intentionally omitted]
8.5 [Intentionally omitted]
8.6 Capital Expenditures. The Borrowers and their
<PAGE>
Subsidiaries shall not make payments for Capital Expenditures in excess of
$4,500,000 in Fiscal Year 1998, $5,000,000 in Fiscal Year 1999, and
$5,500,000 in any Fiscal Year thereafter, except for acquisitions of assets
in a Permitted Acquisition; provided that the maximum amount for each
Fiscal Year shall be increased by an amount equal to fifty percent (50%) of
the amount by which the actual Capital Expenditures in the immediately
preceding Fiscal Year are less than the maximum permitted amount for such
Fiscal Year, without giving effect to any amounts carried forward to that
Fiscal Year. The Borrowers shall not make any Capital Expenditures that
are not directly related to the business conducted on the Closing Date by
the Borrowers and their Subsidiaries (after giving effect to the Kolmar
Acquisition) or lines of business reasonably related thereto.
8.7 Additional Indebtedness. Neither OSG nor any of its
Subsidiaries shall directly or indirectly incur, create, assume or suffer
to exist any Indebtedness other than:
(a) Indebtedness under the Credit Documents;
(b) Indebtedness under Interest Rate Agreements in the
ordinary course of business;
(c) Indebtedness described on Schedule B, Part 8.7, and any
refinancing of such Indebtedness (excluding any Indebtedness of Foreign
Subsidiaries), so long as the aggregate principal amount of the
Indebtedness so refinanced shall not be increased and the refinancing shall
be on terms and conditions no more restrictive than the terms and
conditions of the Indebtedness to be refinanced;
(d) Indebtedness under Capital Leases or secured by purchase
money liens on Equipment acquired after the date of this Credit Agreement
not to exceed $2,000,000 in the aggregate outstanding at any one time
(collectively, "Purchase Money Liens") so long as such Indebtedness shall
be from parties and on terms and conditions satisfactory to the Agent, each
Purchase Money Lien shall attach only to the property to be acquired and
proceeds thereof, a description shall have been furnished to the Agent for
any item of Equipment for which the purchase price is greater than
$500,000, and the Indebtedness incurred shall not exceed one hundred
percent (100%) of the purchase price of the item or items of Equipment
purchased.
(e) Subordinated Debt of OSG, which may be guaranteed by the
Borrowers and any Subsidiaries which are Guarantors hereunder, provided all
such guaranties shall be on a subordinated basis on the terms approved by
the Agent and the Majority Lenders;
(f) Indebtedness representing deferred payments of insurance
premiums;
(g) Indebtedness of (i) a Borrower Party to another Borrower
Party or a Domestic Subsidiary or (ii) a Domestic Subsidiary to a Borrower
or another Domestic Subsidiary in each case evidenced by an Intercompany
Note pledged to the Agent; provided that Indebtedness of a Borrower to any
Domestic Subsidiary of a Borrower not a Borrower Party shall not exceed
$1,000,000 in the aggregate at any time outstanding;
(h) Indebtedness of a Foreign Subsidiary other than a Borrower
Party to a Borrower Party in an outstanding amount not to exceed $4,000,000
at any time after the Closing Date for all Foreign Subsidiaries or
$2,000,000 at any time after the Closing Date for any Foreign Subsidiary,
provided that such Indebtedness is evidenced by an Intercompany Note
pledged to the Agent; and
(i) Contingent Obligations permitted under Section 8.9.
8.8 Liens. Neither OSG nor any of its Subsidiaries shall
directly or indirectly create, incur, assume, or suffer to exist any Lien
on any of its property now owned or hereafter acquired except:
(a) Liens granted to the Lenders under the Credit Documents;
(b) Liens listed on Schedule B, Part 8.8;
(c) Purchase Money Liens;
(d) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, or landlords, liens for taxes, assessments or
other governmental charges, and other similar Liens arising by operation of
law for amounts that are not more than 30 days delinquent or which are
being diligently contested in good faith by the applicable Credit Party, so
long as the Agent has been notified thereof and adequate reserves are
maintained by the applicable Credit Party for their payment;
(e) Attachment or judgment Liens which do not constitute an
Event of Default;
(f) Deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under unemployment
insurance, not to exceed an aggregate of $2,000,000;
(g) Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
<PAGE>
obligations, and other obligations of like nature arising in the ordinary
course of business not to exceed an aggregate of $1,000,000;
(h) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially
detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of any Credit Party;
(i) Deposits in an aggregate amount not to exceed $1,000,000
made in the ordinary course of business to secure liability to insurance
carriers;
(j) Any interest or title of a lessor or sublessor under any
Operating Lease permitted under Section 8.22 and any "encumbrance" created
by arrangements providing for customers to use or sublease a portion of a
Credit Party's leased warehouses to store Inventory belonging to such
customers;
(k) Liens for taxes, assessments or other governmental charges
not yet due and payable or which are being diligently contested in good
faith by the applicable Credit Party by appropriate proceedings, provided
that in such case an adequate reserve is being maintained by the Credit
Party for the payment of same;
(l) Deposits or pledges to secure surety and appeal bonds; and
(m) Extensions and renewals of any of the foregoing so long as
the aggregate amount of extended or renewed Liens are not increased and are
on terms and conditions no more restrictive than the terms and conditions
of the Liens extended or renewed.
8.9 Contingent Obligations. Neither OSG nor any of its
Subsidiaries shall directly or indirectly incur, assume, or suffer to exist
any Contingent Obligation, excluding (i) customary indemnities given in
connection with the sale of Inventory or other asset dispositions or
Permitted Acquisitions; (ii) Contingent Obligations of OSG or any Borrower
under guaranties of Indebtedness of any Borrower Party or any Domestic
Subsidiary permitted to be incurred under Section 8.7; (iii) Contingent
Obligations of OSG or any Borrower under guaranties of Indebtedness of any
of its Foreign Subsidiaries not to exceed $4,000,000 in the aggregate
outstanding at any time and (iv) Contingent Obligations of OSG and its
Subsidiaries in an aggregate amount outstanding not to exceed $2,500,000
with respect to loans to employees of OSG or any of its Subsidiaries to
purchase OSG capital stock.
8.10 Sale of Assets. OSG shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, sell, lease, assign,
transfer or otherwise dispose of any assets other than (i) Inventory in the
ordinary course of business, (ii) individual items of Collateral with a
book value of less than $1,000,000 in the aggregate during any Fiscal Year,
(iii) obsolete or worn out property disposed of in the ordinary course of
business and (iv) other dispositions of assets, provided that with respect
to this clause (iv) (a) such dispositions are for fair value, (b) the
aggregate consideration is either paid in full in cash at the time of
disposition and is either reinvested in the business of the Borrowers or
their Subsidiaries (subject to the limitations of Sections 8.6, 8.12 and
8.20) or used to repay the Revolving Loans and (c) the aggregate amount of
all such dispositions does not exceed $2,500,000 in the aggregate for any
Fiscal Year. None of the Credit Parties shall, directly or indirectly,
become or remain liable as lessee or as guarantor or other surety with
respect to any lease of any property, whether real or personal or mixed, or
whether now owned or hereafter acquired, which any Credit Party has sold or
transferred or intends to sell or transfer to any other Person if the
aggregate amount for which the Credit Parties are liable, contingently or
otherwise, exceeds $2,000,000 in any Fiscal Year.
8.11 Restricted Payments. OSG shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend (other than dividends payable
solely in common stock of OSG or any of its Subsidiaries) on, or make any
payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of capital stock of OSG or any of
its Subsidiaries or any warrants, options or rights to purchase any such
capital stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of OSG or any of its Subsidiaries except
that:
(i) any Subsidiary may declare and pay dividends to a
Borrower Party or any other Subsidiary of the Borrower which is
its direct parent;
(ii) (A) if after giving effect to the following, no Default
or Event of Default would exist, Borrowers may make payments and
distributions to OSG to permit OSG to pay federal, state and
provincial income taxes then due and owing, capital and franchise
taxes and other similar licensing expenses incurred in the
ordinary course of business; provided that the Borrowers' and
their Subsidiaries' aggregate contribution to federal, state and
<PAGE>
provincial income taxes as a result of the filing of a
consolidated return by OSG shall not be greater, nor shall the
aggregate receipt of tax benefits be less, than they would have
been had the Borrowers and their Subsidiaries not filed a
consolidated return with OSG; and (B) Borrowers may make payments
and distributions to OSG to permit OSG to pay executive salaries,
lease payments and other expenses incurred in the ordinary course
of business (but excluding any Indebtedness);
(iii) Borrowers may make dividend payments to OSG with
respect to Borrower common stock from time to time in amounts
sufficient to permit OSG to make payments with respect to the
Subordinated Debt, but only to the extent permitted by the
subordination provisions contained in the indenture or other
agreement pursuant to which such Subordinated Debt was issued or
otherwise as approved in writing by Majority Lenders and OSG may
make such payments; provided that nothing in this clause (iii)
shall be deemed to permit any voluntary prepayment with respect
to, or redemption or defeasance of, any such Subordinated Debt;
(iv) so long as no Default or Event of Default has occurred
and is continuing or would arise as a result of such payments,
Borrowers may make dividend payments to OSG with respect to any
Borrower's common stock from time to time in amounts sufficient to
permit OSG to purchase OSG stock from its employees or managers
pursuant to the terms of the Stockholder Agreement and OSG may
make payments to purchase such stock; provided that the aggregate
amount of such payments shall not exceed during the term of this
Credit Agreement the sum of (a) $1,000,000 plus (b) the net cash
proceeds of any OSG capital stock sold to management investors
after the Closing Date which net cash proceeds have been
contributed to a Borrower;
(v) so long as no Default or Event of Default has occurred
and is continuing or would arise as a result of such payments,
Borrowers may make dividend payments to OSG with respect to any
Borrower's common stock from time to time in an amount sufficient
to permit OSG to make scheduled quarterly cash dividend payments
on the Series A Preferred Stock in accordance with the terms
thereof as in effect on the Closing Date and OSG may make such
payments; provided that the aggregate sum of such payments shall
not exceed $60,000 during any Fiscal Year; and
(vi) so long as no Default or Event of Default has occurred
and is continuing or would arise as a result of such payments,
Borrowers may make dividend payments to OSG with respect to any
Borrower's common stock from time to time in amounts sufficient to
permit OSG to make additional scheduled quarterly cash dividend
payments on the Series A Preferred Stock or Series B Preferred
Stock in accordance with the terms thereof as in effect on the
Closing Date and OSG may make such payments; provided that (A) the
aggregate sum of such payments shall not exceed $300,000 during
any Fiscal Year, and (B) after giving effect to the payment, the
ratio of the consolidated EBITDA to consolidated Fixed Charges is
greater than 1.6 to 1 and Borrowers have Excess Availability of at
least $25,000,000; or
(b) make any optional payment or prepayment on or redemption
(including, without limitation, by making payments to a sinking or
analogous fund) or repurchase of any Indebtedness (other than Indebtedness
pursuant to this Credit Agreement) or of any Mandatory Redeemable
Obligation or any payments in violation of the subordination provisions of
any Subordinated Debt; provided that any Subsidiary may make payments on
account of Indebtedness owing to a Borrower Party and any Borrower Party
may make payments under any Intercompany Note in accordance with its terms;
and OSG may refinance the Bridge Loan with Subordinated Debt permitted
hereunder; or
(c) change or amend the terms of any Subordinated Debt (or any
indenture or agreement in connection therewith) if the effect of such
amendment is to: (a) increase the interest rate on such Subordinated Debt;
(b) change the dates upon which payments of principal or interest are due
on such Subordinated Debt other than to extend such dates; (c) change any
default or event of default other than to delete or make less restrictive
any default provision therein, or add any covenant with respect to such
Subordinated Debt; (d) change the redemption or prepayment provision of
such Subordinated Debt other than to extend the dates therefor or to reduce
the premiums payable in connection therewith; (e) grant any security or
collateral to secure payment of such Subordinated Debt; (f) add any
guarantor thereof which is not a Guarantor or a Borrower hereunder, or (g)
change or amend any other term if such change or amendment would materially
increase the obligations of any obligor or confer additional material
rights on the holder of any Subordinated Debt in a manner adverse to any
Credit Party, the Agent, any Lender or the Issuing Bank.
8.12 Investments. OSG shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, make any Investment in any
Person, whether in cash, securities, or other property of any kind
including, without limitation, any Subsidiary or Affiliate of the
Borrowers, other than:
(a) Advances or loans by Borrowers or their Subsidiaries to
<PAGE>
subcontractors or suppliers made in the ordinary course of business not to
exceed $300,000 outstanding at any one time to any one Person and $750,000
in the aggregate outstanding at any one time; and progress payments to
purchase Equipment in the ordinary course of business;
(b) loans, Investments and advances between the Borrowers and
their Subsidiaries permitted under Section 8.7 including, without
limitation, under Section 8.7(h);
(c) Cash Equivalents;
(d) Deposits with financial institutions, disclosed in
Schedule B, Part 8.14 or notified to the Agent under Section 8.14, and
which are insured by the Federal Deposit Insurance Corporation ("FDIC") or
a similar federal insurance program; provided, however, that a Borrower
may, in the ordinary course of its business, maintain in its Disbursement
Accounts from time to time amounts in excess of then applicable FDIC or
other program insurance limits; and Foreign Subsidiaries which are not
Borrower Parties may maintain other deposit accounts;
(e) Loans and advances by Borrowers and their Subsidiaries to
employees of OSG and its Subsidiaries for moving, travel or entertainment
and similar expenses in the ordinary course of business and relocation
loans to employees in an aggregate amount not to exceed $500,000 at any
time outstanding;
(f) Investments received in connection with Insolvency
Proceedings;
(g) the Kolmar Acquisition and Permitted Acquisitions;
(h) advances or loans to employees of OSG and its
Subsidiaries to the extent permitted under clause (iv) of Section 8.9;
(i) Investments in joint ventures in an aggregate amount not
to exceed $5,000,000 during the term of this Credit Agreement; provided
that no Credit Party shall have or assume any liability as a general
partner in connection therewith; and
(j) Such other Investments as the Agent may approve in writing
in its sole discretion.
8.13 Affiliate Transactions. OSG shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, enter into any
transaction, including, without limitation, the purchase, sale or exchange
of property or the rendering of any service to, with any Subsidiary or
Affiliate of OSG, except (i) in the ordinary course of and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's or
Affiliate's business, as the case may be, and upon fair and reasonable
terms no less favorable to such Borrower or such Subsidiary or such
Affiliate than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person and (ii) as permitted under Section 8.19.
8.14 Additional Bank Accounts. OSG shall not, and shall not
permit any of its Domestic Subsidiaries or any Foreign Subsidiary which is
a Borrower Party to, directly or indirectly, open, maintain or otherwise
have any checking, savings or other accounts at any bank or other financial
institution, or any other account where money is or may be deposited or
maintained with any Person, other than the Disbursement Accounts and the
accounts set forth on Schedule B, Part 8.14, without at least 5 days prior
written notice to the Agent, and delivery of such executed Lock Box
Agreements or Blocked Account Agreements as the Agent requests with respect
to any account other than a checking account.
8.15 Excess Cash. OSG shall not, and shall not permit its
Domestic Subsidiaries or any Foreign Subsidiary which is a Borrower Party
to, directly or indirectly, maintain in the aggregate in all deposit
accounts of OSG and such Subsidiaries (other than the Disbursement Accounts
and payroll accounts), total cash balances and Investments permitted by
Section 8.12(c), (d) and (f), in excess of $2,000,000 at any time during
which any Revolving Loans bearing interest at the Prime Rate are
outstanding hereunder or on any date when any Interest Period applicable to
Revolving Loans that are Eurodollar Loans ends.
8.16 Additional Negative Pledges. OSG shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective, or permit any of
its Subsidiaries to create or otherwise cause or suffer to exist or become
effective, directly or indirectly, (i) any prohibition or restriction
(including any agreement to provide equal and ratable security to any other
Person in the event a Lien is granted to or for the benefit of the Agent
and the Lenders) on the creation or existence of any Lien upon the assets
of the Borrowers or its Subsidiaries or (ii) any Contractual Obligation
which may restrict or inhibit the Agent's rights or ability to sell or
otherwise dispose of the Collateral or any part thereof after the
occurrence of an Event of Default.
8.17 Additional Subsidiaries. OSG shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, form or acquire
any new Subsidiaries, except in connection with the Kolmar Acquisition and
Permitted Acquisitions in compliance with Section 8.20 hereof, or unless
such Subsidiary is a Wholly-owned Subsidiary and becomes a Borrower
<PAGE>
hereunder.
8.18 No Restrictions on Subsidiary Distributions to Borrowers.
Except as provided herein, OSG will not and will not permit any of its
Subsidiaries directly or indirectly to create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any such Subsidiary to: (1) pay dividends or
make any other distribution on any of such Subsidiary's capital stock owed
by any Borrower or any Subsidiary of any Borrower; (2) subject to
subordination provisions for the benefit of Agent and Lenders, pay any
Indebtedness owned to any Borrower or any other Subsidiary; (3) make loans
or advances to any Borrower or any other Subsidiary; or (4) transfer any of
its property or assets to any Borrower or any other Subsidiary.
8.19 Management Fees and Compensation. OSG will not and will
not permit any of its Subsidiaries directly or indirectly to pay any
management, consulting or similar fees to any Affiliate or to any director,
officer or employee of any Credit Party, except that Credit Parties may (i)
pay management fees quarterly in arrears in an aggregate amount not in
excess of $350,000 annually to G+M under the Management Agreement; (ii) pay
fees to G+M in connection with Permitted Acquisitions in amounts not to
exceed $800,000 for the Kolmar Acquisition, and 1% of the total
consideration for other Permitted Acquisitions; and (iii) pay financial
advisory fees to HVP in an aggregate amount not to exceed $115,000
annually, of which up to $50,000 annually may be paid to HVP and the
remainder of which shall accrue but shall not be paid until the later of
(i) repayment in full of the Obligations and (ii) termination of the
Commitments; and Credit Parties may pay the reasonable expenses of G+M
incurred under the Management Agreement and of directors incurred in the
ordinary course of business. Further, OSG and Borrowers may pay director
fees in an aggregate amount not to exceed $35,000 annually to outside
directors not employed by G+M or HVP.
8.20 Permitted Acquisitions. No Credit Party shall make an
Acquisition other than the Kolmar Acquisition unless each of the following
conditions is satisfied:
(a) such acquisition is made by OSG (but only if an acquisition
of a new Wholly-owned Subsidiary) or a Borrower;
(b) such Acquisition shall be consensual and shall have been
approved by the board of directors of the Person to be acquired;
(c) both before and after giving effect to such Acquisition, all
representations and warranties of the Credit Parties contained in any
Credit Document are true and correct in all material respects and no
Default or Event of Default shall have occurred and be continuing, and the
Agent shall receive a certificate of OSG and the Borrowers to such effect
on the date on which such Acquisition is consummated;
(d) both before and after giving effect to such Acquisition and
the incurrence of Indebtedness in connection therewith, all Credit Parties
(including any Subsidiary acquired in such Acquisition) shall be solvent
(as represented in Section 6.7) and the Credit Parties shall be in
compliance with all financial covenants in Sections 8.2 through 8.6 hereof
inclusive on a pro forma basis, and the Agent shall receive a certificate
of OSG and the Borrowers to such effect on the date on which such
Acquisition is consummated;
(e) the purchase price for any single Acquisition or series of
related Acquisitions in any Fiscal Year shall not exceed $10,000,000, nor
shall the purchase price for all Acquisitions exceed $50,000,000 in the
aggregate without the prior written consent of the Agent and the Majority
Lenders. For purposes hereof, any Indebtedness assumed in connection with
an Acquisition shall be included in the calculation of the purchase price;
(f) the Credit Parties shall have delivered written notice of the
pending Acquisition to the Agent and Lenders at least 30 days prior to its
consummation including a detailed description of such pending Acquisition,
which notice shall be accompanied by the following historical financial
statements for the Person or business to be acquired and pro forma
financial statements giving effect to the Acquisition, analyses of sources
and uses of funds, pro forma calculations of compliance with the financial
covenants in Section 8.2 thorough 8.6 hereof and, prior to consummation of
the Acquisition, such other due diligence information as may have been
reasonably requested by the Agent or any Lender;
(g) if a Revolving Loan is to be made for such Acquisition, the
Agent shall have received a Notice of Borrowing and a Borrowing Base
Certificate for the applicable Borrower, which calculation of the Borrowing
Base may include the assets to be acquired directly by such Borrower in the
Acquisition;
(h) the Agent shall have received such financing statements,
filings and other Collateral Documents as required (or advisable in the
Agent's judgment) to perfect Liens on any assets to be acquired, including
assets of any new Domestic Subsidiary or Borrower Party, together with
evidence satisfactory to the Agent that such Liens are first and prior
Liens subject only to Permitted Encumbrances;
(i) all new Subsidiaries formed or acquired in such Permitted
Acquisition shall be Wholly-owned;
<PAGE>
(j) the business and assets to be acquired in such Acquisition
shall be acquired free and clear of all Liens (other than Permitted
Encumbrances);
(k) any new Domestic Subsidiary shall either (i) be designated a
"Borrower" hereunder, and shall execute and deliver to the Agent a Joinder
Agreement and such other Credit Documents as are executed by a Borrower (as
described therein) and such other documents as are required under the
requirements of Requirements of Law in the United States in order to grant
the Agent a perfected first priority security interest and Lien in the
assets of such Borrower (subject only to Permitted Encumbrances) or (ii) be
designated a "Subsidiary Guarantor," and shall execute and deliver to the
Agent a Joinder Agreement and such other Collateral Documents as are to be
executed by Subsidiary Guarantors (as designated therein) and such other
documents as are necessary (or advisable in the Agent's judgment) under the
requirements of Requirements of Law in the United States in order to grant
the Agent a perfected first priority security interest and Lien in the
assets of such Subsidiary Guarantor (subject only to Permitted
Encumbrances); and OSG or the applicable Borrower or Subsidiary Guarantor
shall execute and deliver a Pledge Amendment together with stock
certificates and promissory notes and other instruments endorsed in blank
in accordance with the Pledge Agreement;
(l) prior to inclusion of any assets in the Borrowing Base, the
Agent shall have received appraisals, meeting the standards described in
Section 5.2(l) or Section 7.2(c) hereof, of all Equipment and real estate
of any Borrower Party to be included in the Borrowing Base and shall have
completed such review of Accounts and Inventory as it deems necessary or
desirable for inclusion in the Borrowing Base;
(m) the Person or business to be acquired is engaged in the
business of contract packaging or similar activities related or incidental
thereto; and
(n) on or prior to the date of such Acquisition, the Agent shall
have received, in form and substance satisfactory to Agent, all acquisition
documents related thereto and legal opinions, evidence of solvency,
certificates, lien search results and other documents and instruments
reasonably requested by the Agent, which collectively shall confirm to the
Agent's satisfaction that the conditions set forth herein have been
satisfied.
8.21 Changes to Certain Agreements. OSG shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, without the
prior written consent of the Agent and the Majority Lenders, amend, modify,
cancel or terminate or permit the amendment, modification, cancellation or
termination (other than at its stated maturity) of (a) any of the Material
Contracts if the effect thereof would or reasonably could be expected to
have a Material Adverse Effect, (b) the Management Agreement or the HVP
Agreement if the effect thereof will increase any amounts payable
thereunder or change the time at which such amounts are to be paid; or (c)
any Mandatory Redeemable Obligation if the effect thereof is to accelerate
any required or permitted redemption or repurchase or to add any additional
events requiring such redemption or repurchase.
ARTICLE 9.
EVENTS OF DEFAULT AND REMEDIES.
9.1 Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) Failure to Pay. Any Borrower shall fail to pay any
principal Obligation when due, whether at stated maturity, mandatory
prepayment or otherwise, or any Credit Party shall fail to pay any other
Obligation within three (3) Business Days of the date due;
(b) Breach of Certain Covenants. Any Credit Party shall fail
to comply with any covenant contained in Sections 7.2, 7.3, 7.4, 7.6, 7.9
or 7.15 or Article 8 hereof.
(c) Breach of Representation or Warranty. Any representation
or warranty made or deemed to be made by any Credit Party in this Credit
Agreement or in any other Credit Document (and in any statement or
certificate given under this Credit Agreement or any other Credit
Document), shall be false or misleading in any material respect when made
or deemed to be made.
(d) Other Defaults. Any Credit Party shall fail to comply
with (i) Sections 7.1 or 7.5 and such failure shall continue for five (5)
days or (ii) any provisions contained in this Credit Agreement or any other
Credit Document, other than as set forth in clause (i) or in
Sections 9.1(a), (b) and 9.1(c), and such failure shall continue for
thirty (30) days after the earlier of (x) any Credit Party's knowledge of
its occurrence or (y) notice to such Credit Party from the Agent, any
Lender or the Issuing Bank of such failure.
(e) Dissolution. Any Credit Party shall dissolve, wind up or
otherwise cease it business.
(f) Insolvency Event. Any Credit Party shall become the
<PAGE>
subject of an Insolvency Event that is not resolved or dismissed within
forty-five (45) days.
(g) Change of Control. A Change of Control shall occur.
(h) Cross Default. Any Credit Party or any of their
respective Subsidiaries shall fail to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise)
with respect to any Indebtedness (other than an Obligation) of any Credit
Party or any of their respective Subsidiaries aggregating $2,000,000 or
more; or any breach, default or event of default shall occur, or any other
condition shall exist under any Contractual Obligation pertaining to any
such Indebtedness, if the effect thereof is to cause an acceleration,
mandatory redemption or other required repurchase of such Indebtedness, or
permit the holder(s) of such Indebtedness to accelerate the maturity of any
such Indebtedness or require a redemption or other repurchase of such
Indebtedness; or any such Indebtedness shall be otherwise declared to be
due and payable (by acceleration or otherwise) or required to be prepaid,
redeemed or otherwise repurchased by any Credit Party or any of their
respective Subsidiaries (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; or the holder of any Lien
(other than Liens upon property leased of any Credit Party or any of their
respective Subsidiaries which were created by the lessor prior to the
commencement of the lease), in any amount, shall commence foreclosure of
such Lien upon property of any Credit Party or any of their respective
Subsidiaries having an aggregate value in excess of $2,000,000 and such
foreclosure shall continue against such property to a date less than thirty
(30) days prior to the date of the proposed foreclosure sale.
(i) Failure of Enforceability of Credit Documents; Security.
Any covenant, agreement or obligation of any Credit Party contained in or
evidenced by any of the Credit Documents shall cease to be enforceable, or
shall be determined to be unenforceable, in accordance with its terms; any
Credit Party shall deny or disaffirm its obligations under any of the
Credit Documents or any Liens granted in connection therewith (provided
that a good faith dispute as to erroneous charges shall not constitute a
Default); or any Liens granted in any of the Collateral shall be determined
to be void, voidable, invalid or unperfected, are subordinated or not given
the priority contemplated by this Credit Agreement or the applicable Credit
Document.
(j) Judgments. One or more judgments or decrees shall be
entered against any Credit Party involving in the aggregate a liability
(not paid or fully covered by insurance satisfactory to the Agent) of
$250,000 or more and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within forty-five (45)
days from the entry thereof.
9.2 Acceleration and Cash Collateralization. Upon the
occurrence and during the continuance of an Event of Default, the Agent may
take any or all of the following actions, in addition to all other rights
and remedies in the Credit Documents or under applicable law, without
prejudice to the rights of the Agent or any Lender to enforce its claims
against the Credit Parties:
(a) Acceleration. Upon the written request of the Majority
Lenders, and by delivery of written notice to the Borrowers from the Agent,
all Obligations shall be declared to be immediately due and payable (except
with respect to any Event of Default set forth in Section 9.1(f) hereof, in
which case all Obligations shall automatically become immediately due and
payable without the necessity of any request of the Majority Lenders or
notice or other demand to the Borrowers) without presentment, demand,
protest or any other action or obligation of the Agent or any Lender.
(b) Termination of Commitments. Upon the written request of
the Majority Lenders, and by delivery of written notice to the Borrowers
from the Agent, the Commitments shall be immediately terminated and, at all
times thereafter, all Revolving Loans made by any Lender pursuant to this
Credit Agreement shall be at such Lender's sole discretion, unless such
Event of Default is waived in accordance with Section 11.11.
(c) Cash Collateralization. On demand of the Agent or the
Majority Lenders the Borrowers shall immediately deposit with the Agent for
each Letter of Credit then outstanding, cash or Cash Equivalents in an
amount equal to 110% of the greatest amount drawable thereunder.
9.3 Rescission of Acceleration. After acceleration of the
maturity of the Revolving Loans, if the Borrowers pay all accrued interest
and all principal due (other than by reason of the acceleration) and all
Defaults and Events of Default are otherwise remedied or waived in
accordance with Section 11.11, the Majority Lenders may elect in their sole
discretion to rescind the acceleration and return any cash collateral.
(This Section is intended only to bind all of the Lenders to a decision of
the Majority Lenders and not to confer any right on the Borrowers, even if
the described conditions for the Majority Lenders' election may be met.)
9.4 Remedies. Upon the occurrence and during the continuance
of an Event of Default, the Agent may do any or all of the following:
(a) copy all documents, instruments, files and records
(including the copying of any computer records) relating to the
Accounts or use (at the expense of the Borrowers) such supplies or
<PAGE>
space of any Credit Party at its place of business necessary to
properly administer and collect the Accounts thereon;
(b) accelerate or extend the time of payment, compromise, issue
credits, or bring suit on the Accounts (in the name of a Credit
Party or the Lenders) and otherwise administer and collect the
Accounts;
(c) sell, assign and deliver the Accounts and any returned,
reclaimed or repossessed merchandise, with or without
advertisement, at public or private sale, for cash, on credit or
otherwise; and
(d) foreclose the security interests created pursuant to the
Credit Documents by any available procedure, or take possession of
any or all of the Collateral without judicial process and enter
any premises where any Collateral may be located for the purpose
of taking possession of or removing the same.
Any Lender may bid or become a purchaser at any sale, free from any right
of redemption, which right is expressly waived by the Borrowers. If notice
of intended disposition of any Collateral is required by law, it is agreed
that ten (10) Business Days notice shall constitute reasonable
notification. The Borrowers will, and will cause each other Credit Party
to, assemble the Collateral and make it available to the Agent at such
locations as the Agent may specify, whether at the premises of a Credit
Party or elsewhere, and will make available to the Agent the premises and
facilities of the Credit Parties for the purpose of the Agent's taking
possession of, removing or putting the Collateral in saleable form.
9.5 Right of Setoff. In addition to and not in limitation of
all rights of offset that any Lender or the Issuing Bank may have under
applicable law, upon the occurrence of any Event of Default, and whether or
not any Lender or the Issuing Bank has made any demand or the Obligations
of any Credit Party have matured, each Lender and the Issuing Bank shall
have the right to appropriate and apply to the payment of the Obligations
of such Credit Party all deposits and other obligations then or thereafter
owing by such Lender or the Issuing Bank to such Credit Party. Each Lender
or the Issuing Bank exercising such rights shall notify the Agent thereof
and any amount received as a result of the exercise of such rights shall be
shared in accordance with Section 2.7.
9.6 License for Use of Software and Other Intellectual
Property. Unless expressly prohibited by the licensor thereof, if any,
the Agent is hereby granted a license to use all computer software programs
(including the relevant source codes), data bases, processes and materials
used by any Credit Party in connection with its businesses or in connection
with the Collateral. The Agent agrees not to use any such license prior to
the occurrence of an Event of Default without the Borrowers' prior consent.
9.7 No Marshalling; Deficiencies; Remedies Cumulative. The
net cash proceeds resulting from the Agent's exercise of any of the
foregoing rights to liquidate all or substantially all of the Collateral
(after deducting all of the Agent's Expenses related thereto) shall be
applied by the Agent to the payment of the Obligations to the Agent and the
Lenders, whether due or to become due, in such order as the Agent may
elect. The Borrowers and each other Credit Party shall remain liable to
the Agent and the Lenders for any deficiencies, and the Agent and the
Lenders in turn agree to remit to the Borrowers or successors or assigns or
any other Person lawfully entitled thereto, any surplus resulting
therefrom. The foregoing remedies are not intended to be exhaustive and
the full or partial exercise of any of them shall not preclude the full or
partial exercise of any other available remedy under the Credit Agreement,
under any other Credit Document, at equity or at law.
ARTICLE 10.
THE AGENT
10.1 Appointment of Agent.
(a) Each Lender hereby designates BT Commercial Corporation as
its Agent and irrevocably authorizes the Agent to take action on its behalf
under the Credit Documents, to exercise the powers and perform the duties
described therein, and to exercise such other powers reasonably incidental
thereto. The Agent may perform any of its duties through its agents or
employees.
(b) Other than the Borrowers' rights under Section 10.8, this
Article 10 is for the benefit of the Agent and the Lenders only. The Agent
shall act only for the Lenders and assumes no obligation to or agency or
trust relationship with any Credit Party.
10.2 Nature of Duties of Agent. The Agent has no duties or
responsibilities except those expressly set forth in the Credit Documents.
Neither the Agent nor any of its officers, directors, employees or agents
shall be liable for any action taken or omitted hereunder or in connection
herewith. The duties of the Agent shall be mechanical and administrative
in nature. The Agent shall have no fiduciary relationship to any Lender or
any participant of any Lender.
10.3 Lack of Reliance on Agent. Independently and without
<PAGE>
reliance upon the Agent, each Lender has made and shall continue to make
its own independent investigation and analysis of the content and validity
of the Credit Documents and of the performance and creditworthiness of the
Credit Parties thereunder. The Agent does not assume any responsibility or
undertake any obligation to make inquiry with respect to such matters,
unless specifically requested to do so in writing by a Lender.
10.4 Certain Rights of the Agent. The Agent may request
instructions from the Majority Lenders at any time. If the Agent requests
instructions from the Majority Lenders with respect to any action or
inaction, the Agent shall be entitled to await instructions from the
Majority Lenders before such action or inaction. No Lender shall have any
right of action based upon the Agent's action or inaction in response to
instructions from the Majority Lenders.
10.5 Reliance by Agent. The Agent may rely upon written or
telephonic communication it believes to be genuine and to have been signed,
sent or made by the proper person. The Agent may obtain the advice of
legal counsel (including, for matters concerning the Credit Parties,
counsel for the Borrowers), independent public accountants and other
experts selected by it and shall have no liability for action or inaction
in good faith based upon such advice.
10.6 Indemnification of Agent. To the extent the Agent is not
reimbursed and indemnified by the Borrowers, each Lender will reimburse and
indemnify the Agent, to the extent of its Proportionate Share, for any and
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and
disbursements) or disbursements of any kind or nature whatsoever (including
all Expenses) which may be imposed on, incurred by or asserted against the
Agent in performing its duties hereunder or otherwise relating to the
Credit Documents, unless resulting from the Agent's gross negligence or
willful misconduct.
10.7 The Agent in its Individual Capacity. In its individual
capacity, the Agent shall have the same rights and powers hereunder as any
other Lender and may exercise them as though it was not performing the
duties specified herein. The terms "Lenders," "Majority Lenders," or any
similar terms shall, unless the context clearly otherwise indicates,
include the Agent in its individual capacity. The Agent and each of its
Affiliates may accept deposits from, lend money to, acquire equity
interests in, and generally engage in any kind of banking, trust, financial
advisory or other business with the Borrowers or any Affiliate of the
Borrowers as if it were not performing the duties specified herein, and the
Agent may accept fees and other consideration from the Credit Parties for
services in connection with this Credit Agreement and otherwise without
having to account for the same to the Lenders.
10.8 Successor Agent.
(a) The Agent may, upon five Business Days' notice to the
Lenders and the Borrowers, resign by giving written notice thereof to the
Lenders and the Borrowers. The Agent's resignation shall be effective upon
the appointment of a successor Agent.
(b) Upon receipt of the Agent's resignation, the Majority
Lenders may appoint a successor Agent. Unless an Event of Default shall
have occurred and be continuing at the time of such appointment, the
successor Agent shall be subject to approval by the Borrowers, which
approval shall not to be unreasonably withheld, conditioned or delayed and
shall be delivered to the Majority Lenders within five Business Days after
the Borrowers' receipt of notice of a proposed successor Agent. If a
successor Agent has not accepted its appointment within fifteen Business
Days, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent.
(c) Upon its acceptance of the agency hereunder, a successor
Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations under this Credit Agreement.
The retiring Agent shall continue to have the benefit of this Article 10
for any action or inaction while it was Agent.
10.9 Collateral Matters.
(a) Each Lender authorizes and directs the Agent to enter into
the Collateral Documents for the benefit of the Lenders. Except as
otherwise set forth herein, any action or exercise of powers by the
Majority Lenders under the Credit Documents, together with such other
powers as are reasonably incidental thereto, shall be authorized and
binding upon all of the Lenders. Prior to an Event of Default, without
notice to or consent from any Lender, the Agent may take any action
necessary or advisable to perfect and maintain the perfection of the Liens
upon the Collateral.
(b) The Agent is authorized to release or subordinate any Lien
granted to or held by the Agent upon any Collateral (i) upon termination of
the Commitments and payment and satisfaction of all of the Obligations,
(ii) upon receipt of the proceeds of sales of the Collateral permitted
hereunder, (iii) if required by the holder of any Purchase Money Lien, or
(iv) if the release can be and is approved by the Majority Lenders. The
Agent is further authorized to approve easements and similar agreements
<PAGE>
with respect to Mortgaged Properties and to execute and deliver such
releases or subordinations of Liens as are required in connection
therewith. The Agent may request and the Lenders will provide confirmation
of the Agent's authority to release particular types or items of
Collateral.
(c) The Agent shall have no obligation to assure that the
Collateral exists or is owned by any Credit Party, that such Collateral is
cared for, protected or insured, or that the Liens in the Collateral have
been created, perfected, or have any particular priority. With respect to
the Collateral, the Agent may act in any manner it may deem appropriate, in
its sole discretion, given the Agent's own interest in the Collateral as
one of the Lenders, and it shall have no duty or liability whatsoever to
the Lenders, except for its gross negligence or willful misconduct.
10.10 Actions with Respect to Defaults. In addition to the
Agent's right to take actions on its own accord as permitted under this
Credit Agreement, the Agent shall take such action with respect to a
Default or Event of Default as shall be directed by the Majority Lenders.
Until the Agent shall have received such directions, the Agent may act (or
not act) as it deems advisable and in the best interests of the Lenders.
ARTICLE 11.
MISCELLANEOUS
11.1 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ANY
DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY
OF THE CREDIT DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE
CONFLICTS OF LAWS PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW) AND DECISIONS OF THE STATE OF NEW YORK.
11.2 SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG ANY
CREDIT PARTY AND THE LENDERS (OR THE AGENT ACTING ON THEIR BEHALF), WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY
STATE AND FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN, CITY OF NEW
YORK, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED,
HOWEVER, THAT THE AGENT, ON BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST ANY CREDIT PARTY
OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY THE AGENT IN GOOD
FAITH TO ENABLE THE AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT. OSG AND THE BORROWERS
AGREE THAT THEY WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE AGENT. OSG AND THE BORROWERS
WAIVE ANY OBJECTION THAT ANY OF THEM MAY HAVE TO THE LOCATION OF THE COURT
IN WHICH THE AGENT HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
11.3 SERVICE OF PROCESS. OSG AND THE BORROWERS HEREBY
IRREVOCABLY DESIGNATE NATIONAL REGISTERED AGENTS, INC. AS THEIR DESIGNEE,
APPOINTEE AND AGENT TO RECEIVE, FOR AND ON THEIR BEHALF OF SERVICE OF
PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT. IT IS
UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS
WILL BE PROMPTLY FORWARDED BY MAIL TO OSG AND THE BORROWERS, BUT FAILURE OF
OSG OR ANY BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS.
11.4 JURY TRIAL. OSG, THE BORROWERS, THE AGENT AND THE
LENDERS EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY
DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
11.5 LIMITATION OF LIABILITY. NEITHER THE AGENT NOR ANY
LENDER SHALL HAVE ANY LIABILITY TO ANY CREDIT PARTY (WHETHER SOUNDING IN
TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY CREDIT PARTY IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS
OR RELATIONSHIPS CONTEMPLATED BY THIS CREDIT AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON
THE AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6 Delays. No delay or omission of the Agent or the Lenders
to exercise any right or remedy hereunder shall impair any such right or
operate as a waiver thereof.
11.7 Notices. Except as otherwise provided herein or therein,
all notices and correspondences hereunder or under the other Credit
Documents shall be in writing and sent by certified or registered mail,
return receipt requested, or by overnight delivery service, with all
charges prepaid, if to the Agent or any of the Lenders, then to BT
Commercial Corporation, 300 South Grand Avenue, Los Angeles,, California
90071 Attention: Douglas Lies and if to OSG or the Credit Parties then c/o
Aerosol Services Company, Inc., 425 South Ninth Avenue, City of Industry,
California 91746-3382 Attention: Chief Financial Officer with a copy to
The Gordon + Morris Group, 840 Newport Center Drive, Suite 600, Newport
Beach, California 92660, Attention: Drew Adams: or by facsimile
transmission, promptly confirmed in writing sent by first class mail, if to
the Agent, or any of the Lenders, at 213-620-8394, and if to the Borrowers
<PAGE>
at 626-336-4605 or to G+M at 714-759-7628. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, three Business Days after being postmarked, (ii) if sent by overnight
delivery service, when received at the above stated addresses or when
delivery is refused and (iii) if sent by telex or facsimile transmission,
when receipt of such transmission is acknowledged. Any party may change
its notice address by delivering written notice to the other parties in
accordance with this Section.
11.8 Assignments and Participations.
(a) Borrowers Assignment. The Borrowers shall not assign this
Credit Agreement, or any rights or obligations hereunder, without the prior
written consent of the Agent and the Lenders. Any purported assignment in
violation of the terms of this Section 11.8 shall be void an of no force
and effect.
(b) Lender Assignments. Each Lender may assign to one or more
banks or other financial institutions all or a portion of its rights and
obligations under this Credit Agreement, the Revolving Notes and the other
Credit Documents, with the consent of the Agent and, so long as no Default
or Event of Default has occurred and is continuing, the consent of the
Borrowers (which shall not be unreasonably withheld, conditioned or
delayed), and upon execution and delivery to the Agent, for its acceptance
and recording in the Register (as defined below), of an agreement in
substantially the form of Exhibit G (an "Assignment and Assumption
Agreement"), together with surrender of any Revolving Note or Revolving
Notes subject to such assignment and a processing and recordation fee of
$2,500. No such assignment shall be for less than $5,000,000 of the
Commitments unless it is to another Lender. (This Section does not apply
to branches and Affiliates of a Lender, it being understood that a Lender
may make, carry or transfer Revolving Loans at or for the account of any of
its branch offices or Affiliates without consent of the Borrowers, the
Agent or any other Lender.)
(c) Agent's Register. The Agent shall maintain a register of
the names and addresses of the Lenders, their Commitments, and the
principal amount of their Revolving Loans (the "Register"). The Agent
shall also maintain a copy of each Assignment and Assumption Agreement
delivered to and accepted by it and modify the Register to give effect to
each Assignment and Assumption Agreement. Upon its receipt of each
Assignment and Assumption Agreement and surrender of the affected Revolving
Note or Revolving Notes, the Agent will give prompt notice thereof to the
Borrowers and deliver to the Borrowers a copy of the Assignment and
Assumption Agreement and the surrendered Revolving Note or Revolving Notes.
Within five Business Days after its receipt of such notice, the Borrowers
shall execute and deliver to the Agent a new Revolving Note or Revolving
Notes to the order of the assignee in the amount of the Commitment or
Commitments assumed by it and to the assignor in the amount of the
Commitment or Commitments retained by it, if any. Such new Revolving Note
or Revolving Notes shall re-evidence the Indebtedness outstanding under the
surrendered Revolving Note or Revolving Notes and shall be dated as of the
Closing Date. The Agent shall be entitled to rely upon the Register
exclusively for purposes of identifying the Lenders hereunder.
(d) Lender Participations. Each Lender may sell
participations (without the consent of the Agent, the Borrowers or any
other Lender) to one or more parties in or to all or a portion of its
rights and obligations under this Credit Agreement, the Revolving Notes and
the other Credit Documents. Notwithstanding a Lender's sale of a
participation interest, its obligations hereunder shall remain unchanged.
The Borrowers, the Agent, and the other Lenders shall continue to deal
solely and directly with such Lender. No participant shall have rights to
approve any amendment or waiver of this Credit Agreement except to the
extent such amendment or waiver would (i) increase the Commitment of the
Lender from whom the participant purchased its participation interest; (ii)
reduce the principal of, or rate or amount of interest on the Revolving
Loans subject to such participation, (iii) postpone any date fixed for any
payment of principal of, or interest on, the Revolving Loans subject to the
participation interest, or (iv) release any guarantor of the Obligations or
all or a substantial portion of the Collateral, other than when otherwise
permitted hereunder.
11.9 Confidentiality. Each Lender agrees that it will not
disclose without the prior consent of the Borrowers any information with
respect to OSG or any of its Subsidiaries which is furnished pursuant to
this Credit Agreement and which is designated by the Borrowers to the
Lenders in writing as confidential; provided, that any Lender may disclose
any such information (a) to its employees, auditors, or counsel, or to
another Lender if the disclosing Lender or such disclosing Lender's holding
or parent company in its sole discretion determines that any such party
should have access to such information, (b) as has become generally
available to the public, (c) as may be required or appropriate in any
report, statement or testimony submitted to any Governmental Authority
having or claiming to have jurisdiction over such Lender, (d) as may be
required or appropriate in response to any summons or subpoena or in
connection with any litigation, (e) in order to comply with any Requirement
of Law, and (f) to any prospective or actual transferee or participant in
connection with any contemplated transfer or participation of any of the
Revolving Notes or Commitments or any interest therein by such Lender.
11.10 Indemnification; Reimbursement of Expenses of
<PAGE>
Collection. The Borrowers hereby jointly and severally indemnify and agree
to defend and hold harmless the Agent, the Issuing Bank and each of the
Lenders and their respective directors, officers, agents, employees and
counsel from and against any and all losses, claims, damages, liabilities,
deficiencies, judgments or expenses incurred by any of them (except to the
extent that it is finally judicially determined to have resulted from their
own gross negligence or willful misconduct) arising out of or by reason of
(a) any litigations, investigations, claims or proceedings which arise out
of or are in any way related to (i) this Credit Agreement, the other Credit
Documents or any Transaction Document or Acquisition Document or the
transactions contemplated thereby, including the Kolmar Acquisition or any
Permitted Acquisition, (ii) the issuance of the Letters of Credit,
(iii) the failure of the Issuing Bank to honor a drawing under any Letter
of Credit, as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
Governmental Authority, (iv) any actual or proposed use by the Borrowers of
the proceeds of the Revolving Loans or (v) the Agent's or the Lenders'
entering into this Credit Agreement, the other Credit Documents or any
Transaction Document or any other agreements and documents relating hereto,
including, without limitation, amounts paid in settlement, court costs and
the fees and disbursements of counsel incurred in connection with any such
litigation, investigation, claim or proceeding or any advice rendered in
connection with any of the foregoing and (b) any remedial or other action
taken by any Credit Party or the Lenders in connection with compliance by
any Credit Party, or any of their respective properties, with any federal,
state, local or foreign environmental laws, acts, rules, regulations,
orders, directions, ordinances, criteria or guidelines. In addition, the
Borrowers shall, upon demand, pay to the Agent and any Lender all costs and
expenses (including the reasonable fees and disbursements of counsel and
other professionals) paid or incurred by the Agent or such Lender in
(i) enforcing or defending its rights under or in respect of this Credit
Agreement, the other Credit Documents or any other document or instrument
now or hereafter executed and delivered in connection herewith, (ii) in
collecting the Revolving Loans, (iii) in foreclosing or otherwise
collecting upon the Collateral or any part thereof and (iv) obtaining any
legal, accounting or other advice in connection with any of the foregoing.
11.11 Amendments and Waivers. No amendment or waiver of any
provision of this Credit Agreement, any part of Schedule B, or any other
Credit Document shall be effective unless in writing and signed by the
Majority Lenders (or by the Agent on their behalf), and then only in the
specific instance and for the specific purpose for which given, except
that:
(a) the consent of all the Lenders is required to (i) increase
the Commitments, (ii) reduce the principal of, or interest on, the
Revolving Notes, any Letter of Credit reimbursement obligations or
any Fees hereunder (other than Fees that are exclusively for the
account of the Agent or the Issuing Bank), (iii) postpone any date
fixed for any payment in respect of principal of, or interest on,
the Revolving Notes, any Letter of Credit reimbursement
obligations or any Fees hereunder, (iv) change the percentage of
the Commitments, or any minimum requirement necessary for the
Lenders or the Majority Lenders to take any action hereunder,
(v) amend or waive this Section 11.11(a), or change the definition
of Majority Lenders, (vi) except as otherwise expressly provided
in this Credit Agreement, and other than in connection with the
financing, refinancing, sale or other disposition of any asset of
a Credit Party permitted under this Credit Agreement, release any
Liens in favor of the Lenders on any of the Collateral, or (vii)
increase advance rates under the Borrowing Base to any level above
the advance rates in effect as of the date hereof; and
(b) the consent of the Agent or the Issuing Bank, as the case
may be, shall be required for any amendment, waiver or consent
affecting the rights or duties of the Agent or the Issuing Bank
under any Credit Document, in addition to the consent of the
Lenders otherwise required by this section.
The consent of the Credit Parties shall not be required for any amendment,
modification or waiver of the provisions of Article 10 (other than
Section 10.8). OSG and the Borrowers and the Lenders hereby authorize the
Agent to modify this Credit Agreement by unilaterally amending or
supplementing Annex I to reflect assignments of the Commitments.
Notwithstanding the foregoing, the Borrowers may amend Schedule B, Parts
6.1, 6.10, 6.14 and 8.14, without the consent of the Majority Lenders.
11.12 Counterparts and Effectiveness. This Credit Agreement
and any waiver of amendment hereto may be executed in any number of
counterparts and by the different parties hereto in 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. This
Credit Agreement shall become effective on the date on which all of the
parties hereto shall have signed a copy hereof (whether the same or
different copies) and shall have delivered the same to the Agent pursuant
to Section 11.7 or, in the case of the Lenders, shall have given to the
Agent written, telecopied or telex notice (actually received) at such
office that the same has been signed and mailed to it.
11.13 Severability. In case any provision in or obligation
under this Credit Agreement or the Revolving Notes or the other Credit
Documents shall be invalid, illegal or unenforceable in any jurisdiction,
<PAGE>
the validity, legality and enforceability of the remaining provisions or
obligations shall not in any way be affected or impaired thereby.
11.14 Maximum Rate. Notwithstanding anything to the contrary
contained elsewhere in this Credit Agreement or in any other Credit
Document, OSG, the Borrowers, the Agent and the Lenders hereby agree that
all agreements among them under this Credit Agreement and the other Credit
Documents, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever
shall the amount paid, or agreed to be paid, to the Agent or any Lender for
the use, forbearance, or detention of the money loaned to the Borrowers and
evidenced hereby or thereby or for the performance or payment of any
covenant or obligation contained herein or therein, exceed the Highest
Lawful Rate. If due to any circumstance whatsoever, fulfillment of any
provisions of this Credit Agreement or any of the other Credit Documents at
the time performance of such provision shall be due shall exceed the
Highest Lawful Rate, then, automatically, the obligation to be fulfilled
shall be modified or reduced to the extent necessary to limit such interest
to the Highest Lawful Rate, and if from any such circumstance any Lender
should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall
be applied to the reduction of the principal amount then outstanding
hereunder or on account of any other then outstanding Obligations and not
to the payment of interest, or if such excessive interest exceeds the
principal unpaid balance then outstanding hereunder and such other then
outstanding Obligations, such excess shall be refunded to the Borrowers.
All sums paid or agreed to be paid to the Agent or any Lender for the use,
forbearance, or detention of the Obligations and other Indebtedness of the
Borrowers to the Agent or any Lender, to the extent permitted by applicable
law, shall be amortized, prorated, allocated and spread throughout the full
term of such Indebtedness, until payment in full thereof, so that the
actual rate of interest on account of all such Indebtedness does not exceed
the Highest Lawful Rate throughout the entire term of such Indebtedness.
The terms and provisions of this Section shall control every other
provision of this Credit Agreement, the other Credit Documents and all
agreements among OSG, the Borrowers, the Agent and the Lenders.
11.15 Entire Agreement; Successors and Assigns. This Credit
Agreement and the other Credit Documents constitute the entire agreement
among OSG, the Borrowers, the Agent, and the Lenders, supersede any prior
agreements among them, and shall bind and benefit OSG, the Borrowers, and
the Lenders and their respective successors and permitted assigns.
11.16 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of a Default or Event of Default if
such action is taken or condition exists.
11.17 Survival. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Credit
Agreement, the Notes and the other Credit Documents, the making of the
Revolving Loans and issuance of Letters of Credit hereunder.
Notwithstanding anything in this Credit Agreement, any other Credit
Document or implied by law to the contrary, all indemnities set forth
herein, including, without limitation, in Section 3.10, 4.14, 4.15, 4.16,
10.6 and 11.10, shall survive the payment of the Obligations and the
termination of this Credit Agreement.
11.18 Judgment Currency.
(a) If, for the purpose of obtaining judgment in any
court, it is necessary to convert a sum due hereunder in any currency (the
"Original Currency") into another currency (the "Other Currency") the
parties hereto agree, to the fullest extent permitted by any Requirements
of Law, that the rate of exchange used shall be that at which in accordance
with normal banking procedures the Agent could purchase the Original
Currency with the Other Currency on the Business Day immediately preceding
the day on which any such judgment, or any relevant part thereof, is paid
or otherwise satisfied.
(b) The obligations of each Credit Party in respect of
any sum due from it to the Agent, the Lenders or the Issuing Bank hereunder
and under the other Credit Documents shall, notwithstanding any judgment in
such Other Currency, be discharged only to the extent that on the Business
Day following receipt by the Agent of any sum adjudged to be so due in the
Other Currency the Agent may in accordance with normal banking procedures
purchase the Original Currency with the Other Currency; if the Original
Currency so purchased is less than the sum originally due to the Agent, the
Lenders or the Issuing Bank in the Original Currency, OSG and each Borrower
agrees, as a separate obligation and notwithstanding any such judgment, to
severally indemnify the Agent, the Lenders and Issuing Bank against such
loss, and if the amount of the Original Currency so purchased exceeds the
sum originally due to the Agent, the Lenders or the Issuing Bank in the
Original Currency, the Agent, the Lenders or the Issuing Bank, as
applicable, shall remit such excess to the applicable Credit Party.
11.19 Currency of Payments. Notwithstanding any provision to
the contrary herein or in any Credit Document, all payments made under or
in connection with this Credit Agreement and the other Credit Documents
shall be in lawful currency of the United States.
<PAGE>
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be executed and delivered by their proper and duly authorized officers as
of the date set forth above.
GUARANTOR: OUTSOURCING SERVICES GROUP, INC.
a Delaware corporation
By: /s/ Joe Sortais
----------------------------
Name: Joe Sortais
Title: Chief Financial Officer
BORROWERS: AEROSOL SERVICES COMPANY, INC.
a California corporation
PIEDMONT LABORATORIES, INC.
a Georgia corporation
By: /s/ Joe Sortais
----------------------------
Name: Joe Sortais
Title: Chief Financial Officer
AGENT: BT COMMERCIAL CORPORATION,
as Agent
By: /s/ Mark E. Funk
----------------------------
Name: Mark E. Funk
Title: Vice President
LENDERS: BT COMMERCIAL CORPORATION
By: /s/ Mark E. Funk
----------------------------
Name: Mark E. Funk
Title: Vice President
HELLER FINANCIAL, INC.
By: /s/ Terry A. Rothe
----------------------------
Name: Terry A. Rothe
Title: Senior Vice President
NATIONAL BANK OF CANADA
By: /s/ Thomas H. Hopkins
----------------------------
Name: Thomas H. Hopkins
Title: Vice President
By: /s/ Joseph Perdenza
----------------------------
Name: Joseph Perdenza
Title: Assistant Vice President
SUMITOMO BANK OF CALIFORNIA
By: /s/ Ann L. Darnall
----------------------------
Name: Ann L. Darnall
Title: Vice President
FLEET CAPITAL CORPORATION
By: /s/ Alisa Frederick
----------------------------
Name: Alisa Frederick
Title: Vice President
<PAGE>
AMENDMENT AND WAIVER NO. 1
AMENDMENT AND WAIVER NO. 1 ("Amendment No. 1"), dated as of April
29, 1998, to that certain Credit Agreement, dated as of January 8, 1998 (as
amended, supplemented or otherwise modified to date, the "Credit
Agreement", capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Credit Agreement), by and among
OUTSOURCING SERVICES GROUP, INC., a Delaware corporation, as a guarantor,
its wholly-owned Subsidiaries AEROSOL SERVICES COMPANY, INC., a California
corporation, and PIEDMONT LABORATORIES, INC., a Georgia corporation, as the
initial Borrowers and, following consummation of the Kolmar Acquisition,
KOLMAR LABORATORIES, INC., a Delaware corporation (Kolmar"), as an
additional Borrower, each financial institution from time to time party to
the Credit Agreement (each a "Lender" and, collectively, "Lenders"), BT
COMMERCIAL CORPORATION, a Delaware corporation, as agent for Lenders and
the Issuing Bank (as defined in the Credit Agreement) (in such capacity,
"Agent"), and HELLER FINANCIAL, INC., acting as co-agent (in such capacity,
"Co-Agent").
RECITALS
WHEREAS, Kolmar intends to acquire all or substantially all of
the manufacturing assets of A-D Contract Packaging, Inc., a California
corporation and a subsidiary of Norden, Inc., a New Jersey corporation;
WHEREAS, Kolmar Canada Inc., a wholly owned subsidiary of Kolar
("Kolmar Canada"), intends to acquire all or substantially all of the
manufacturing assets of Yardley of London Limited, a corporation
incorporated under the laws of England and Wales (collectively, the
"Yardley Assets"); and
WHEREAS, in connection with such acquisitions, Borrowers have
requested that Lenders make certain revisions to the Credit Agreement and
Lenders are willing to amend the Credit Agreement on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and upon execution and delivery hereof by Borrower and
the Majority Lenders, the parties hereto hereby agree as follows:
AGREEMENT
SECTION 1. AMENDMENT AND WAIVER
1.1 Section 1.1 of the Credit Agreement is amended by asserting in
appropriate alphabetical order the following new definitions:
"A-D Acquisition means the acquisition by Kolmar on or before May 15,
1998 of all or substantially all of the manufacturing assets,
including equipment, of A-D Contract Packaging, Inc., a California
corporation and a subsidiary of Norden, Inc., a New Jersey
corporation, for an aggregate consideration not to exceed $1,065,000."
"Yardley Acquisition means the acquisition by Kolmar Canada on or
before December 31, 1998 of all or substantially all of the
manufacturing assets, including equipment, of Yardley of London
Limited, a corporation incorporated under the laws of England and
Wales, for an aggregate consideration not to exceed $975,000."
1.2 The Required Lenders acknowledge and agree that each of the A-D
Acquisition and the Yardley Acquisition constitutes an "Acquisition" under,
and as defined in, the Credit Agreement.
1.3 Section 8.7 of the Credit Agreement is amended by deleting the
word "and" as it appears at the end of clause (h) thereof, by deleting the
period at the end of clause (i) thereof and substituting the words "; and"
in lieu thereof, and by inserting immediately following clause (i) thereof
the following new clause (j):
"(j) Indebtedness incurred by Kolar to finance the A-D
Acquisition in an aggregate principal amount not to exceed $400,000 at
any time outstanding."
1.4 The Required Lenders waive compliance with the requirements of
Section 8.20(a) so as to permit Kolmar Canada to make the Yardley
Acquisition.
1.5 The Required Lenders waive compliance with the requirements in
Section 8.20(b) of the Credit Agreement that (i) the A-D Acquisition be
approved by the board of directors of A-D Contract Packaging, Inc. and/or
Norden, Inc.; and (ii) the Yardley Acquisition be approved by the board of
directors of Yardley of London Limited.
1.6 The Required Lenders waive compliance with the requirement of
Section 8.20(f) of the Credit Agreement in connection with the A-D
Acquisition and the Yardley Acquisition.
<PAGE>
SECTION 2. CONDITIONS TO EFFECTIVENESS
This Amendment No. 1 shall be effective upon the execution and
delivery to Agent of the following (the date of satisfaction of such
conditions being the "Amendment Effective Date"):
2.1 a counterpart hereof by Borrowers and the Majority Lenders;
provided, however, that any Borrower and/or any Lender may deliver its
counterpart signature page hereto by telecopy to Agent or Agent's counsel,
which delivery shall be binding on such Borrower and such Lender, and
provided, further that any such Borrower and Lender shall promptly provide
Agent or Agent's counsel with an adequate number (as determined by Agent)
of originally executed signature pages hereto;
2.2 a counterpart of the Consent of Guarantors and Grantors in the
form attached hereto as Exhibit A (the "Consent") by each Guarantor and
Credit Party party to a Security Agreement; provided, however, that any
such Guarantor and/or Credit Party may deliver its counterpart of the
Consent by telecopy to Agent or Agent's counsel, which delivery shall be
binding on such Guarantor and Credit Party; and provided further that any
such Guarantor and Credit Party shall promptly provide Agent or Agent's
counsel with an adequate number (as determined by Agent) of originally
executed counterparts of the Consent;
2.3 a certificate of the Secretary of each Borrower, each Guarantor
and each Credit Party party to a Security Agreement certifying (i) that
there existed no Default or Event of Default, after giving effect to this
Amendment No. 1 and that the execution, delivery and performance of this
Amendment No. 1 will not cause a Default or Event of Default, and (ii) as
to the incumbency of the officer executing this Amendment No. 1 and the
Consent and the resolutions of its Board of Directors approving this
Amendment No. 1 and the Consent; and
2.4 the certificates, financial statements and other documents and
instruments required to be delivered on or before the Amendment Effective
Date pursuant to Section 8.20 (other than clause (f) thereof) of the Credit
Agreement in connection with the A-D Acquisition and the Yardley
Acquisition.
SECTION 3. COVENANTS
Kolmar Canada covenants and agrees to provide written notification
to the Agent, as soon as reasonably practicable (and in any event no later
than the sixtieth day following the date on which Kolmar Canada acquires
the Yardley Assets) (the date by which such notification is required to be
given, the "Notification Date"), of the location at which the Yardley
Assets are to be kept by Kolmar Canada and to promptly execute and deliver
all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Agent may request, in order to
perfect and protect a first priority perfected security interest therein in
favor of the Administrative Agent for the benefit of the Lenders.
Notwithstanding anything to the contrary herein, the failure by Kolmar
Canada provide such notification on or before the Notification Date shall
constitute an Event of Default under the Credit Agreement.
SECTION 4. MISCELLANEOUS PROVISIONS
4.1 EFFECT ON AND RATIFICATION OF THE CREDIT AGREEMENT.
Except as specifically modified hereby, the Credit Agreement
remains in full force and effect and is hereby ratified and confirmed.
4.2 FEES AND EXPENSES.
Borrowers acknowledge that all costs, fees and expenses incurred by
Agent and its counsel with respect to this Amendment No. 1 shall be for the
account of Borrowers.
4.3 HEADINGS.
Section headings in this Amendment No. 1 are included herein for
convenience of reference only and shall not constitute a part of this
Amendment No. 1 for any other purpose or be given any substantive effect.
4.4 COUNTERPARTS.
This Amendment No. 1 may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
4.5 APPLICABLE LAW.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT NO.
1 AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AMENDMENT NO.
1, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW) AND DECISIONS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, this Amendment and Waiver No. 1 has been duly
executed on behalf of each of the undersigned as of the date first written
above.
AEROSOL SERVICES COMPANY, INC.,
as Borrower
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
PIEDMONT LABORATORIES, INC.,
as Borrower
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
KOLMAR LABORATORIES, INC.,
as Borrower
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
BT COMMERCIAL CORPORATION,
as Agent and as a Lender
By: /s/ Mark E. Funk
---------------------------
Name: Mark E. Funk
Title: Vice President
IN WITNESS WHEREOF, this Amendment and Waiver No. 1 has been duly
executed on behalf of each of the undersigned as of the date first written
above.
HELLER FINANCIAL, INC.,
as Co-Agent and as a Lender
By: /s/ Thomas W. Bukowski
---------------------------
Name: Thomas W. Bukowski
Title: Senior Vice President
NATIONAL BANK OF CANADA,
as a Lender
By: /s/ Thomas H. Hopkins/Robert A. McKersol
-----------------------------------------
Name: Thomas H. Hopkins/Robert A. McKersol
Title: Vice President/Vice President
SUMITOMO BANK OF CALIFORNIA,
as a Lender
By: /s/ N.R. Ryan
---------------------------
Name: N.R. Ryan
Title: Senior Vice President
FLEET CAPITAL CORPORATION,
as a Lender
By: /s/ Alisa G. Frederick
---------------------------
Name: Alisa G. Frederick
Title: Vice President
<PAGE>
CONSENT OF GUARANTORS AND GRANTORS
This undersigned as "Guarantors" under their respective Guarantees
and "Grantors" under their respective Security Agreements hereby
acknowledge the foregoing Amendment and Waiver No. 1, confirm their
respective Guarantees and Security Agreements and agree that their
respective obligations under such Guarantees and Security Agreements are
not impaired or adversely affected by such Amendment and Waiver No. 1, and
that such Guarantees and Security Agreements remain in full force and
effect.
OUTSOURCING SERVICE GROUP INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
AEROSOL SERVICES COMPANY, INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
PIEDMONT LABORATORIES, INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
KOLMAR LABORATORIES, INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
EXHIBIT A
CONSENT OF GUARANTORS AND GRANTORS
This undersigned as "Guarantors" under their respective Guarantees
and "Grantors" under their respective Security Agreements hereby
acknowledge the foregoing Amendment and Waiver No. 1, confirm their
respective Guarantees and Security Agreements and agree that their
respective obligations under such Guarantees and Security Agreements are
not impaired or adversely affected by such Amendment and Waiver No. 1, and
that such Guarantees and Security Agreements remain in full force and
effect.
OUTSOURCING SERVICE GROUP INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
AEROSOL SERVICES COMPANY, INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
PIEDMONT LABORATORIES, INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
KOLMAR LABORATORIES, INC.
By: /s/ Joseph W. Sortais
---------------------------
Name: Joseph W. Sortais
Title: Chief Financial Officer
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
The Plan is intended to provide incentive to key employees, directors
and consultants of the Corporation and its Subsidiaries, to encourage
proprietary interest in the Corporation, to encourage such key personnel to
maintain their relationship with, and to attract new personnel with
outstanding qualifications.
2. DEFINITIONS.
Unless otherwise defined herein or the context otherwise requires, the
capitalized terms used herein shall have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Administrator" shall mean the Board or the Committee,
whichever shall be administering the Plan from time to time, as described
in Section 4 of the Plan.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean the committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" shall mean the Common Stock of the Corporation.
(g) "Consultant" shall mean an individual or entity providing
services to the Company that is not an Employee.
(h) "Corporation" shall mean OUTSOURCING SERVICES GROUP, INC., a
Delaware corporation.
(i) "Employee" shall mean an individual who is employed (within the
meaning of Section 3401 of the Code and the regulations thereunder) by the
Corporation or a Subsidiary.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(k) "Exercise Price" shall mean the price per Share of Common
Stock, determined by the Administrator, at which an Option may be
exercised.
(l) "Fair Market Value" shall mean the value of one (1) Share of
Common Stock, determined as follows:
(i) The closing price of a share of the Common Stock on the
principal exchange on which shares of the Company's Common Stock are then
trading, if any, on the date of determination, or, if shares were not
traded on the date of determination, then on the nearest preceding trading
day during which a sale occurred;
(ii) If such stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system,
(a) the last sales price (if the stock is then listed as
a National Market Issue under The Nasdaq National Market System) or
(b) the mean between the closing representative bid and asked
prices (in all other cases) for the stock on the date of determination as
reported by NASDAQ or such successor quotation system;
(iii) if the Company's stock is not publicly traded, the fair
market value established in good faith by the Board.
(m) "Option" shall mean any stock option granted pursuant to the
Plan. An Option shall be granted on the date the Administrator takes the
necessary action to approve the grant. However, if the minutes or
appropriate resolutions of the Administrator provide that an Option is to
be granted as of a date in the future, the date of grant shall be that
future date.
(n) "Option Agreement" shall mean a written stock option agreement
evidencing a particular Option.
(o) "Optionee" shall mean a Participant who has received an Option.
(p) "Participant" shall have the meaning assigned to it in Section
5 hereof.
(q) "Plan" shall mean this OUTSOURCING SERVICES GROUP, INC. 1998
STOCK OPTION PLAN, as it may be amended from time to time.
(r) "Purchase Price" shall mean the Exercise Price multiplied by
<PAGE>
the number of Shares with respect to which an Option is exercised.
(s) "Share" shall mean one share of Common Stock, adjusted in
accordance with Section 9 of the Plan (if applicable).
(t) "Subsidiary" shall mean any subsidiary corporation as defined
in Section 425(f) of the Code.
3. EFFECTIVE DATE.
The Plan was approved on January ____, 1998 and is adopted
effective December 31, 1997.
4. ADMINISTRATION.
The Plan shall be administered, in the discretion of the Board from
time to time, by the Board or by a Committee which shall be appointed by
the Board. The Board may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee, however caused,
shall be filled by the Board. The Committee shall be composed of
Non-Employee Directors, as such term is defined in Rule 16b-3 as
promulgated under the Exchange Act (i.e., directors who (i) are not
currently officers of the Corporation or any of its Subsidiaries, (ii) do
not receive compensation from the Corporation or any of its Subsidiaries
for services rendered as a consultant or in any capacity other than as a
director, (iii) do not possess an interest in any transaction for which
disclosure would be required pursuant to Item 404(a) of Regulation S-K, and
(iv) are not engaged in a business relationship for which disclosure would
be required pursuant to Item 404(b) of Regulation S-K). There shall be at
least two directors serving on the Committee at any time. The Board shall
appoint one of the members of the Committee as Chairman. The Administrator
shall hold meetings at such times and places as it may determine. Acts of
a majority of the Administrator at which a quorum is present, or acts
reduced to or approved in writing by the unanimous consent of the members
of the Administrator, shall be the valid acts of the Administrator.
The Administrator shall from time to time at its discretion select
the Participants who are to be granted Options and determine the number of
Shares to be subject to Options to be granted to each Optionee. A Committee
or Board member shall in no event participate in any determination relating
to Options held by or to be granted to such Committee or Board member. The
interpretation and construction by the Administrator of any provision of
the Plan or of any Option or Option Agreement shall be final. No member of
the Administrator shall be liable for any action or determination made in
good faith with respect to the Plan or any Option.
5. PARTICIPATION.
The Optionees shall be such persons (collectively, "Participants,"
individually, a "Participant") as the Administrator may select from among
the following classes of persons:
(a) Employees of the Corporation or of a Subsidiary (who may be
officers, whether or not they are directors); and
(b) Directors and Consultants of the Corporation or of a
Subsidiary.
Notwithstanding provisions of the first paragraph of this Section
5, the Administrator may at any time or from time to time designate one or
more directors as being ineligible for selection as Participants in the
Plan for any period or periods of time.
6. STOCK.
The stock subject to Options granted under the Plan shall be Shares
of the Corporation's authorized but unissued or reacquired Common Stock.
The aggregate number of Shares which may be issued upon exercise of Options
under the Plan shall not exceed 750,000 shares. The number of Shares
subject to Options outstanding at any time shall not exceed the number of
Shares remaining available for issuance under the Plan. The limitations
established by this Section 6 shall be subject to adjustment in the manner
provided in Section 9 hereof upon the occurrence of an event specified in
that Section.
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Each Option shall be evidenced by an Option Agreement in such form
as the Administrator shall from time to time determine. Such Option
Agreement need not be identical but shall comply with and be subject to the
terms and conditions set forth in this Section 7.
(b) Number of Shares.
Each Option shall state the number of Shares to which it pertains
and shall provide for the adjustment thereof in accordance with the
provisions of Section 9 hereof.
(c) Exercise Price.
<PAGE>
Each Option shall state the Exercise Price. The Exercise Price in
the case of any Option shall not be less than one hundred percent (100%) of
the Fair Market Value on the date of grant.
(d) Medium and Time of Payment.
The Purchase Price shall be payable in full in cash or by check
upon the exercise of the Option. The purchase price may also be paid, in
whole or in part, by delivery to the Company of outstanding shares of the
Common Stock.
In the event the Corporation determines that it is required to
withhold state or federal income tax or any other federal, state or local
tax a result of the exercise of an Option, as a condition to the exercise
thereof, an Optionee must make arrangements satisfactory to the Corporation
to enable it to satisfy withholding requirements before the Optionee shall
be permitted to exercise the Option.
(e) Term and Non-Transferability of Options.
Each Option shall state the time or times when all or part thereof
becomes exercisable. The vesting schedule of Options granted pursuant to
the Plan shall be determined by the Administrator in its sole discretion.
No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or the Optionee's
guardian or legal representative and shall not be assignable or
transferable. In the event of the Optionee's death, the Option shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution. Any other attempted alienation, assignment, pledge,
hypothecation, transfer, sale, attachment, execution or similar process,
whether voluntary or involuntary, with respect to all or any part of any
Option or right thereunder, shall be null and void and, at the
Corporation's option, shall cause all of the Optionee's rights under the
Option to terminate.
(f) Termination of Employment.
(i) Termination of Optionee. An Optionee shall forfeit all Options
if Optionee's employment terminates prior to the date the Options become
exercisable because of Optionee's resignation (unless such resignation is
for "good reason" as described below) or because of Optionee's termination
for any of the following grounds:
a) Any illegal act by the Optionee (as evidenced by a
conviction) which materially and adversely affects the business of the
Corporation; or
b) Intentional wrongful engagement in any competitive activity
prohibited by the Optionee's employment agreement or employment in another
business in a manner not permitted by the Optionee's employment agreement.
(ii) Termination by Optionee for "Good Reason." If on Optionee's
employment is terminated by the Optionee for "good reason" as defined in
such Optionee's employment agreement, if any, such Optionee shall have the
right to exercise the Options prior to their termination as provided under
the application Option Agreement, but only to the extent that the Options
were exercisable on such date of termination.
(iii) Death. If Optionee's employment is terminated for death, or
having ceasing to be an employee, but during the period during which an
Optionee could have exercised the Options granted under this Plan in
accordance with the terms of the Optionee's Option Agreement, Optionee
should die, Optionee's executor or administrator of Optionee's estate shall
have the right for twelve (12) months following such death to exercise the
Options, but only to the extent that the Options were exercisable on the
date of Optionee's death.
(iv) Disability. If Optionee's employment is terminated for
disability, such Optionee or his or her administrator or legal guardian,
shall have the right for six (6) months following such termination to
exercise the Options granted this Plan, but only to the extent that the
Options were exercisable on the date of termination.
(v) Other. If an Optionee's employment is terminated for any reason
other than as set forth in Sections 7(f)(i) through (iv), Optionee shall
have ninety (90) days following such termination to exercise the Options
granted under this Plan, but only to the extent that the Options were
exercisable on the date of termination.
(g) Rights as a Stockholder.
No one shall have rights as a stockholder with respect to any
Shares covered by an Option until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as expressly provided in
Section 9 hereof.
(h) Modification, Extension and Renewal of Options.
<PAGE>
Within the limitations of the Plan, the Administrator may modify an
Option, extend or renew outstanding Options or accept the cancellation of
outstanding Options (to the extent not previously exercised) for the
granting of new Options in substitution therefor. The foregoing
notwithstanding, no modification of an Option shall, without the consent of
the Optionee, alter or impair any rights or obligations under any Option
previously granted.
(i) Restrictions on Shares; Repurchase Right.
The Corporation shall have the right to repurchase the Shares, and
in certain cases Optionees shall have the right to sell their Shares to the
Corporation, as provided under the Corporation's Amended and Restated
Stockholder Agreement, dated as of June 30, 1997, as it may be amended from
time to time (the "Stockholder Agreement"). Moreover, the Corporation shall
have the right to repurchase any Option held by an Optionee upon the same
terms as the Corporation's right to repurchase the Shares pursuant to the
Stockholder Agreement.
(j) Shares Subject to Stockholder Agreement.
Shares issued to Optionee upon exercise of the Options granted
under this Plan shall be subject to the Stockholder Agreement. In
connection with the issuance of the Shares, the Optionee shall take such
actions and shall execute such documents as the Corporation shall require
for the Optionee to become a party to the Stockholder Agreement.
(k) Other Provisions.
An Option Agreement authorized under the Plan may contain such
other provisions not inconsistent with the terms of the Plan (including,
without limitation, restrictions upon the exercise of the Option) as the
Administrator, from time to time, shall deem advisable.
(l) Substitution of Options.
Notwithstanding any inconsistent provisions or limits under the
Plan, in the event the Corporation acquires (whether by purchase, merger or
otherwise) all or substantially all of the outstanding capital stock or
assets of another corporation or in the event of any reorganization or
other transaction qualifying under Section 424 of the Code, the
Administrator may, in accordance with the provisions of that Section,
substitute options under the Plan for options under the plan of the
acquired company provided (i) the excess of the aggregate fair market value
of the shares subject to an option immediately after the substitution over
the aggregate option price of such shares is equal to the excess
immediately before such substitution (taking into account any rounding to
the nearest whole share to adjust for any fractional shares resulting from
such substitution) and (ii) the new option does not give persons additional
benefits, including any extension of the exercise period.
8. TERM OF PLAN.
Options may be granted pursuant to the Plan until the expiration of
the Plan ten years after the effective date referred to in Section 3.
9. RECAPITALIZATION.
The number of Shares covered by the Options and the exercise price
thereof shall be proportionately adjusted for any increase or decrease in
the number of issued shares of common stock resulting from a subdivision or
consolidation of such shares or the payment of a stock dividend (but only
of common stock) or any other increase or decrease in the number of issued
shares of common stock effected without receipt of consideration by the
Corporation. Subject to any required action by stockholders, if the
Corporation is the surviving corporation in any merger or consolidation,
the Options shall pertain and apply to the securities to which a holder of
the number of shares of common stock subject to the Options would have been
entitled.
The foregoing adjustments shall be made by the Administrator, whose
determination shall be conclusive and binding on the Corporation and the
Optionee.
Except as expressly provided in this Section 9, an Optionee shall
have no rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class, or by reason of
any dissolution, liquidation, merger, consolidation or spin-off of assets
or stock of another corporation, and any issue by the Corporation of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares subject to the Options or the
exercise price thereof.
The Options shall not affect in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or
assets.
<PAGE>
10. SECURITIES ACT AND OTHER REGULATORY REQUIREMENTS.
If through any act or omission of an Optionee the exercise of the
Options or the sale of any of the underlying shares of stock would, in the
opinion of counsel for the Corporation, violate the Act (or any other
federal or state statutes having similar requirements) as it may be in
effect at that time, then the Options shall not be exercisable and the
Corporation shall not be obligated to sell any shares subject to the
Options.
Further, the Administrator may require as a condition of issuance
of any shares under the Options that an Optionee furnish a written
representation that Optionee is acquiring the shares for investment and not
with a view to distribution to the public.
11. LEGENDS.
Each certificate representing Shares issued upon exercise of the
Options shall bear upon its face the following legends in addition to any
legends required by applicable state law:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO
THE STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND
SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO THE ISSUER, SUCH
OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR
OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE STOCKHOLDER
AGREEMENT, DATED AS OF JUNE 30, 1997, AS AMENDED."
(b) "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS, AS
SPECIFIED IN A STOCKHOLDER AGREEMENT ENTERED INTO AS OF THE 30TH
DAY OF JUNE, 1997, AS AMENDED, COPIES OF WHICH ARE ON FILE AT
THE OFFICE OF THE ISSUER AND WILL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST."
Each Optionee shall be bound by the requirements of such legends to
the extent that such legends are applicable.
12. AMENDMENT OF THE PLAN.
The Board may from time to time, with respect to any Shares at the
time not subject to Options, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever except that, without the approval of the
Corporation's stockholders, no such revision or amendment shall:
(a) Materially increase the benefits accruing to Participants under
the Plan;
(b) Increase the number of Shares which may be issued under the Plan;
(c) Change the designation in Section 5 hereof with respect to the
classes of persons eligible to receive Options; or
(d) Amend this Section 12 to defeat its purpose.
13. EXCHANGE ACT.
If the Common Stock is registered under the Exchange Act, the Options
and option covered by this Plan shall be registered as soon as practicable
and the Plan shall be amended by the Board from time to time to the extent
necessary or advisable, in the judgment of the Board after having consulted
with Corporation's counsel, to enable Participants who are officers or
directors of the Corporation and who are generally subject to the duties
established by Section 16(a) or 16(b) of the Exchange Act ("Section 16
Requirements") with respect to purchases and sales of equity securities of
the Corporation, to obtain the benefits of such exclusions or exemptions
from the Sections 16 Requirements as may be established by the Securities
and Exchange Commission from time to time by rule, regulation,
administrative order or interpretation (whether such interpretation is made
by such Commission or staff) with respect to (i) the receipt of Options,
(ii) the exercise, modification, extension, cancellation, exchange,
termination or expiration of Options, (iii) the purchase of Common Stock
upon the exercise of Options, and (iv) the sale of Common Stock received
upon the exercise of Options. Anything in the Plan to the contrary
notwithstanding, such amendments may be made without approval of the
Corporation's stockholders unless and to the extent that, in the judgment
of the Board after consulting with the Corporation's counsel, stockholder
approval of such an amendment is a prerequisite to effectuating a desired
exclusion or exemption from the Section 16 Requirements.
With respect to Participants who may be subject to the Section 16
Requirements, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provision of the Plan or action by the Administrator
fails to so comply, it shall be deemed null and void, to the extent
<PAGE>
permitted by law and deemed advisable by the Administrator.
14. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common
Stock pursuant to the exercise of an Option will be used for general
corporate purposes.
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made as of this
31st day of December, 1997, by and between OUTSOURCING SERVICES GROUP,
INC., a Delaware corporation having its principal place of business at 425
South Ninth Avenue, City of Industry, California 91716-3382 (the
"Company"), and CHRISTOPHER DENNEY, whose address is _______________________
(the "Employee").
RECITALS
a. As an inducement to Employee to joining the Company, the
Company has agreed to grant to Employee options to purchase
shares of the Company's common stock in connection with the
Employment and Non-Competition Agreement, of even date, by and
among Employee and the Company and certain of its subsidiaries
(the "Employment Agreement").
b. The Company and Employee desire to enter into this Agreement
to memorialize the grant of the options to Employee.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant. Upon the effectiveness of this Agreement, as
described in Section 20, the Company hereby grants to Employee the right to
purchase up to eighty-five thousand (85,000) shares of common stock of the
Company at a price of $10.00 per share (which price equals the fair market
value of a share of the Company's common stock as determined by the
Company's Board of Directors in good faith) (the "Initial Option"), on the
terms and conditions set forth herein. For each of the first five years
after the Effective Date (as defined herein) Employee shall participate,
along with other executives of the Company, in the annual award to all such
participants in the aggregate, of options to purchase up to 50,000 shares
of the Company's common stock at an exercise price equal to the then fair
market value as determined by the Board of Directors at the time of the
grant. Any such options granted to Employee shall be referred to herein as
"Subsequent Options." The Subsequent Options shall be issued on the terms
and conditions set forth herein. The Initial Option and Subsequent Options
are also referred to as the "Options"). Employee agrees that Employee and
any other person who may be entitled hereunder to exercise the Options
shall be bound by all terms and conditions of this Agreement.
2. Exercisability. Subject to the terms of this Agreement,
the Options granted herein shall become exercisable at the following times
and in the following amounts:
The Initial Option shall become exercisable on the
third anniversary of the Effective Date described
below. Each Subsequent Option shall become exercisable
at a rate of 20% per year on each anniversary of the
effective date of the grant of such Subsequent Option
until it is fully vested. All unvested Options shall
become exercisable on the earliest of the date (i) the
Company's common stock becomes publicly traded on a
national securities exchange or the Nasdaq stock
market, (ii) the Company completes an initial public
offering of its common stock with proceeds in excess of
$15,000,000, (iii) the Company, or its assets or
business, is sold substantially as an entirety. Each
Option granted hereunder shall lapse and expire on the
tenth (10th) anniversary of the effective date of its
grant.
If Employee does not purchase the full number of shares
Employee is entitled to purchase in any one year, the right to purchase
such shares carries over to the subsequent years during the term of the
Option.
3. Exercise. The Options may be exercised on the terms and
conditions contained herein by giving three (3) day's prior written notice
of exercise to the Company, specifying the number of shares to be purchased
and the price to be paid therefor and by delivering a check in the amount
of the purchase price payable to the Company. The purchase price may also
be paid, in whole or in part, by delivery to the Company of outstanding
shares of the Company's common stock previously held by the Employee valued
at "Fair Market Value".
For the purposes of this Agreement, "Fair Market Value" as
of a certain date (the "Determination Date") means: (a) the closing price
of a share of the Company's common stock on the principal exchange on which
shares of the Company's common stock are then trading, if any, on the
Determination Date, or, if shares were not traded on the Determination
Date, then on the nearest preceding trading day during which a sale
occurred; or (b) if such stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, (i) the last sales price (if the
stock is then listed as a National Market Issue under The Nasdaq National
Market System) or (ii) the mean between the closing representative bid and
<PAGE>
asked prices (in all other cases) for the stock on the Determination Date
as reported by NASDAQ or such successor quotation system; or (c) if the
Company's stock is not publicly traded, the fair market value established
in good faith by the Board.
4. Termination of Employment.
(a) Termination of Employee. Employee shall forfeit all
Options if Employee's employment terminates prior to the date the Options
become exercisable because of Employee's resignation (unless such
resignation is for "good reason" as described below) or because of
Employee's termination for any of the following grounds specified in
section 4.01(b), (c) or (d) of Employee's Employment Agreement.
(b) Termination by Employee for "Good Reason." If
Employee's employment is terminated by Employee for "good reason", Employee
shall have the right to exercise the (i) Initial Option at any time prior
to the Initial Option's expiration; and (ii) Subsequent Options for twelve
(12) months following Employee's termination, but only to the extent that
the Subsequent Options were exercisable on such date of termination.
For purposes of this Agreement, Employee's resignation for
"good reason" means any of the following:
(i) Without the Employee's prior written consent, a
reduction in Employee's current salary;
(ii) The taking of any action by the Company that would
substantially diminish the aggregate value of the benefits provided to the
Employee under the Employee's medical, health, accident, disability, life
insurance, thrift and retirement plans in which Employee was participating
on the date of this Agreement, other than any such reduction which is (a)
required by law, (b) implemented in connection with a general concessionary
arrangement affecting all employees or affecting the group of employees
(senior management) of which the Employee is a member or (c) generally
applicable to all beneficiaries of such plans;
(iii) Resignation as a result of unlawful
discrimination or other unlawful acts committed against employee, as
evidenced by a settlement, arbitration award or final court order; or
(iv) Any other "good reason" described in the
Employment Agreement.
(c) Death. If Employee's employment is terminated for
death, or having ceasing to be an employee, but during the period during
which Employee could have exercised the Options granted hereunder in
accordance with the terms of this Agreement, Employee should die,
Employee's executor or administrator of Employee's estate shall have the
right for twelve (12) months following such death to exercise the Options,
but only to the extent that the Options were exercisable on the date of
Employee's death.
(d) Disability. If Employee's employment is terminated for
disability, Employee or his administrator or legal guardian, shall have the
right for twelve (12) months following such termination to exercise the
Options granted hereunder, but only to the extent that the Options were
exercisable on the date of termination.
(e) Other. If Employee's employment is terminated for any
reason other than as set forth in Sections 4(a), (b), (c) and (d) above,
Employee shall have sixty (60) days following such termination to exercise
the Options granted hereunder, but only to the extent that the Options were
exercisable on the date of termination.
5. Transferability. The Options shall be transferable only by
will or by the laws of descent and distribution to the estate (or other
personal representative) of Employee and shall be exercisable during
Employee's lifetime only by Employee. Except as otherwise provided herein,
any attempt at alienation, assignment, pledge, hypothecation, transfer,
sale, attachment, execution or similar process, whether voluntary or
involuntary, with respect to all or any part of this option or any right
under this Agreement, shall be null and void and, at the Company's option,
shall cause Employee's rights under this Agreement to terminate.
6. Withholding Requirements. In the event the Company
determines that it is required to withhold state or federal income taxes as
a result of the exercise of the Options, Employee shall be required, as a
condition to the exercise thereof, to make arrangements satisfactory to the
Company to enable it to satisfy such withholding requirements.
7. Rights as a Stockholder. Employee, or any permitted
transferee of Employee, shall have no rights as a stockholder with respect
to any shares covered by the Options until the date of the issuance of a
stock certificate for such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior
to the date such stock certificate is issued, except as provided in Section
8 of this Agreement. This Agreement shall not confer upon Employee any
right of continued employment by the Company or interfere in any way in the
Company's right to terminate Employee.
<PAGE>
8. Recapitalization. The number of shares of Common Stock
covered by the Options and the exercise price thereof shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of common stock resulting from a subdivision or consolidation
of such shares or the payment of a stock dividend (but only of common
stock) or any other increase or decrease in the number of issued shares of
common stock effected without receipt of consideration by the Company.
Subject to any required action by stockholders, if the Company is the
surviving corporation in any merger or consolidation, the Options shall
pertain and apply to the securities to which a holder of the number of
shares of common stock subject to the Options would have been entitled.
The foregoing adjustments shall be made by the Company's
Board of Directors, whose determination shall be conclusive and binding on
the Company and Employee.
Except as expressly provided in this Section 8, Employee
shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class,
or by reason of any dissolution, liquidation, merger, consolidation or
spin-off of assets or stock of another corporation, and any issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares subject to the
Options or the exercise price thereof.
The Options shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or
assets.
9. Securities Act and Other Regulatory Requirements. If
through any act or omission of Employee the exercise of the Options or the
sale of any of the underlying shares of stock would, in the opinion of
counsel for the Company, violate the Securities Act of 1933 (or any other
federal or state statutes having similar requirements) as it may be in
effect at that time, then the Options shall not be exercisable and the
Company shall not be obligated to sell any shares subject to the Options.
Further, the Board of Directors of the Company may require
as a condition of issuance of any shares under the Options that Employee
furnish a written representation that Employee is acquiring the shares for
investment and not with a view to distribution to the public.
10. Shares subject to Shareholder Agreement. Shares issued to
Employee upon exercise of the Options granted hereunder shall be subject to
the Company's Amended and Restated Stockholder Agreement, dated as of June
30, 1997, as it may be amended from time to time (the "Stockholder
Agreement"). In connection with the issuance of the shares of Company
common stock, Employee shall take such actions and shall execute such
documents as the Company shall require for Employee to become a party to
the Stockholder Agreement.
11. Legends. Each certificate representing shares of the
Company's common stock issued upon exercise of the Options shall bear upon
its face the following legends in addition to any legends required by
applicable state law:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN
THE OPINION OF COUNSEL TO THE STOCKHOLDER, WHICH COUNSEL
MUST BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE,
SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS
EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH
THE ACT, SUCH LAWS AND THE STOCKHOLDER AGREEMENT, DATED AS
OF JUNE 30, 1997, AS AMENDED."
(b) "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS, AS
SPECIFIED IN A STOCKHOLDER AGREEMENT ENTERED INTO AS OF THE
30TH DAY OF JUNE, 1997, AS AMENDED, COPIES OF WHICH ARE ON
FILE AT THE OFFICE OF THE ISSUER AND WILL BE FURNISHED
WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN
REQUEST."
Employee shall be bound by the requirements of such legends to
the extent that such legends are applicable.
12. Effect of Exercise. Upon the exercise of all or any part of
the Options, the number of shares of common stock subject to the Options
under this Agreement shall be reduced by the number of shares with respect
to which such exercise is made.
13. Notices. Any notices to be given hereunder by either party
to the other shall be in writing and may be effected by personal delivery,
<PAGE>
by courier, or by mail (registered or certified), postage prepaid with
return receipt requested, or by facsimile confirmed by mail. Mailed
notices shall be addressed to the parties at the addresses appearing in the
introductory paragraph. Mailed notices shall be deemed communicated as of
four (4) calendar days after mailing. Notices delivered personally or by
courier shall be deemed delivered when actually received.
14. Entire Agreement. This Agreement supersedes any and all
other agreements (other than the Employment Agreement), either oral or in
writing, between the parties hereto with respect to the employment of the
employee by the company and contains all the covenants and agreements
between the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or otherwise,
have been made by any party, which are not embodied herein, and that no
other prior agreement, statement or promise not contained in this Agreement
shall not be valid or binding. Any modification of this Agreement will be
effective only if it is in writing signed by the party to be charged. To
the extent that this Agreement and the Company's 1998 Stock Option Plan are
in conflict, the terms of this Agreement control.
15. No Conflict. The Company hereby represents and warrants
that this Agreement and the Options granted hereunder do not violate or
conflict with covenants of the Company's (and certain of its subsidiaries'
financing agreements entered into on or about the Effective Date.
16. Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
17. Choice of Law; Counterparts. This Agreement, and all rights
and obligations hereunder, shall be governed by the laws of the State of
New York. This Agreement may be executed in one or more counterparts, each
of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same
instrument.
18. Successor. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors,
heirs, beneficiaries, executors and administrators.
19. Paragraph Headings. Paragraph headings are for convenience
only and are not part of the context.
20. Effective Date. This Agreement shall become effective upon
the closing contemplated by the Share and Asset Purchase Agreement among
CCL Industries, Inc., CCL Industries Corporation and Outsourcing Services
Group, Inc. dated October 28, 1997. Provided such closing occurs, the
"Effective Date" for purposes of this Agreement shall be December 31, 1997.
[Signature Page Follows]
[SIGNATURE PAGE OPTION AGREEMENT]
IN WITNESS WHEREOF, this Agreement is executed as of the date
first written above.
"Company"
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joseph Sortais
----------------------------------------
Name: Joseph Sortais
-------------------------------------
Title: Chief Financial Officer
-------------------------------------
"Employee"
/s/ Christopher Denney
-------------------------------------------
CHRISTOPHER DENNEY
<PAGE>
AMENDED AND RESTATED WARRANT AGREEMENT dated as of January 8, 1998
between OUTSOURCING SERVICES GROUP, INC., a company duly organized and
validly existing under the laws of the State of Delaware (the "Issuer"),
and Chase Manhattan Capital, L.P. (the "Investor") .
WHEREAS, the Issuer, the Subsidiary Guarantors listed on the
signature pages thereof and The Chase Manhattan Bank, N.A., are parties to
an Amended and Restated Senior Subordinated Loan Agreement dated as of June
30, 1997, providing, subject to the terms and conditions thereof, for
senior subordinated notes of the Issuer in an aggregate original principal
amount of $6,000,000 to be issued to The Chase Manhattan Bank and such
notes are being paid concurrently herewith.
WHEREAS, the Investor currently holds warrants for 80,883 shares of
common stock of the Issuer.
WHEREAS, the Company is currently refinancing its senior debt and
expects to issue high-yield notes, and wishes to modify the warrants in
connection therewith.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; Accounting Terms and Determinations.
1.01 Definitions. As used herein, the following terms shall have the
following meanings (all terms defined in this Section 1 or in other
provisions of this Agreement in the singular to have the same meanings when
used in the plural and vice versa):
"Accruing Liability" shall have the meaning assigned to such term in
Section 10-02(c).
"Additional Common Stock" shall mean all shares of Common Stock
issued or sold by the Issuer on or after the date hereof, other than
Excluded Securities.
"Affiliate" shall mean, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"Applicable Disposition" shall mean any sale, transfer or other
disposition, prior to the date of a Qualified IPO, by a Principal
Shareholder or any Affiliate of such Principal Shareholder of Common Stock
representing in excess of 10% the aggregate amount of Common Stock
beneficially owned by such Principal Shareholder and its Affiliates.
"Board" shall mean the Board of Directors of the Issuer.
"Business Day" shall mean any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required by law to remain closed.
"Call Notice" shall have the meaning assigned to such term in Section
11.01(b).
"Call Notice Date" shall mean the date on which a Call Notice shall
be received by the Holders.
"Call Price Per Unit" shall mean, as at any date, (a) Fair Market
Value as of such date divided by (b) the number of shares of Common Stock
outstanding on such date on a fully diluted basis.
"Call Right" shall mean the right of the Issuer to purchase Warrants
and Warrant Stock pursuant to, and in accordance with, Section 11.01.
"Closing Date" shall mean January 8, 1998
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the Federal government administering
the Securities Act and/or the Exchange Act.
"Common Stock" shall mean the Common Stock of the Issuer, par value
$0.001 per share, or any other common stock or other securities receivable
thereon, or into which the Common Stock is convertible or exchangeable, as
a result of any recapitalization, reclassification, merger or consolidation
of, or deposition of assets by, the Issuer.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract
or otherwise. "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Convertible Securities" shall mean evidences of indebtedness,
interests or other securities or rights which are exchangeable for or
exercisable or convertible into shares of Common Stock either immediately or
pon the arrival of a specified date or the occurrence of a specified event.
<PAGE>
"Date of Issuance" shall have the meaning assigned to such term in
Section 14 hereof.
"Demand Registration" shall have the meaning assigned to such term in
Section 7.01 hereof.
"Election Notice" shall have the meaning assigned to such term in
Section 14 hereof.
"Election Period" shall have the meaning assigned to such term in
Section 14 hereof.
"Equity Securities" means Voting Securities, Convertible Securities
and Rights to Purchase Voting Securities.
"Excluded Securities" shall mean (a) shares of Common Stock issued or
issuable upon exercise of any options or warrants and other securities
(including options and warrants) issued to employees, consultants,
advisors, officers and directors, or (b) securities issued in connection
with any acquisition or merger.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Exercise Price" shall have the meaning assigned to such term in the
form of Warrant attached as Annex 1 hereto.
"Expiration Date" shall have the meaning assigned to such term in
form of the Warrant attached as Annex 1 hereto.
"Fair Market Value" shall mean, as at any Put Notice Date, Call
Notice Date or any other date specified herein, as the case may be (i) if
there is not a public market for the Common Stock, the price for which all
the outstanding shares of Common Stock (on a fully diluted basis, assuming
receipt of applicable consideration for any conversion, exchange or
exercise of any Convertible Securities or Options which are exchangeable
for or convertible or exercisable into shares of Common Stock unless they
are Out of the Money) could be sold in an arm's length transaction to a
third party which is not an Affiliate in a sale conducted in an orderly
manner with a reasonable time for conducting the same, treating the Issuer
and its Subsidiaries as a going concern and without regard to the lack of
liquidity of the Common Stock due to any restrictions contained in this
Agreement or otherwise or any discount for minority interests and assuming
the conversion or exchange of all securities then outstanding which are
convertible into or exchangeable for Common Stock and the exercise of all
rights and warrants (including the Warrants) then outstanding and
exercisable to purchase shares of Common Stock or securities convertible
into or exchangeable for shares of Common Stock, or (ii) if there shall be
a public market for the Common Stock, the average of the daily market
prices for each day during the 30 consecutive trading days commencing 45
Business Days before such date as of which such a price can be established
in the manner set forth below. The market price for each such Business Day
shall be the last sale price on such day as reported in the Consolidated
Last Sale Reporting System or as quoted in the National Association of
Securities Dealers Automated Quotation System, or if such last sale price
is not available, the average of the closing bid and asked prices as
reported in either such system, or in any other case the higher bid price
quoted for such day as reported by The Wall Street Journal and the National
Quotation Bureau pink sheets.
If the Fair Market Value is being determined in connection with the
exercise of a Put Right, within 15 days after the applicable Put Notice
Date, the Issuer and the Holder exercising such Put Right shall each
designate a representative and such representatives will meet and use their
best efforts to reach an agreement on the Fair Market Value. If the Fair
Market Value is being determined in connection with the exercise by the
Issuer of a Call Right, within 15 days after the applicable Call Notice
Date, the Issuer and the Majority Warrant Stock Holders shall each
designate a representative and such representatives will meet and use their
best efforts to reach an agreement on the Fair Market Value.
If the representatives referred to in the preceding paragraph are
unable to reach such agreement within 15 days after the date on which the
later of the two representatives are designated, then (A) the holder
exercising its Put Right or the Majority Warrant Stock Holders, as the case
may be, shall immediately designate one Independent Appraiser; (B) the
Issuer shall immediately designate one Independent Appraiser; (C) the two
Independent Appraisers so selected shall, within 15 days after the date on
which the later of the two Independent Appraisers are appointed, determine
independently the Fair Market Value using the parameters established in the
first paragraph of this definition; (D) if the lesser of the two appraised
values exceeds or is equal to 90% of the other appraised value, then the
Fair Market Value will be the average of the two, which average amount
shall be conclusive and binding upon all the applicable parties; (E) if the
lesser of the two appraised values is less than 90% of the other appraised
value, then the two appraisers shall, within 15 days of the date of the
later of the two appraisals appoint a third Independent Appraiser; and (F)
the third Independent Appraiser so selected shall, within 15 days of its
appointment, determine independently the Fair Market Value (which shall be
an amount within the range established by the other two appraisal values)
using the parameters established in the first paragraph of this definition,
<PAGE>
which determination shall be conclusive and binding upon all the applicable
parties.
The Issuer will provide each Independent Appraiser with all
information about the Issuer and its Subsidiaries which such Independent
Appraiser reasonably deems necessary for determining the Fair Market Value.
The fees and expenses of the appraisal process (including those of the
Independent Appraisers) will be paid by the Issuer. The Issuer may require
that the Independent Appraisers keep confidential any non-public
information received as a result of this paragraph pursuant to reasonable
confidentiality arrangements.
"Financing" shall mean the borrowing of money by the Issuer
(including in connection with any refinancing of existing indebtedness for
borrowed money of the Issuer), the sale or issuance of Additional Common
Stock, a recapitalization of the Issuer, a revaluation of the Issuer's
assets (to the extent permitted under applicable law and GAAP), transfers
by the Issuer from its capital to its surplus accounts, effecting the sale
of the Warrants and/or the Warrant Stock required to be purchased by the
Issuer under Section 10 to one or more third parties or any other
transaction (other than a sale of a majority of the assets of the Issuer)
pursuant to which the Issuer makes available funds in an amount sufficient
to satisfy in cash all of its obligations under Section 10.
"GAAP" shall mean generally accepted accounting principles,
consistently applied throughout the specified period.
"Go-Along Notice" shall have the meaning assigned to such term in
Section 9.02.
"Go-Along Sale" shall mean the sale, transfer or other disposition by
a Principal Shareholder and its Affiliates at any time prior to a Qualified
IPO of 50% or more of the Common Stock and other equity interests in the
Issuer beneficially owned by such Principal Shareholder and its Affiliates
in a bona fide arm's length transaction to or with a Third Party Purchaser
for consideration consisting solely of cash and/or marketable securities.
"Go-Along Seller" shall have the meaning assigned to such term in
Section 9.01.
"Governmental Authority" shall mean the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory, monetary or administrative
powers or functions of or pertaining to government.
"Holder" shall mean any Person who acquires Warrants or Warrant Stock
pursuant to the provisions of this Agreement, including any transferees of
Warrants or Warrant Stock; provided, however, that a holder of Warrant
Stock purchased pursuant to an effective registration statement or pursuant
to Rule 144 shall not be deemed a Holder.
"Include" and "including" shall be construed as if followed by the
phrase "without being limited to".
"Indebtedness" means with respect to any Person without duplication,
(i) all indebtedness, obligations and liabilities of such Person for
borrowed money, (ii) all indebtedness, obligations and liabilities of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all capitalized lease obligations of such Person, assumed as the
deferred purchase price of property, all conditional sale obligations and
all indebtedness, obligations and liabilities under any title retention
agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business that are not overdue
by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all
indebtedness, obligations and liabilities for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all indebtedness, obligations and liabilities of any other
Person of the type referred to in clauses (i) through (vi) which are
secured by any lien on any property or asset of such Person, the amount of
such Indebtedness being deemed to be the lesser of the fair market value of
such property or asset or the amount of the Indebtedness so secured, and
(viii) all indebtedness, obligations and liabilities under currency
agreements and interest swap agreements of such Person.
"Independent Appraiser" shall mean an appraiser which is a recognized
independent expert (including any Investment Banking Firm) experienced in
valuing businesses similar or related to the principal business of the
Issuer and its Subsidiaries.
"Investment Banking Firm" shall mean a nationally recognized
investment banking firm.
"Investor" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Issue Price" shall have the meaning assigned to such term in Section
14.
<PAGE>
"Issuer" shall have the meaning assigned to such term in the preamble
of this Agreement.
"Kolmar Acquisition" shall mean Issuer's acquisition of the issued
and outstanding shares of Kolmar Laboratories, Inc. and certain assets
owned by CCL Industries Inc., an indirect parent of Kolmar Laboratories,
Inc. pursuant to the Share and Asset Purchase Agreement dated October 28,
1998, as amended.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge,
security interest or encumbrance of any kind in respect of such asset. For
purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it 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 relating to such asset.
"Majority Warrant Stock Holders" shall mean the Holders of a majority
of the Warrant Stock issued or issuable upon exercise of the Warrants. For
purposes of giving notices, waivers and consents hereunder, Holders of
Warrants shall be deemed holders of the Warrant Stock issued on exercise
thereof.
"NASDAQ" shall mean the National Association of Securities Dealers
automated quotation system.
"Notice of Issuance" shall have the meaning assigned to such term in
Section 14.
"Option Plan" shall mean an Employee Stock Option Plan of the Issuer
approved by each of the Issuer's non-employee directors.
"Option" shall mean any warrant, option or other right to subscribe
for or purchase shares of Common Stock.
"Other Equity Documents" shall mean the Option Plan, the Stockholders
Agreement, the certificate of incorporation of the Issuer, the by-laws of
the Issuer and any other instrument or document of organization or
governance of the Issuer.
"Out of the Money" shall mean (a) in the case of an Option, that the
fair market value of shares of Common Stock which the holder thereof is
entitled to purchase or subscribe for is less than the exercise price of
such Option and (b) in the case of a Convertible Security, that the
quotient resulting from dividing the fair market value of such Convertible
Security by the number of shares of Common Stock into or for which such
Convertible Security is exercisable, convertible or exchangeable is greater
than the fair market value of a share of Common Stock.
"Person" shall mean any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Principal Shareholder" shall mean any of Howard Lim, Walter Lim, ASC
Investment Partners, L.P., The Gordon + Morris Investment Partnership, L.P.
and HarbourVest Partners IV-Direct Fund, L.P.
"Put Closing Date" shall have the meaning assigned to such term in
Section 10.02(a).
"Put Notice" shall have the meaning assigned to such term in Section
10.01(b).
"Put Notice Date" shall mean, with respect to a Put Notice, the date
on which such Put Notice is given or deemed given, as the case may be, to
the Issuer.
"Put Postponement" shall have the meaning assigned to such term in
Section 10.02(c).
"Put Price Per Unit" shall mean, as at any date, (a) the Fair Market
Value as of such date divided by (b) the number of shares of Common Stock
outstanding on such date on a fully diluted basis.
"Put Reactivation Date" shall have the meaning assigned to such term
in Section 10.02(c).
"Put Response Notice" shall have the meaning assigned to such term in
Section 10.02(b).
"Put Right" shall mean the right of a Holder to require the Issuer to
purchase Warrants and Warrant Stock pursuant to, and in accordance with,
Section 10.
"Put Withdrawal Notice" shall have the meaning assigned to
such term in Section 10.02(b).
"Qualified IPO" shall mean the Issuer's first firm
commitment underwritten public offering involving the sale of Common Stock
of the Issuer for an aggregate purchase price of at least $10,000,000
(before the payment of underwriting discounts and commissions), pursuant to
<PAGE>
an effective registration statement under the Securities Act.
"Relevant Majority Holders" shall have the meaning
assigned to such term in the definition of "Fair Market Value" in this
Section 1.
"Restricted Certificate" shall mean a certificate for
Warrant Stock or Warrants bearing or required to bear the restrictive
legend set forth in Section 4.03.
"Restricted Securities" shall mean Restricted Warrant
Stock and Restricted Warrants.
"Restricted Warrant Stock" shall mean Warrant Stock
evidenced by a Restricted Certificate.
"Restricted Warrants" shall mean Warrants evidenced by a
Restricted Certificate.
"Rule 144" shall mean Rule 144 promulgated by the
Commission under the Securities Act (or any successor or similar rule then
in force).
"Rule 144A" shall mean Rule 144A promulgated by the
Commission under the Securities Act (or any successor or similar rule then
in force).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Seller" shall have the meaning assigned to such term in
Section 7.01 hereof.
"Seller Notice" shall have the meaning assigned to such
term in Section 7.01 hereof.
"Senior Debt" shall mean the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of
a petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) fees and expenses on any Indebtedness of the Issuer,
whether outstanding on the Closing Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior
in right of payment to the Indebtedness incurred under the Senior
Subordinated Credit Agreement. Without limiting the generality of the
foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of
a petition of bankruptcy at the rate provided for in the documentation with
respect thereof, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (w) all
monetary obligations of every nature of the Issuer under the Senior Credit
Agreement and the Senior Subordinated Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities,
(y) all interest swap obligations and (z) all obligations under currency
agreements, in each case whether outstanding on the Closing Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall
not include (i) any Indebtedness of the Issuer to a Subsidiary of the
Issuer, (ii) Indebtedness to, or guaranteed on behalf of, any director,
officer or employee of the Issuer or any Subsidiary of the Issuer
(including, without limitation, amounts owed for compensation),
(iii) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services, (iv) any liability
for federal, state, local or other taxes owed or owing by the Issuer,
(v) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse
to the Issuer, (vi) Indebtedness incurred in violation of the Senior Credit
Agreement or the Senior Subordinated Credit Agreement.
"Senior Credit Agreement" shall mean the Credit Agreement
dated as of January __, 1998, between the Issuer, Guarantor, Piedmont
Laboratories, Inc. and Aerosol Services Company, Inc., as Initial
Borrowers, the lenders party thereto in their capacities as lenders
thereunder and BT Commercial Corporation, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (provided that there is
no increase in the aggregate principal amount of Indebtedness, as in effect
at such time, of the Issuer and its Subsidiaries) or adding Subsidiaries of
the Issuer as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Senior Credit Subordinated Credit Agreement" shall mean
the Senior Subordinated Credit Agreement, dated as of January , 1998,
<PAGE>
among the Issuer, as Borrower, Bankers Trust Company, as Agent, and the
Guarantors and Lenders party thereto, together with the related documents
thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (specifically including
the documents governing any notes issued to refinance the Senior
Subordinated Credit Agreement,) or adding Subsidiaries of the Issuer as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Shareholder" shall mean any Person who directly or
indirectly owns any shares of Common Stock (including Warrant Stock).
"Stock Unit" shall mean one share of Common Stock, as such
Common Stock is constituted on the date hereof, and thereafter shall mean
such number of shares (including any fractional shares) of Common Stock and
other securities, cash or other property as shall result from the
adjustments specified in Section 4.
"Stockholders Agreement" shall mean the Stockholder
Agreement, dated as of June 30, 1997, among the Investor, the Issuer and
certain shareholders of the Issuer, as it may hereafter be amended,
including by the Amendment to Stockholder Agreement dated as of January 8,
1998.
"Subsidiary" of a Person means (a) any corporation more
than 50% of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or indirectly, by
such Person or by one or more of its Subsidiaries or by such Person and one
or more of its Subsidiaries, or (b) any company, partnership, association,
joint venture or similar business organization more than 50% of the
ownership interests having ordinary voting power of which shall at the time
be so owned or controlled. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a direct or indirect
Subsidiary of the Issuer.
"Tag-Along Sale" shall have the meaning assigned to such
term in Section 8.01.
"Tag-Along Seller" shall have the meaning assigned to such
term in Section 8.01.
"Third Party Purchaser" shall mean an entity not otherwise
an Affiliate of the Issuer or a Subsidiary or any of the Issuer's
Shareholders, which Person purchases Common Stock in a Go-Along Sale.
"Voting Securities" means the Common Stock and any other
securities of the Issuer of any kind or class having power generally to
vote for the election of directors;
"Rights to Purchase Voting Securities" means options and
rights issued by the Company whether presently exercisable or not) to
purchase Voting Securities or Convertible Voting Securities.
"Warrant Stock" shall mean all shares of Common Stock
issuable from time to time upon exercise of the Warrant.
"Warrant" and "Warrants" shall mean the Warrant originally
issued by the Issuer pursuant to this Agreement, evidencing rights to
purchase up to an aggregate of 80,883 Stock Units (which represents 6.0% of
the outstanding shares of Common Stock on a fully diluted basis on the date
hereof), and all Warrants issued upon transfer, division or combination of,
or in substitution for, any thereof.
1.02 Accounting Terms and Determinations. Except as
otherwise may be expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Holder
hereunder shall be prepared, in accordance with GAAP. All calculations made
for the purposes of determining compliance with the terms of this Agreement
shall (except as otherwise may be expressly provided herein) be made by
application of GAAP.
SECTION 2. Purchase and Sale of Warrant.
2.01 Authorization and Issuance of Warrant Stock and
Warrant. The Issuer has authorized: (a) the issuance of the Warrant
evidenced by the warrant certificate in the form of Annex 1; and (b) the
issuance of such number of shares of Common Stock as shall be necessary to
permit the Issuer to comply with its obligations to issue shares of Common
Stock pursuant to the Warrant.
2.02 Issuance of the Warrant. On the Closing Date:
(a) the Issuer shall confirm to the Investor the
validity of the Warrant;
<PAGE>
(b) the Issuer shall deliver to the Investor a legal
opinion from counsel to the Issuer in form and substance satisfactory to
the Investor.
2.03 Purchase for Investor's Account. The Investor
represents and warrants to the Issuer as follows:
(a) The Investor purchased the Warrant for
investment for its own account, without a view to the distribution thereof,
all without prejudice, however, to the right of the Investor at any time,
in accordance with this Agreement, lawfully to sell or otherwise to dispose
of all or any part of the Warrant or the Warrant Stock held by it.
(b) The Investor is an "accredited investor" within
the meaning of Regulation D under the Securities Act.
2.04 Securities Act Compliance. The Investor understands
that the Issuer has not registered the Warrant or the Warrant Stock under
the Securities Act or applicable state securities laws, and the Investor
agrees that neither the Warrant nor the Warrant Stock shall be sold or
transferred or offered for sale or transfer without registration or
qualification under the Securities Act or applicable state securities laws
or the availability of an exemption therefrom, all as more fully provided
in Section 4.
SECTION 3. Representations and Warranties. The Issuer represents and
warrants as follows:
3.01 Existence; Qualification. Each of the Issuer and its
Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization. Each of the Issuer and
its Subsidiaries is duly qualified, licensed or admitted to do business and
is in good standing as a foreign corporation in every jurisdiction where
the failure to be so qualified would have a material adverse effect on the
business, financial condition, operations, assets, prospects, liabilities
or capitalization of the Issuer and its Subsidiaries taken as a whole and
has all requisite corporate power and authority to transact its business as
now conducted in all such jurisdictions.
3.02 No Breach. The execution, delivery and performance
of this Agreement and the Warrant by the Issuer and the consummation by it
of the transactions contemplated hereby and thereby will not (a) violate
the certificate of incorporation or by-laws or any other instrument or
document of organization or governance of the Issuer, (b) violate, or
result in a breach of or default under, any other material instrument or
agreement to which the Issuer is a party or is bound, (c) violate any
judgment, order, injunction, decree or award against or binding upon the
Issuer, (d) result in the creation of any material Lien upon any of the
properties or assets of the Issuer (other than as contemplated by the
Senior Credit Agreement), or (e) violate any law, rule or regulation
relating to the Issuer.
3.03 Corporate Action. The Issuer has all necessary
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Warrant; the execution, delivery
and performance by the Issuer of this Agreement and the Warrant have been
duly authorized by all necessary action (including all Shareholder action)
on the part of the Issuer; this Agreement and the Warrant have been duly
executed and delivered by the Issuer and constitute the legal, valid and
binding obligations of the Issuer, enforceable against the Issuer in
accordance with their respective terms; the Warrant Stock initially covered
by the Warrant has been duly and validly authorized and reserved for
issuance and shall, when paid for, issued and delivered in accordance with
the Warrant, be duly and validly issued, fully paid and nonassessable and
free and clear of any Liens; and none of the Warrant Stock issued pursuant
to the terms hereof will be in violation of any preemptive rights of any
Shareholder.
3.04 Approvals. Except in connection with the
registration of the Warrant Stock pursuant to Section 7 and as required
under applicable California securities laws, no authorizations, approvals
or consents of, and no filings or registrations with, any Governmental
Authority or any other Person are necessary for the execution, delivery or
performance by the Issuer of this Agreement or the Warrant or for the
validity or enforceability thereof. Any such action required to be taken as
a condition to the execution and delivery of this Agreement, or the
execution, issuance and delivery of the Warrant, has been duly taken by all
such Governmental Authorities or other Persons, as the case may be.
3.05 Investment Company Act. The Issuer is not an
"investment company," or a company "controlled by" an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
3.06 Public Utility Holding Company Act. The Issuer is
not a "holding company," or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
3.07 Capitalization.
(a) On the date hereof, the total number of shares
of Common Stock that the Issuer has authority to issue is 6,000,000 of
<PAGE>
which 1,267,174 are, and 3,360,174 immediately after the Kolmar
Acquisition, will be outstanding. Upon the issuance of the Warrant under
this Agreement, other than the Warrant and the Stockholders Agreement, the
Issuer did not have outstanding any Convertible Securities or Options
exercisable or convertible into or exchangeable for any interests or other
equity rights of the Issuer, nor did it have outstanding any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, any interests or equity
rights of the Issuer or Convertible Securities exercisable or convertible
into or exchangeable for any interests or equity rights of the Issuer,
except for options in favor of managers issued pursuant to an Option Plan.
(b) Other than the Other Equity Documents and this
Agreement and the documents pertaining to the Senior Subordinated Credit
Agreement, there is not in effect on the date hereof any agreement by the
Issuer pursuant to which any holders of equity securities of the Issuer
have a right to cause the Issuer to register such equity securities under
the Securities Act or any agreement to which the Issuer or (to its
knowledge) any of its Shareholders is a party relating to the voting,
transfer or sale of such equity securities.
(c) Except for the Stockholders Agreement, there is
not in effect on the date hereof any agreement by the Issuer or any of its
Shareholders which (i) restricts the transferability of the Warrant and/or
the Warrant Stock, except as provided in Sections 4 and 5, (ii) restricts
the transferability of the right of the Holder in this Agreement to any
transferee of all or a portion of the Holder's Warrant and/or Warrant
Stock, or (iii) requires any consent or other approval of any Person to the
exercise of the Warrant by the Holder or the issuance of Warrant Stock upon
such exercise.
3.08 Private Offering.
(a) Assuming the truth and accuracy of the
Investor's representations and warranties contained in Section 2.03, the
issuance and sale of the Warrant to the Investor hereunder are exempt from
the registration and prospectus delivery requirements of the Securities
Act.
(b) All equity interests of the Issuer heretofore issued
and sold by the Issuer were and all securities of the Issuer issued and
sold by the Issuer on the date hereof are being issued and sold in
accordance with, or were exempt from, the registration and prospectus
delivery requirements of the Securities Act.
3.09 Litigation.
(a) There is no action, suit, proceeding or
investigation pending or, to the best of the Issuer's knowledge after due
inquiry, threatened against the Issuer or any of its Subsidiaries before
any Governmental Authority seeking to enjoin the transactions contemplated
by this Agreement or the Warrant.
(b) There are no legal or arbitral proceedings or
any proceedings by or before any Governmental Authority, now pending or (to
the knowledge of the Issuer) threatened against the Issuer or any of its
Subsidiaries which, if adversely determined, is likely to have a material
adverse effect on the business, financial condition, operations, assets,
prospects, liabilities or capitalization of the Issuer and its Subsidiaries
taken as a whole which has not been described on the schedules to the
Senior Credit Agreement.
3.10 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the
Issuer directly with the Investor without the intervention of any Person on
behalf of the Issuer in such manner as to give rise to any valid claim by
any Person against the Investor or the Holder for a finder's fee, brokerage
commission or similar payment.
SECTION 4. Restrictions on Transferability.
4.01 Transfers Generally. Except as otherwise provided in
Section 5 and subject to the Issuer's consent, which shall not be
unreasonably withheld (as measured by the Stockholders Agreement), the
Restricted Securities shall be transferable only upon the conditions
specified in this Section 4 and in Section 7, which conditions are intended
to insure compliance with the provisions of the Securities Act and
applicable state securities laws in respect of the transfer of any
Restricted Securities.
4.02 Transfers of Restricted Securities Pursuant to
Registration Statements, Rule 144 and Rule 144A. The Restricted Securities
may be offered or sold by the Holder thereof pursuant to (a) an effective
registration statement under the Securities Act, (b) to the extent
applicable, Rule 144 or Rule 144A or (c) any other legally available means
of transfer.
4.03 Restrictive Legends. Unless and until otherwise
permitted by this Section 4, the certificate for the Warrant issued under
this Agreement, each certificate for any Warrants issued to any subsequent
transferee of any such certificate, each certificate for any Warrant Stock
issued upon exercise of any Warrant and each certificate for any Warrant
<PAGE>
Stock issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT
CERTAIN AMENDED AND RESTATED WARRANT AGREEMENT DATED AS OF
JANUARY 8, 1998 (THE "WARRANT AGREEMENT"), BETWEEN
OUTSOURCING SERVICES GROUP, INC., A DELAWARE COMPANY (THE
"ISSUER"), AND CHASE MANHATTAN CAPITAL, L.P., AS THE
WARRANT AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN
EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID
OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A
COPY OF THE FORM OF THE WARRANT AGREEMENT IS ON FILE AND
MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF
THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF
THE WARRANT AGREEMENT."
4.04 Termination of Restrictions. All of the restrictions
imposed by this Section 4 upon the transferability of the Restricted
Securities shall cease and terminate as to any particular Restricted
Security when such Restricted Security shall have been effectively
registered under the Securities Act and applicable state securities laws
and sold by the Holder thereof in accordance with such registration or sold
under and pursuant to Rule 144 or is eligible to be sold under and pursuant
to paragraph (k) of Rule 144. Whenever the restrictions imposed by this
Section 4 shall terminate as to any Restricted Security as hereinabove
provided, the Holder thereof shall be entitled to receive from the Issuer,
without expense, a new certificate evidencing such Restricted Security not
bearing the restrictive legend otherwise required to be borne by a
certificate evidencing such Restricted Security.
SECTION 5. Dispositions of Securities.
5.01 Dispositions of Securities.
(a) Notwithstanding anything herein to the contrary,
no Investor may assign all or any portion of its rights under this
Agreement and the Warrant(s) held by such Investor if after giving effect
to such transfer there would be more than five holders of the Warrants.
Subject to the foregoing and to compliance with the Securities Act and the
Stockholders Agreement, applicable state securities laws and the
requirement as to placement of a legend on certificates for Restricted
Securities specified in Section 4.03, this Warrant and all rights hereunder
are transferable (subject to any restrictive legends hereon), in whole or
in part, upon surrender of this Warrant to the Issuer, together with a
written assignment of this Warrant duly executed by the Holder hereof or
such holder's agent or attorney. Such written assignment shall be in the
form of the Assignment Form attached as Annex 2 hereto. Upon such
surrender, and receipt by the Issuer of a written agreement (in form
reasonably satisfactory to the Issuer) of the assignee agreeing to be bound
by the Stockholders Agreement to the same extent that the Holder was so
bound, the Issuer shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denominations specified in
such instrument of assignment, and the original Warrant shall promptly be
canceled.
(b) The warrant may be exchanged for other Warrants
of the same series upon presentation to the Issuer, together with a written
notice specifying the denominations in which new Warrants are to be issued,
signed by the Holder hereof. The Issuer shall execute and deliver a new
Warrant or Warrants to the holder in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. The Issuer shall
pay all expenses, taxes (including transfer taxes) and other charges
payable in connection with the preparation, issuance and delivery of the
Warrants, including any transfer or exchange thereof.
(c) The Issuer shall maintain books for the
registration and transfer of the Warrants, and shall allow each holder of
Warrants to inspect such books at such reasonable times as such holder
shall request.
SECTION 6. Adjustments.
6.01 Dividends, Distributions and Purchases.
(a) If at any time the Issuer shall pay any dividend
or make any other distribution to holders of its Common Stock of any cash,
evidence of indebtedness or other property of any nature whatsoever (other
than as provided in sections 6.02, 6.03(i)(A) and 6.04(i)(A) hereof), the
Issuer shall at the same time pay or distribute to each holder of Warrants
which are by their terms then exercisable (whether or not such holder
exercises such Warrants) the cash, evidence of indebtedness or other
property such holder would have been entitled to receive if such holder had
exercised such Warrants immediately prior to the record date for such
dividend or distribution.
(b) If at any time the Issuer shall propose to
purchase or redeem any shares of its Common Stock owned by any of its
Affiliates for cash, evidence of indebtedness or other property of any
<PAGE>
nature whatsoever, the Issuer shall deliver to each holder of Warrants
which are by their terms then exercisable or shares of Warrant Stock a
notice of such proposed purchase or redemption, and each such holder shall,
at its option, have the right to require the Issuer to at the same time
purchase or redeem Warrants which are by their terms them exercisable and
shares of Warrant Stock owned by such holder, pro-rata based on the number
of shares of such other Common Stock to be so purchased or redeemed, on the
same terms and conditions as the proposed purchase or redemption of such
other Common Stock and for the same consideration per Warrant or share of
Warrant Stock, as the case may be, as is paid to the holders of such other
Common Stock for each share of Common Stock so redeemed or purchased,
minus, in the case of Warrants, the exercise price of the Warrants to be so
purchased or redeemed. Nothing in this Section 6.01(b) shall prohibit or
apply to repurchases of Common Stock from management shareholders in
compliance with and pursuant to the terms of the Stockholders Agreement.
6.02 Subdivisions and Combinations. If at any time the
Issuer shall
(a) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or
other distribution of Common Stock;
(b) subdivide or reclassify its outstanding shares
of Common Stock into a larger number of shares of Common
Stock; or
(c) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock;
then immediately after the occurrence of any such event the number of
shares of Warrant Stock comprising a Stock Unit shall be adjusted so as to
equal the number of shares of Warrant Stock which such holder would have
been entitled to receive if such holder had exercised the Warrant
immediately prior to the occurrence of such event.
6.03 Issuance of Common Stock. In case at any time the
Issuer (i)(A) shall take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase shares of any
class or series of Common Stock or (B) shall otherwise sell or issue any
such securities and (ii) the consideration per share of Common Stock to be
paid upon such issuance or subscription is less than the Fair Market Value
per share of Common Stock on such record date, then the number of shares of
Warrant Stock comprising a Stock Unit shall be adjusted to be that number
determined by multiplying the number of shares of Warrant Stock comprising
a Stock Unit immediately prior to such record date by a fraction (not to be
less than one) (i) the numerator of which shall be equal to the product of
(A) the number of shares of Common Stock outstanding after giving effect to
such issuance, distribution, subscription or purchase and (B) the Fair
Market Value per share of Common Stock determined immediately before such
record date and (ii) the denominator of which shall be equal to the sum of
(A) the product of (1) the number of shares of Common Stock outstanding
immediately before such record date and (2) the Fair Market Value per share
of Common Stock determined immediately before such record date and (B) the
aggregate consideration to be received by the Issuer for the total number
of shares of Common Stock to be issued, distributed, subscribed for or
purchased. Aggregate consideration for purposes of the preceding clause (B)
shall be determined as follows: In case any shares of Common Stock shall be
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount payable to the Issuer therefor, after deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts or, in the case of a private placement thereof,
finders' fees or commissions paid or allowed by the Issuer in connection
therewith. In case any shares of Common Stock shall be issued or sold for a
consideration other than cash payable to the Issuer, the consideration
received therefor shall be deemed to be the fair value of such
consideration as determined by the Board, after deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by the Issuer in connection therewith. In case
any shares of Common Stock shall be issued in connection with any merger of
another corporation into the Issuer, the amount of consideration therefor
shall be deemed to be the fair value as determined by the Board of such
portion of the assets of such merged corporation as the Board shall
determine to be attributable to such shares of Common Stock.
The Fair Market Value per share of Common Stock shall in
each instance initially be determined by the Issuer in accordance with the
provisions of the definition of Fair Market Value in Section 1 hereof. The
Issuer shall notify the Holders of such determination. If the holders of a
majority in interest of the Warrants disagree with the determination of the
Issuer, the Issuer may appoint an Independent Appraiser to determine the
Fair Market Value per share of Common Stock and the determination of the
Independent Appraiser shall govern for purposes of determining the
adjustment pursuant to this Section. The Issuer shall notify each holder of
Warrants of the final determination of the Fair Market Value per share of
Common Stock. The Issuer shall pay the fees and expenses of the Independent
Appraiser.
6.04 Issuance of other Securities, Rights or Obligations.
In case at any time the Issuer (i)(A) shall take a record of the holders of
its Common Stock for the purpose of entitling them to subscribe for or
purchase options to purchase or rights to subscribe for Common Stock or
<PAGE>
securities directly or indirectly convertible into or exchangeable for
Common Stock (or options or rights with respect to such securities) or (B)
shall otherwise issue or sell any such options, rights or securities and
(ii) the consideration per share for which Common Stock is deliverable upon
exercise of such options or rights or conversion or exchange of such
securities (determined by dividing (x) the total amount received or
receivable by the Issuer in consideration of the issuance of or
subscription for such options, rights or securities, plus the minimum
aggregate amount of premiums (if any) payable to the Issuer upon such
exercise, conversion or exchange, by (y) the total maximum number of shares
of Common Stock necessary to effect the exercise, conversion or exchange of
all such options, rights or securities) shall be less than the Fair Market
Value per share of Common Stock on such record date or sale or issuance
date, as the case may be, then the number of shares of Warrant Stock
comprising a Stock Unit shall be adjusted to be that number determined by
multiplying the number of shares of Warrant Stock comprising a Stock Unit
immediately prior to such date by a fraction (not to be less than one) (i)
the numerator of which shall be equal to the product of (A) the total
maximum number of shares of Common Stock outstanding after giving effect to
the assumed exercise or conversion of all such options, rights or
securities and (B) the Fair Market Value per share of Common Stock
determined immediately before such date and (ii) the denominator of which
shall be equal to the sum of (A) the product of (1) the number of shares of
Common Stock outstanding immediately before such date and (2) the Fair
Market Value per share of the Common Stock determined immediately before
such date and (B) the aggregate consideration per share (determined as set
forth in subsection (ii)(x) and (y) above) for which Common Stock is
deliverable upon exercise conversion or exchange of such options, rights or
securities. Aggregate consideration for purposes of the preceding clause
(B) shall be determined as follows: In case any options, rights or
convertible or exchangeable securities (or options or rights with respect
thereto) shall be issued or sold, or exercisable, convertible or
exchangeable for cash, the consideration received therefor shall be deemed
to be the amount payable to the Issuer (determined as set forth in
subsection (ii)(x) and (y) above) therefor, after deduction therefrom of
any expenses incurred or any underwriting commissions or concessions or
discounts or, in the case of a private placement thereof, finders' fees or
commissions paid or allowed by the Issuer in connection therewith. In case
any such options, rights or securities shall be issued or sold, or
exercisable, convertible or exchangeable for a consideration other than
cash payable to the Issuer, the consideration received therefor (determined
as set forth in subsection (ii)(x) and (y) above) shall be deemed to be the
fair value of such consideration as determined by the Board, after
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the Issuer in
connection therewith. In case any such options, rights or securities shall
be issued or sold, or exercisable, convertible or exchangeable in
connection with any merger of another corporation into the Issuer, the
amount of consideration therefor shall be deemed to be the fair value as
determined by the Board of such portion of the assets of such merged
corporation as the Board shall determine to be attributable to such
options, rights or securities.
The Fair Market Value per share of Common Stock shall be
determined as set forth in the last paragraph of section 6.03 hereof.
6.05 Superseding Adjustment. If, at any time after
any adjustment in the number of shares of Warrant Stock comprising a Stock
Unit shall have been made on the basis of the issuance of any options or
rights, or convertible or exchangeable securities (or options or rights
with respect to such securities) pursuant to section 6.04 hereof:
(a) the options or rights shall expire prior to
exercise or the right to convert or exchange any such securities shall
terminate; or
(b) the consideration per share for which shares of
Common Stock are issuable pursuant to the terms of such options or rights
or convertible or exchangeable securities shall be increased or decreased,
other than under or by reason of provisions designed to protect against
dilution;
such previous adjustment shall be rescinded and annulled. Thereupon, a
recomputation shall be made of the effect of such options or rights or
convertible or exchangeable securities with respect to shares of Common
Stock on the basis of
(A) treating the number of shares of Common Stock,
if any, theretofore actually issued or issuable pursuant
to the previous exercise, conversion or exchange of such
options, rights or securities as having been issued on
the date or dates of such exercise, conversion or
exchange and for the consideration actually received and
receivable therefore, and
(B) treating any such options, rights or securities
which then remain outstanding as having been
granted or issued immediately after the time of
such increase or decrease for the consideration
per share for which shares of Common Stock are
issuable upon exercise, conversion or exchange
of such options, rights or securities.
<PAGE>
To the extent called for by the foregoing provisions of this Section 6.05
on the basis aforesaid, a new adjustment in the number of shares of Warrant
Stock comprising a Stock Unit shall be made, determined using the Fair
Market Value used at the time of the original determination, which new
adjustment shall supersede the previous adjustment so rescinded and
annulled. If the exercise, conversion or exchange price provided for in any
such option, right security shall decrease at any time under or by reason
of provisions designed to protect against dilution, then in the case of the
delivery of shares of Common Stock upon the exercise, conversion or
exchange of any such option, right or security, the Stock Unit purchasable
upon the exercise of a Warrant shall forthwith be adjusted in the manner
which would have obtained had the adjustment made upon issuance of such
option, right or security been made upon the basis of the issuance of (and
the aggregate consideration received for) the shares of Common Stock
delivered as aforesaid.
6.06 Other Provisions Applicable to Adjustments under this
Section 6. The following provisions shall be applicable to the making of
adjustments of the number of shares of Warrant Stock comprising a Stock
Unit:
(a) The sale or other disposition of any issued
shares of Common Stock owned or held by or for the account
of the Issuer shall be deemed to be an issuance thereof
for purposes of this Section 6, except for resales to
management employees of Common Stock purchased from
management employees pursuant to and in accordance with
the Stockholders Agreement.
(b) In computing adjustments under this Section 6,
fractional interests in Common Stock shall be taken into
account to the nearest one-thousandth of a share.
(c) If the Issuer shall take a record of the
holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the
distribution thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any
such adjustment previously made in respect thereof shall
be rescinded and annulled.
6.07 Merger, Consolidation or Disposition of Assets. If
the Issuer shall merge or consolidate with another corporation, or shall
sell, transfer or otherwise dispose of all or substantially all of its
assets to another corporation and pursuant to the terms of such merger,
consolidation or disposition of assets, cash, shares of common stock or
other securities of the successor or acquiring corporation, or property of
any nature is to be received by or distributed to the holders of Common
Stock of the Issuer, then each holder of Warrants which are by their terms
then exercisable shall, at such holder's election, have the right to
receive (whether or not such holder exercises such Warrants) the amount it
would have been entitled to receive if such holder had exercised such
Warrants immediately prior to the occurrence of such merger, consolidation
or disposition of assets, net of the exercise price of such Warrants, and
shall thereupon be deemed to have exercised such Warrants. In case of any
such merger, consolidation or disposition of assets in which the foregoing
election is not made, the successor or acquiring corporation (and any
affiliate thereof issuing securities) shall expressly assume the due and
punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Issuer and
all of the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of
the Board and reasonably acceptable to the holders of a majority in
interest of the Warrants) in order to provide for adjustments of Stock
Units which shall be as nearly equivalent as practicable to the adjustments
provided for in this Section. The foregoing provisions shall similarly
apply to successive mergers, consolidations and dispositions of assets.
6.08 Other Action Affecting Common Stock. If at any time
or from time to time the Issuer shall take any action affecting its Common
Stock, other than an action described in any of the foregoing subsections
of this Section 6 or an action taken in the ordinary course of the Issuer's
business and consistent with past practice, then, unless in the reasonable
opinion of the Board such action will not have a material adverse effect
upon the rights of the holders of the Warrants, the number of shares of
Warrant Stock comprising a Stock Unit shall be adjusted in such manner and
at such time as the Board shall in good faith determine to be equitable in
the circumstances, but no such adjustment shall decrease the number of
shares of Warrant Stock comprising a Stock Unit.
6.09 No Adjustment Necessary. Anything to the contrary herein
notwithstanding, no adjustment to the number of shares of Warrant Stock
comprising a Stock Unit Shall be made as a result of, or in connection
with, the issuance of up to an aggregate of 1,000,000 shares of Common
stock (subject to adjustments for stock splits) to management employees,
directly or pursuant to an Option Plan.
6.10 Notice of Adjustments. Whenever the number of shares
<PAGE>
of Warrant Stock comprising a Stock Unit shall be adjusted pursuant to this
Agreement, the Issuer shall forthwith obtain a certificate signed by the
Issuer's chief financial officer (or, if a majority in interest of the
Holders so request after delivery of a certificate from the chief financial
officer, signed by a firm of independent accountants of recognized national
standing selected by the Issuer), setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the number of shares of Warrant Stock comprising
a Stock Unit, after giving effect to such adjustment or change. The Issuer
shall promptly cause a signed copy of such certificate to be delivered to
each holder of Warrants. The Issuer shall keep at its office copies of all
such certificates and cause the same to be available for inspection at said
office during normal business hours by any holder of Warrants or any
prospective purchaser of Warrants designated by the registered holder
hereof.
6.11 Notice of Certain Corporate Action. If the Issuer
shall propose (i) to pay any dividend to the holders of its Common Stock or
to make any other distribution to the holders of its Common Stock; (ii) to
offer to the holders of its Common Stock rights to subscribe for or to
purchase any additional shares of Common Stock (or options or rights with
respect thereto); (iii) to effect any reclassification of its Common Stock;
(iv) to otherwise issue any Common Stock or other securities; (v) to effect
any capital reorganization; (vi) to effect any consolidation, merger or
sale, transfer or other disposition of all or substantially all of its
assets; or (vii) to effect the liquidation, dissolution or winding up of
the Issuer, then, in each such case, the Issuer shall give to each holder
of Warrants a notice of such proposed action, which shall specify the date
on which a record is to be taken for the purposes of such dividend,
distribution or rights offer, or the date on which such reclassification,
issuance, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution or winding up is to take place and
the date of participation therein by the holders of Common Stock, if any
such date is to be fixed, and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such
action on the Common Stock, and the number of shares of Warrant Stock which
will comprise a Stock Unit after giving effect to any adjustment which will
be required as a result of such action. Such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 20 days
prior to the record date for determining holders of the Common Stock for
purposes of such action, and in the case of any other such action, at least
20 days prior to the date of the taking of such proposed action or the date
of participation therein by the holders of Common Stock, whichever shall be
the earlier.
SECTION 7. Registration.
7.01 Notice.
(a) Upon receipt of notice (a "Demand Notice") from
a Holder of any Warrants or shares of Warrant Stock given at any time after
the date that is 180 days after the consummation of a Qualified IPO
requesting that the Issuer effect the registration of Warrants and/or
shares of Warrant Stock held by such holder, or (b) whenever the Issuer
otherwise proposes to effect the registration of all or any part of the
Common Stock under the Securities Act, the Issuer shall promptly, and in
any event at least 30 days prior to the effective date of the proposed
registration statement, give written notice of such proposed registration
to all holders of Warrants or shares of Warrant Stock. Each holder of any
Warrants or shares of Warrant Stock that wishes to register its Warrants or
shares of Warrant Stock (each, a "Seller") shall, within 20 days after
receipt of such notice from the Issuer, deliver to the Issuer a notice (a
"Seller Notice") stating that such Seller wishes to participate in such
offering and setting forth the number of shares of Warrant Stock that such
Seller desires to include in such offering. The Issuer thereupon shall,
subject to Section 7.01(c) as expeditiously as practicable, use its best
efforts to effect the registration under the Securities Act of such shares
of Warrant Stock (any such registration effected or undertaken pursuant to
a Demand Notice being herein referred to as a "Demand Registration");
provided, however, that the Issuer shall not be required to effect a Demand
Registration pursuant to a Demand Notice from any holder of Warrants or
shares of Warrant Stock unless the holders of 50% in interest (on an
aggregate basis) of the then outstanding Warrants and shares of Warrant
Stock notify the Issuer of their wish to participate in an offering
pursuant to such registration; and, provided, further, that the Issuer
shall not be required to effect more than two Demand Registrations. In the
event that (i) the amount of securities proposed to be sold by Sellers
pursuant to a Demand Notice shall be reduced pursuant to Section 7.02(a)
hereof to an amount which is less than 85% of the amount of securities
originally proposed to be sold by Sellers, or (ii) any Demand Notice shall
be withdrawn by the holder or holders originally giving such Demand Notice
at any time prior to the filing by the Issuer of a preliminary registration
statement in connection with such Demand Notice, then, in such event, no
right to a Demand Registration shall be deemed to have been exercised or
forfeited and such Demand Notice shall not operate to reduce the Issuer's
obligation to effect a Demand Registration pursuant to a Demand Notice on
two occasions.
(b) Deferral of Filing. The Issuer may defer the
filing (but not the preparation) of a registration statement required by
Section 7.01(a) until a date not later than 90 days after the date of the
Demand Notice if (i) at the time the Issuer receives the Demand Notice, the
<PAGE>
Issuer or any of its Subsidiaries is engaged in confidential negotiations
or other confidential business activities, disclosure of which would be
required in such registration statement (but would not be required if such
registration statement were not filed), and the Board determines in good
faith that such disclosure would be materially detrimental to the Issuer
and its shareholders or would have a material adverse effect on any such
confidential negotiations or other confidential business activities. A
deferral of the filing of a registration statement pursuant to this Section
7.01(c) shall be lifted, and the requested registration statement shall be
filed forthwith, if the negotiations or other activities are disclosed or
terminated. In order to defer the filing of a registration statement
pursuant to this Section 7.01(c), the Issuer shall promptly (but in any
event within 10 days), upon determining to seek such deferral, deliver to
each Seller a certificate signed by an executive officer of the Issuer
setting forth a statement of the reason for such deferral and an
approximation of the anticipated delay, which information the Sellers shall
treat as confidential. Within 20 days after receiving such certificate,
Sellers holding a majority in interest of the Warrant Stock for which
registration was previously requested may withdraw such request by giving
notice to the Issuer; if withdrawn, the Demand Notice shall be deemed not
to have been made for all purposes of this Agreement. The Issuer may not
invoke its right to defer the filing of a registration statement under this
Section 7.01(c) more than once in any twelve month period.
7.02 Proration.
(a) In the case of a Demand Registration, if the
underwriter (or, if the offering is not underwritten, an independent
financial advisor to the Sellers) determines that marketing factors require
a limitation on the number of securities to be offered and sold, there
shall be included in such registration only that number of securities that
the underwriter, or financial advisor, as the case may be, believes will
not jeopardize the success of the offering. Any reduction in the number of
securities to be so offered shall first be pro-rata among all Persons
(other than the Issuer) proposing to sell securities pursuant to such
offering who are not Sellers, based on the number of securities originally
proposed to be sold by each of them, and then, if necessary, pro-rata among
all Sellers based on the number of securities originally proposed to be
sold by each of them.
(b) In the case of a registration to be effected
pursuant to Section 7.01(b) hereof, if the underwriter (or, if the offering
is not underwritten, an independent financial advisor to the Issuer)
determines that marketing factors require a limitation on the number of
securities to be offered and sold in the offering, including securities
requested to be offered and sold by Sellers, there shall be included in the
offering only that number of securities that the underwriter, or financial
advisor, as the case may be, believes will not jeopardize the success of
the offering. Any reduction in the number of securities to be so offered
shall be pro-rata among the Shareholders, the Sellers and all other Persons
(other than the Issuer or securityholders who are exercising "demand"
registration rights), proposing to sell securities pursuant to such
offering, based on the number of securities originally proposed to be sold
by each such person.
Nothing contained herein shall be construed to limit in any way the
Issuer's right, in its sole discretion, to withdraw any registration
statement (other than a registration statement filed pursuant to a Demand
Notice) before such registration statement becomes effective, or to
postpone the offering of securities contemplated by any such registration
statement.
7.03 Registration Procedures. If and whenever the Issuer
is required by the provisions of Section 7.01(a) hereof or, with respect to
subsections (iii), (vi), (vii), (viii), (ix), (x) and (xiii) of this
Section 7.03, by the provisions of Section 7.01(a) or (b) hereof, to use
its best efforts to effect the registration of any of its securities under
the Securities Act, the Issuer shall, as expeditiously as possible,
(i) prepare and file with the SEC a registration
statement with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for a period of
not less than 180 days in the case of the Issuer's initial registration of
securities under the Securities Act and 90 days in the case of any
subsequent registration, to permit the sale of such securities in
accordance with the plan of distribution chosen by the Seller or Sellers
and the underwriter:
(ii) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities covered by
such registration statement;
(iii) furnish to each Seller such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such
Seller may reasonably request in order to facilitate the public sale or
other disposition of the securities owned by such Seller;
(iv) use its best efforts to register or qualify the
<PAGE>
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
as each Seller shall reasonably request, and do such other reasonable acts
and things as may be requested of it to enable such Seller to consummate
the public sale or other disposition in such jurisdictions of the
securities owned by such Seller, except that the Issuer shall not for any
such purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified;
(v) use its best efforts to cause the securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the Seller or Sellers thereof to consummate the disposition of such
securities;
(vi) notify each Seller of any securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the Issuer's becoming
aware that the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing (upon receipt of which each Seller agrees to forthwith cease
making offers and sales of such securities pursuant to such prospectus and
to deliver to the Issuer any copies of such prospectus then in the
possession of such Seller), and at the request of any such Seller promptly
prepare and furnish to such Seller a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(vii) make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with one
of the first three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11 (a) of the Securities Act;
(viii) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC;
(ix) use its best efforts to list such securities on any
securities exchange on which the Common Stock of the Issuer is then listed,
or, if not so listed, on a national securities exchange, if the listing of
such securities is then permitted under the rules of such exchange;
(x) provide a transfer agent and registrar for all
the securities covered by such registration statement not later than the
effective date of such registration statement;
(xi) enter into such agreements (including an underwriting
agreement in customary form containing without limitation customary
indemnity and contribution provisions for the benefit of the underwriter or
underwriters and the Seller or Sellers) and take such other actions as the
Seller or Sellers shall reasonably request in order to expedite or
facilitate the disposition of such securities;
(xii) obtain an opinion from the Issuer's counsel and
a "cold comfort" letter from the Issuer's independent public accountants in
customary form and covering such matters as the Seller or Sellers shall
reasonably request;
(xiii) make available for inspection by any Seller of
securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such Seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Issuer, and cause all of the Issuer's officers, directors and
employees to supply all information reasonably requested by any such
Seller, underwriter, attorney, accountant or agent in connection with such
registration statement; and
(xiv) permit any Seller of securities covered by such
registration statement to require the insertion therein of material,
furnished to the Issuer in writing, which in the reasonable judgment of
such Seller should be included.
If any such registration or comparable statement refers to any Seller by
name or otherwise as the holder of any securities of the Issuer, then such
Seller shall have the right to require (A) the insertion therein of
language, in form and substance satisfactory to such Seller, to the effect
that the holding by such Seller of such securities is not to be construed
as a recommendation by such Seller of the investment quality of the
Issuer's securities covered thereby and that such holding does not imply
that such Seller will assist in meeting any future financial requirements
of the Issuer, or (B) in the event that such reference to such Seller by
name or otherwise is not required by the Securities Act, the deletion of
the reference to such Seller.
<PAGE>
The Issuer may require each Seller of securities to, and
each such Seller, as a condition to including Securities in such
registration, shall, furnish the Issuer with such information and
affidavits regarding such Seller and the distribution of such securities as
the Issuer may from time to time reasonably request in writing in
connection with such registration. No Seller may participate in any
underwritten registration hereunder unless such Seller (a) agrees to sell
such Seller's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and
these registration rights.
Each Seller of securities agrees that upon receipt of any
notice from the Issuer of the happening of any event of the kind described
in Section 7.03(vi), such Seller will forthwith discontinue such Seller's
disposition of securities pursuant to the registration statement relating
to such securities until such Seller's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 7.03(vi) and, if
so directed by the Issuer, will deliver to the Issuer (at the Issuer's
expense) all copies, other than permanent file copies, then in such
Seller's possession of any prospectus relating to such securities at the
time of receipt of such notice.
7.04 Holdback on Sales. The Issuer and the Holders hereby
agree not to effect any public sale or distribution of any securities
similar to those registered in accordance with Section 7.03 hereof during
the 14 day period prior to, and during the 90 day period beginning on, the
effective date of any registration statement (except as part of such
registration statement).
7.05 Expenses. All reasonable expenses incurred in
complying with this Section 7, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Issuer, the reasonable fees and disbursements of one
counsel for the Seller or the Sellers (to be chosen by the Seller or the
Sellers holding a majority of the securities to be included by Sellers in a
registration statement), expenses of any special audits incident to or
required by any such registration and expenses of complying with the
securities or blue sky laws of any jurisdictions, shall be paid by the
Issuer; provided, that in no event shall the Issuer be required to pay any
underwriting discounts, commissions or fees attributable to the sale of
Warrant Shares by a Seller hereunder.
7.06 Indemnification.
(a) In the event of any registration of any of its
securities under the Securities Act pursuant to this Section, the Issuer
shall, and hereby agrees to, indemnify and hold harmless each Seller of
such securities, its directors and officers, and each other person, if any,
who controls such Seller within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages, liabilities or expenses
("Losses") to which such Seller or any such director, officer or person may
become subject under the Securities Act or any other statute or at common
law, insofar as such Losses (or actions in respect thereof) arise out of or
are based upon any alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
with respect thereto, or any amendment or supplement thereto, or any
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
shall reimburse such Seller or such director, officer or controlling person
for any legal or any other expenses reasonably incurred by such Seller or
such director, officer or controlling person in connection with
investigating or defending any such Loss; provided, however, that the
Issuer shall not be liable in any such case to the extent that any such
Loss arises out of or is based upon any alleged untrue statement or alleged
omission made in such registration statement, preliminary prospectus,
prospectus, or amendment or supplement in reliance upon and in conformity
with written information furnished to the Issuer for inclusion therein by
such Seller; provided further, however that with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this paragraph
shall not apply to the extent that any such Loss results from the fact that
a current copy of the prospectus was not sent or given to the person
asserting any such Loss at or prior to the written confirmation of the sale
of the securities concerned to such person if the Issuer had prior thereto
given such Seller the notice referred to in Section 7.03(vi) hereof and
provided to such Seller a supplemented or amended prospectus as
contemplated by Section 7.03(vi), and such current copy of the prospectus
would have cured the defect giving rise to such Loss. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of such Seller or such director, officer or controlling person,
and shall survive the transfer of such securities by such Seller.
(b) Each Seller of securities which are included in
a registration statement hereunder, as a condition to including securities
in such registration statement, shall, to the full extent permitted by law,
indemnify and hold harmless the Issuer, its directors and officers and each
other Person, if any, who controls the Issuer within the meaning of Section
15 of the Securities Act, against any Losses to which the Issuer or any
<PAGE>
such director, officer or person may become subject under the Securities
Act or otherwise, insofar as such Losses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in such registration statement,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made)
not misleading, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Issuer by such Seller
specifically for use in the preparation thereof; provided, however, that
the obligation to provide indemnification pursuant to this Section 7.06(b)
shall be several, and not joint and several, among such Sellers on the
basis of the number of securities included by each in such registration
statement and the aggregate amount which may be recovered from any holder
of securities pursuant to the indemnification provided for in this Section
7.06(b) in connection with any sale of securities shall be limited to the
total proceeds received by such holder from the sale of such securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Issuer or any such other Person
and shall survive the transfer of such securities by such Seller.
(c) Promptly after receipt by any Person under this
Section of notice of the commencement of any action, such Person (an
"Indemnified Party") shall, if a claim in respect thereof is to be made
against any other Person (an "Indemnifying Party") for indemnity under this
Section, notify the Indemnifying Party in writing of the commencement
thereof; but the omission so to notify the Indemnifying Party shall not
relieve it from any liability which it may have to any Indemnified Party,
except to the extent that the Indemnifying Party is prejudiced thereby. The
Indemnifying Party may, upon being notified of such action, assume the
defense thereof, with counsel satisfactory to such Indemnified Party, and,
after such assumption, the Indemnifying Party shall not be liable to such
Indemnified Party under this Section for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
Indemnified Party, in connection with the defense thereof; provided,
however, that the Indemnifying Party may not assume the defense of the
action, and shall remain liable to the Indemnified Party for its legal
expenses of counsel and other expenses, in the event that the Indemnified
Party determines that a conflict of interest may exist between the
Indemnified Party and the Indemnifying Party.
(d) If the indemnification provided for in this
Section is unenforceable although available, or insufficient to hold
harmless an Indemnified Party hereunder for any Losses (or actions in
respect thereof) in respect of which the provisions of Section 7.06(a) or
(b) would otherwise apply by their terms, then the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on
the one hand and the Indemnified Party on the other hand in connection with
the statements or omissions which resulted in such Losses (or actions in
respect thereof), as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact relates
to information supplied by the Indemnifying Party on the one hand or such
Indemnified Party on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties agree that it would not be just and
equitable if contribution pursuant to this subsection were determined by
pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in this
subsection. The amount paid or payable as a result of the Losses (or
actions in respect thereof) referred to above in this subsection shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7.07 No Other Registration Rights. The Issuer shall not
grant any registration rights to any holder of equity securities of the
Issuer in respect of such securities if such registration rights would rank
senior to, or otherwise adversely affect, the registration rights granted
in this Section 7. This section 7.07 shall not prohibit the grant of
registration rights to others on a "pari passu" basis with those granted in
this Section 7, including the registration rights which may be granted to
Bankers Trust New York Corporation in connection with the Senior
Subordinated Credit Agreement.
SECTION 8. Tag-Along Sale.
8.01 Tag-Along Obligations.
(a) If at any time a Principal Shareholder or any
Affiliate of a Principal Shareholder ("Tag-Along Seller") shall, in one or
in a series of transactions, enter into an agreement to effect, or effect
or propose to effect, an Applicable Disposition to any transferee and it
does not elect to exercise its rights under Section 9 hereof (a "Tag-Along
<PAGE>
Sale"), each holder of Warrants or shares of Warrant Stock shall have the
right, but not the obligation, to participate in such Tag-Along Sale by
selling up to the number of shares (on an aggregate basis) of Warrant Stock
subject to Warrants and shares of Warrant Stock equal to the product of (i)
the total number of shares (on an aggregate basis) of Common Stock proposed
to be sold in the proposed Tag-Along Sale multiplied by (ii) a fraction,
the numerator of which is equal to the number of shares (on an aggregate
basis) of Warrant Stock subject to Warrants and shares of Warrant Stock
owned by such holder together with the number of shares of Common Stock
owned by any holder thereof who is entitled to so called "Tag along" rights
and elects to exercise such rights in connection with the Tag along Sale,
in each case immediately prior to the Tag-Along Sale, and the denominator
of which is equal to (A) the number of shares of Common Stock owned by the
Tag-Along Seller immediately prior to the Tag-Along Sale plus (B) the
number of shares (on an aggregate basis) of Warrant Stock subject to
Warrants and shares of Warrant Stock owned by such holder together with the
number of shares of Common Stock owned by any holder thereof who is
entitled to so called "Tag along" rights and elects to exercise such rights
in connection with the Tag Along Sale, in each case immediately prior to
the Tag-Along Sale. Any such sales by such holder shall be on the same
terms and conditions as the proposed Tag-Along Sale by the Tag-Along
Seller, except the holder shall not be required to make any representations
or warranties except as to (x) its title to the Warrants or shares of
Warrant Stock to be sold by it, (y) such holder's power and authority to
effect such transfer and (z) such matters pertaining to compliance with
securities law as the transferee may reasonably require.
(b) The foregoing notwithstanding, the provisions of
this Section 8.02 shall not apply to any (i) bona fide public sale of
shares of Common Stock sold, or to the securities so sold or to holders
thereof, pursuant to an effective registration statement under the
Securities Act and (ii) any transfer, sale or disposition of shares of
Common Stock solely among the Principal Shareholder and its Affiliates.
8.02 Procedures.
(a) If a Tag-Along Seller is participating in a
Tag-Along Sale, at least 30 days before the proposed date thereof, the
Issuer shall provide each holder of Warrants or shares of Warrant Stock
with written notice of such Tag-Along Sale setting forth in reasonable
detail the consideration per share to be paid by the transferee and the
other terms and conditions of the Tag-Along Sale. Each holder of Warrants
or shares of Warrant Stock wishing to participate in the Tag-Along Sale
shall provide written notice to such Tag-Along Seller and to the Issuer
within 5 days of the date the notice specified in the preceding sentence is
received by such holder. Such notice shall set forth the number (on an
aggregate basis) of then exercisable Warrants and shares of Warrant Stock,
if any, such holder elects to include in the Tag-Along Sale. If such notice
is not received from a holder within the 5 day period specified above, the
Tag-Along Seller shall have the right to sell or otherwise transfer the
shares of Common Stock to the proposed transferee without any participation
by such holder, but only (i) on the terms and conditions stated in the
notice, and (ii) if the sale or transfer of such shares of Common Stock is
consummated not later than 60 days after the end of such 5 day period
specified above.
(b) The provisions of this Section 8.02 shall apply
regardless of whether the consideration received in the Tag-Along Sale is
cash, debt, equity securities, property-in-kind, or any combination
thereof; provided that, if the consideration to be received includes
securities, only holders who have certified to the reasonable satisfaction
of the Principal Shareholder that they are "accredited investors" (as
defined in Regulation D promulgated under the Securities Act) shall be
entitled to participate in such transfer unless the transferee consents
otherwise.
SECTION 9. Go-Along Sale.
9.01 Go-Along Obligations. If at any time there shall
occur a Go-Along Sale, each holder of Warrants or Warrant Stock shall be
obligated to, and shall, if so requested by the Shareholder or Shareholders
proposing to effect a Go-Along Sale (the "Go-Along Seller") in writing, (i)
sell, transfer and deliver, or cause to be sold, transferred and delivered
to the Third Party Purchaser, a portion of its Warrants and Warrant Stock
owned by it which represents the same percentage of such holder's shares of
the fully-diluted Common Stock of the Company as the shares being disposed
of by the Go-Along Seller and its Affiliates represent of the fully-diluted
Common Stock of the Company owned by the Go-Along Seller and its Affiliates
at the same price per share and on the same terms and conditions (except as
expressly permitted below) as are applicable to the Go-Along Seller, except
that the holder shall not be required to make any representations or
warranties except as to (x) its title to the Warrants or shares of Warrant
Stock to be sold by it to be sold in the Go-Along Sale, (y) such holder's
power and authority to effect such transfer, and (z) such matters
pertaining to compliance with securities law as the transferee may
reasonably require; and (ii) if shareholder approval of the transaction is
required, vote its shares of Warrant Stock entitled to vote thereon in
favor thereof (or abstain from voting, unless such abstention would defeat
the approval of such transaction) at any meeting of the Issuer's
shareholder called for the purpose of voting on such transaction (it being
understood that the holders of the Warrants and Warrant Stock shall not be
obligated to pay any portion of the transaction costs associated with a
<PAGE>
Go-Along Sale or the sale, transfer or delivery of securities pursuant
thereto).
9.02 Procedures.
(a) If any Go-Along Seller proposes to effect a
Go-Along Sale, the Issuer shall deliver a written notice ("Go-Along
Notice") to each of the holders of the Warrants and Warrant Stock setting
forth in reasonable detail the consideration per share to be paid by the
Third Party Purchaser and the other terms and conditions of the Go-Along
Sale. Not later than the later of 20 days following the date of the
Go-Along Notice, each of such Holders shall deliver to the Issuer, for the
benefit of such Go-Along Seller Warrant certificates and certificates
representing Warrant Stock of such Holder, accompanied by duly executed
stock powers. At the closing for the Go-Along Sale, such Go-Along Seller
shall remit to each of such holders the consideration to which they are
entitled.
(b) If any holder of Warrants or Warrant Stock
should fail to deliver its Warrants or certificates representing Warrant
Stock, the Issuer shall cause the books and records of the Issuer to show
that such Warrants and/or Warrant Stock are bound by the provisions of this
Section 9 and that such Warrants and/or Warrant Stock shall be transferred
only to the Third Party Purchaser upon surrender for transfer by the holder
thereof.
(c) If, within 60 days after any Go-along Seller
delivers a Go-Along Notice, the Go-Along Sale is not completed, such
Go-Along Seller shall return to each holder of Warrants and Warrant Stock
all Warrants and certificates representing Warrant Stock that such holder
delivered for sale pursuant hereto.
SECTION 10. Put Rights.
10.01 Put Rights.
(a) At any time or from time to time after June 30,
2002, but prior to the earlier to occur of (i) the Expiration Date and (ii)
a Qualified IPO, each Holder will have the right to require the Issuer to
purchase (the "Put Right") all or any part of the Warrants and the Warrant
Stock owned by such Holder at the Put Price Per Unit as of the Put Notice
Date.
(b) Each Holder may exercise a Put Right by
delivering a notice to the Issuer stating that such Holder will require the
Issuer to purchase the Warrants or Warrant Stock specified in such notice
(a "Put Notice").
10.02 Procedures.
(a) The purchase and sale of the Warrants and the
Warrant Stock pursuant to a Put Right shall be consummated on a date
selected by the Issuer upon at least 10 days' prior written notice to such
Holders, which date in no event shall be earlier than the date 5 days, nor
later than the date 30 days, after the determination of Fair Market Value
(the "Put Closing Date"). On the Put Closing Date, the Issuer shall
purchase from the Holders which have given such Put Notice, and each such
Holder shall sell to the Issuer, the Warrants and/or the Warrant Stock
specified in such Put Notice: (i) in the case of Warrant Stock so
purchased, at a purchase price equal to the Put Price Per Unit as of the
Put Notice Date; and (ii) in the case of each Warrant, at a purchase price
equal to (A) the product of (1) the Put Price Per Unit as of the Put Notice
Date and (2) the number of shares of Warrant Stock for which such Warrant
is exercisable as of the Put Notice Date, minus (B) an amount equal to the
aggregate Exercise Price as of the Put Notice Date for such number of
shares of Warrant Stock. Payment of the purchase price for the Warrants
and/or the Warrant Stock so purchased by the Issuer shall be made by wire
transfer in immediately available funds.
(b) If the Issuer is prohibited from purchasing all
Warrants and Warrant Stock put to it pursuant to a Put Notice because (i)
of the existence of a contractual restriction or (ii) the Issuer does not
have sufficient funds legally available therefor under applicable law, then
the Issuer shall give notice (a "Put Response Notice") to each Holder which
has delivered such Put Notice of (x) the reason that it is unable to
purchase all Warrants and Warrant Stock put to it pursuant to a Put Notice,
including (1) if due to a deficiency, the computation thereof, and/or (2)
if due to such a contractual restriction, the nature of the provisions
which have been or would be breached and if such provisions are financial
covenants, a computation of the amounts or ratios setting forth the
deficiencies with respect to such covenants, and (y) the aggregate amount
of such Warrants and Warrant Stock, if any, which it will be able to
purchase, which Put Response Notice shall be delivered within 10 days of
the determination of Fair Market Value and shall be given together with the
notice of the Put Closing Date, if any, given by the Issuer pursuant to the
first sentence of Section 10.02(a) if a Put Response is delivered. Each
such Holder shall have the right to withdraw its Put Notice by delivering a
notice (a "Put Withdrawal Notice") to the Issuer at any time prior to the
Put Closing Date or if none is set in the Put Response Notice, prior to the
last day on which a Put Closing could occur pursuant to the first sentence
of Section 10.02(a). If any such Holders have not timely delivered Put
Withdrawal Notices, unless prohibited by a contractual restriction which
<PAGE>
has not been waived by the requisite Persons, the Issuer thereupon shall
purchase from such Holders the aggregate amount of Warrants and Warrant
Stock, if any, it may purchase on such date with funds legally available
under applicable law for such purpose. Such purchase shall be allocated
among the Holders which have not timely delivered Put Withdrawal Notices
pro rata, based on the ratio of the number of Warrant Stock put to the
Issuer (including Warrant Stock issuable upon the exercise of Warrants put
to the Issuer) by each such Holder to the number of Warrant Stock put to
the Issuer (including Warrant Stock issuable upon the exercise of Warrants
put to the Issuer) by all such Holders.
If the Issuer is prohibited from purchasing any Warrants
and/or Warrant Stock upon the exercise by a Holder of a Put Right for any
of the reasons described in the first sentence of this Section 10.02(b),
then the Issuer shall use its best efforts to increase its legally
available funds under applicable law to an amount sufficient to enable it
to purchase legally all Warrants and Warrant Stock put to it pursuant to a
Put Notice and to obtain relief from any contractual restriction in order
to enable it to make the required payments, including through effecting a
Financing (provided such financing is available on reasonable terms and
provided no financing to replace the [high-yield notes] shall be required),
obtaining the consent of requisite number of holders of indebtedness or
otherwise, in each case, as soon as practicable.
(c) If the Issuer is prohibited from purchasing some
of or all Warrants and/or Warrant Stock upon the exercise by a Holder of a
Put Right for any of the reasons described in the first sentence of Section
10.02(b) and such Holder shall not have timely delivered a Put Withdrawal
Notice, then: (i) the Put Price Per Unit for such Holder with respect to
such unpurchased Warrants and/or Warrant Stock shall become an accruing
liability of the Issuer with interest thereon commencing on the date 10
days after the determination of Fair Market Value as provided above through
the date on which the related Warrants and/or Warrant Stock are purchased
by the Issuer at a rate per annum equal to 12.5%, compounded quarterly
(such liability and interest being herein called the "Accruing Liability");
and (ii) such obligation of the Issuer to purchase shall otherwise be
deemed suspended for so long as and only to the extent that the Issuer is
unable to repurchase such Warrants and/or Warrant Stock after taking all
the action described in the last paragraph of Section 10.02(b) (a "Put
Postponement"). On any Put Reactivation Date, the Put Price Per Unit for
such Warrants and Warrant Stock shall be deemed to be the Accruing
Liability. As used herein, "Put Reactivation Date" shall mean a date when
the Put Postponement lapses in whole or in part and the obligation of the
Issuer to purchase Warrants and Warrant Stock shall no longer be deemed
suspended to the same extent pursuant to clause (ii) of this Section
10.02(c).
(d) If on the Expiration Date any Holder is
prevented from exercising its rights under this Section 10 for any of the
reasons described in the first sentence of Section 10.02(b), the Issuer's
obligation to purchase Warrants and/or Warrant Stock shall be extended
until 5:00 p.m., New York City time, on the last day of the calendar month
next following by at least 90 days the date upon which the Issuer shall
notify the Holders that such reason or reasons no longer exist.
(e) Each Holder agrees, for the benefit of the
holders of the Senior Debt, that any Accruing Liability shall be
subordinated in right of payment to the prior payment in full of all the
Senior Debt and that no payment shall be made in respect of the principal
of or interest on the Accruing Liability until the earliest to occur of:
(i) the date on which the Senior Debt has been paid in full in cash; (ii)
the date on which the requisite consent of the holders of the Senior Debt
to such payment has been given; and (iii) the first date on which such
payment is permitted under this Agreement.
SECTION 11. Call Rights.
11.01 Call Rights.
(a) At any time or from time to time after June 30,
2003, but prior to the earlier to occur of (i) the Expiration Date and (ii)
a Qualified IPO, the Issuer shall have the right to purchase (the "Call
Right") all (but not less than all) of the Warrants and Warrant Stock owned
by all (but not less than all) the Holders.
(b) The Issuer may exercise a Call Right by
delivering an irrevocable notice to the Holders indicating that the Issuer
wishes to purchase the Warrants and/or the Warrant Stock of each Holder
specified in such notice (a "Call Notice").
(c) The purchase and sale of the Warrants and/or the
Warrant Stock pursuant to a Call Right shall be consummated on a date
selected by the Issuer by giving the Holders at least 10 days' prior
written notice thereof, which date in no event shall be earlier than the
date 5 days, nor later than the date 30 days, after the determination of
the Fair Market Value pursuant to the procedure described in the definition
of such term in Section 1. The Issuer shall purchase from the Holders, and
each Holder shall sell to the Issuer, Warrants and Warrant Stock: (i) in
the case of Warrant Stock so purchased, at a price equal to the Call Price
Per Unit as of the Call Notice Date; and (ii) in the case of a Warrant, at
a purchase price equal to (A) the product of (1) the Call Price Per Unit
and (2) the number of shares of Warrant Stock for which such Warrant is
<PAGE>
exercisable as of the Call Notice Date, minus (B) an amount equal to the
aggregate Exercise Price as of the Call Notice Date for such number of
shares of Warrant Stock. Payment of the purchase price for the Warrants and
the Warrant Stock so purchased by the Issuer shall be made by wire transfer
in immediately available funds.
SECTION 12. Holders' Rights.
12.01 Delivery Expenses. If any Holder surrenders any
certificate for Warrants or Warrant Stock to the Issuer or a transfer agent
of the Issuer for exchange for instruments of other denominations or
registered in another name or names, the Issuer shall cause such new
instruments to be issued and shall pay the cost of delivering to or from
the office of such Holder from or to the Issuer or its transfer agent, duly
insured, the surrendered instrument and any new instruments issued in
substitution or replacement for the surrendered instrument.
12.02 Taxes. The Issuer shall pay all taxes (other
than Federal, state or local income taxes) which may be payable in
connection with the execution and delivery of this Agreement or the
issuance of the Warrants and Warrant Stock hereunder or in connection with
any modification of this Agreement or the Warrants and shall hold each
Holder harmless without limitation as to time against any and all
liabilities with respect to all such taxes. The obligations of the Issuer
under this Section 12.02 shall survive any redemption, repurchase or
acquisition of Warrants or Warrant Stock by the Issuer, any termination of
this Agreement, and any cancellation or termination of the Warrants.
12.03 Replacement of Instruments. Upon receipt by the
Issuer of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any certificate or instrument
evidencing any Warrants or Warrant Stock, and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided that, if the Issuer's
Common Stock is not at the time publicly traded and the owner of the same
is any Investor or an institutional lender or investor, its own agreement
of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender or
cancellation thereof, the Issuer, at its expense, shall execute, register
and deliver, in lieu thereof, a new certificate or instrument for (or
covering the purchase of) an equal number of Warrants or Warrant Stock.
12.04 Indemnification. The Issuer shall indemnify and
hold harmless each of the Investor and the Holders and each of their
respective directors, officers, employees, shareholders, Affiliates and
agents (each, an "indemnified person") on demand from and against any and
all losses, claims, damages, liabilities (or actions or other proceedings
commenced or threatened in respect thereof) and expenses that arise out of,
result from, or in any way relate to, this Agreement or the Warrants, or in
connection with the other transactions contemplated hereby and thereby, and
to reimburse each indemnified person, upon its demand, for any legal or
other expenses incurred in connection with investigating, defending or
participating in the defense of any such loss, claim, damage, liability,
action or other proceeding (whether or not such indemnified person is a
party to any action or proceeding out of which any such expenses arise),
other than any of the foregoing claimed by any indemnified person to the
extent incurred by reason of the gross negligence or willful misconduct of
such indemnified person. No indemnified person shall be responsible or
liable to either the Issuer or any other Person for any damages which may
be alleged as a result of or relating to this Agreement or the Warrants
(other than in connection with a breach of this Agreement), or in
connection with the other transactions contemplated hereby and thereby. Any
claim for indemnity in connection with or relating to a registration of
securities pursuant to Section 7 hereof shall be governed by Section 7.06
hereof, without regard to the provisions of this Section 12.04.
12.05 Inspection Rights. At any time prior to a
Qualified IPO, the Issuer shall afford, and shall cause its Subsidiaries to
afford, any Holder or its authorized agents, access, at reasonable times,
upon reasonable prior notice, (i) to inspect the books and records of the
Issuer and its Subsidiaries, (ii) to discuss with management of the Issuer
and its Subsidiaries the business and affairs of the Issuer and its
Subsidiaries, and (iii) to inspect the properties of the Issuer and its
Subsidiaries.
SECTION 13. Other Covenants of Issuer. The Issuer agrees with each
Holder that, so long as any of the Warrants and/or Warrant Stock shall be
utstanding:
13.01 Financial Statements, Etc. The Issuer shall
deliver the information specified below to each Holder:
(a) within 90 days after the end of each fiscal year
of the Issuer, its audited consolidated and consolidating balance sheet and
related statements of operations, stockholders' equity and cash flows as of
the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, together with, in the case
of such consolidated financial statements, the report thereon by the
Issuer's independent public accountants of recognized national standing
(without any qualification or exception as to the scope of such audit) to
<PAGE>
the effect that such consolidated financial statements present fairly in
all material respects the financial condition and results of operations of
the Issuer and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied and, in the case of such
consolidating financial statements, certified by its chief financial
officer as presenting fairly in all material respects the financial
condition and results of operations of the Issuer and each of its
consolidated subsidiaries in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments and the absence of footnotes;
(b) within 45 days after the end of each month, the
Issuer's consolidated and consolidating balance sheet and related
statements of operations, stockholders' equity and cash flows as of the end
of and for such month and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet,
as of the end of) the previous fiscal year, all certified by its chief
financial officer as presenting fairly in all material respects the
financial condition and results of operations of the Issuer and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(c) promptly after the same become publicly
available, copies of all periodic and other reports, proxy statements and
other materials filed by the Issuer or any Subsidiary with the Commission,
or any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or distributed
by the Issuer to its Shareholders generally; and
13.02 Repurchases and Redemption. Except as otherwise
specifically provided herein and other than repurchase or redemption of
shares of Common Stock from management, the Issuer shall not effect any
repurchase or redemption of shares of Common Stock and shall cause its
Subsidiaries not to effect any repurchase or redemption of shares of Common
Stock from any Shareholder, other than on a pro rata basis from all
Shareholders and Holders of Warrants participating in such repurchase or
redemption at the same type and amount of consideration. Any repurchase or
redemption of shares of Common Stock shall include Warrant Stock.
13.03 Transactions with Affiliates. Except as
expressly permitted by this Agreement, the Issuer shall not, nor shall it
permit any of its Subsidiaries to, directly or indirectly, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except (a) in the ordinary
course of business at prices and on terms and conditions not less favorable
to the Issuer or such Subsidiary than could be obtained on an arm's-length
basis from unrelated third parties, (b) transactions between or among the
Issuer and its wholly owned Subsidiaries not involving any other Affiliate
or (c) any transactions or arrangements existing on the date hereof.
13.04 Restrictions on Performance. The Issuer shall
not at any time enter into an agreement or other instrument limiting in any
manner its ability to perform its obligations under this Agreement or the
Warrants, or making such performance or the issuance of Warrant Stock upon
the exercise of any Warrant a default under any such agreement or
instrument other than the Senior Subordinated Credit Agreement and the
Senior Credit Agreement and refinancings thereof with an increase in
principal and instruments relating to Issuer's proposed issuance of certain
high-yield notes which will be used to refinance Issuer's Indebtedness
under the Senior Subordinated Credit Agreement.
13.05 Modification of Other Equity Documents. The
Issuer shall not amend or consent to any modification, supplement or waiver
of any provision of any Other Equity Documents in any manner which would
have an adverse effect on the Warrant Stock Holders, in each case without
the prior written consent of the Majority Warrant Stock Holders. Without
limiting the generality of the foregoing, the Issuer shall not amend, or
consent to any modification, supplement or waiver of any provision of any
Other Equity Documents in a way which would (i) restrict the
transferability of the Warrants and the Warrant Stock, (ii) restrict the
transferability of the rights of any Holder in this Agreement to any
transferee of all or a portion of such Holder's Warrants and/or Warrant
Stock or (iii) require any consent or other approval of any Person to the
exercise of the Warrants by any Holder, the issuance of Warrant Stock upon
such exercise or the admission of such Holder as a member of the Issuer
upon such exercise.
SECTION 14. Right to Purchase Equity Securities.
(a) Following the Closing Date the Issuer shall not
issue any Equity Securities (except by way of stock dividends or other
distributions or offerings made available to holders of shares of Common
Stock generally) unless, prior to such issuance, the Issuer offers Holders
of Warrants or Warrant Stock the right to participate proportionately
according to such Holder's pro rata share as of the date of issuance of any
such Equity Securities (the "Date of Issuance") and on the same terms and
conditions and at the same per unit price (the "Issue Price"). The Issuer
shall give written notice to all Holders of Warrants or Warrant Stock of
any such issuance as far in advance of the Date of Issuance as possible,
but in no event less than 10 days in advance of the Date of Issuance (a
<PAGE>
"Notice of Issuance"). The Notice of Issuance will describe in reasonable
detail the terms and conditions of the proposed issuance, including the
Issue Price, the maximum number of Equity Securities that such Holder will
be entitled to purchase (assuming for this purpose only that such Holder's
pro rata share does not change between the date of the giving of such
notice and the Date of Issuance) on the Date of Issuance. Notwithstanding
the foregoing, each Holders' preemptive right set forth above shall not
apply to any Equity Securities issued (i) in connection with a merger,
acquisition or other business combination transaction approved by the
Board, (ii) in sales to management employees pursuant to the Option Plan or
otherwise, up to a maximum of 1,000,000 shares of Common Stock in the
aggregate (subject to adjustment for stock splits), (iii) in connection
with an underwritten public offering, or (iv) in connection with any debt
financing that would otherwise not be available to the Issuer on similar
terms in absence of such Equity Securities.
(b) Each Holder of Warrants or Warrant Stock shall
have the option to elect to purchase all or part of such Holder's Pro Rata
Share of the Equity Securities described in a Notice of Issuance at the
Issue Price and on the other terms contained in the Notice of Issuance by
notifying the Issuer in writing (an "Election Notice") at least two
business days prior to the Date of Issuance (the "Election Period"), at
which time such Holder (or such designee) shall become irrevocably bound
(subject to the satisfaction of all regulatory requirements) to purchase
such Equity Securities. Each Election Notice will indicate the number of
units that such Holder elects to purchase.
(c) Any purchase and sale pursuant to the
provisions of this Section 14 shall occur on the Date of Issuance at the
principal offices of the Issuer unless otherwise agreed, subject to the
satisfaction of all regulatory requirements. At any closing of a purchase
and sale in accordance with this Section 14, the Issuer will deliver
certificates evidencing the Equity Securities to be so purchased against
delivery by such Holder of an amount equal to the number of units that such
Holder has elected to purchase multiplied by the Issue Price. Such amount
will be payable in immediately available United States funds. The Issuer
and such Holder will use their best efforts to accomplish the satisfaction
of all regulatory requirements with respect to such purchase, and the date
on which such purchase and sale must be completed in accordance with this
Section 14 will be extended automatically until such time as each
applicable Governmental Authority has given a final determination
permitting or prohibiting or otherwise denying necessary authorization for
such purchase and, in the case of a favorable determination, for an
additional five (5) business days.
(d) The failure of any Holder to exercise its right
to purchase Equity Securities under this Section 14 in connection with any
one issuance of Equity Securities by the Issuer will not, in any manner,
waive or otherwise impair the rights of such Holder to purchase such
Holder's Pro Rata Share in connection with any other proposed issuance of
Equity Securities to which this Section 14 is applicable.
(e) Notwithstanding anything contained in this
Section 14 to the contrary, the Issuer may at any time, regardless of
whether an Election Notice has been given, prior to the Date of Issuance
abandon an offering as to which it has given a Notice of Issuance, in which
case the Holders shall have no further right to purchase the Equity
Securities described in such Notice of Issuance.
SECTION 15. Miscellaneous.
15.01 Home Office Payment. Notwithstanding anything
to the contrary in this Agreement or the Warrants, so long as any Investor
or any nominee designated by it shall be a Holder, the Issuer shall
punctually pay all amounts which become due and payable with respect to any
Warrant or Warrant Stock to such Investor at the address registered on the
books of the Issuer maintained for such purpose, or at such other place and
in such manner as such Investor may designate by notice to the Issuer,
without presentation or surrender of such Warrant or the making of any
notation thereon. Each Investor agrees that prior to the sale, transfer or
other disposition of a part of any Warrant, it will make notation thereon
of the number of shares of Warrant Stock covered by the part of the Warrant
sold, transferred or disposed, or surrender the same in exchange for a
Warrant covering the number of shares of Warrant Stock remaining on the
Warrant so surrendered. The Issuer agrees that the provisions of this
Section 15.01 shall inure to the benefit of any other Holder registered on
the books of the Issuer.
15.02 Waiver. No failure on the part of any Investor
to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or the
Warrants shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement or the
Warrant preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
15.03 Notices.
(a) All notices, requests and other communications
provided for herein and the Warrants (including any waivers or consents
under this Agreement and the Warrants) shall be given or made in writing,
<PAGE>
(i) if to the Issuer:
Address for Notices:
Outsourcing Services Group
Attention: Chief Financial Officer, Inc.
425 South Ninth Avenue
City of Industry, California 91746
Telephone: 626-968-8531
Facsimile: 626-336-4605
(ii) if to Chase Manhattan Capital, L.P.:
Chase Manhattan Capital, L.P.
c/o Chase Capital Partners
Attention: Richard D. Waters, Jr.
380 Madison Avenue, 12th Floor
New York, New York 10017
Telephone: 212-622-3096
Facsimile: 212-622-3950
(iii) if to any other Person who is the registered
Holder of any Warrants or Warrant Stock, to the
address for such Holder as it appears in the
stock or warrant ledger of the Issuer;
or, in the case of any Holder, at such other address as shall be designated
by such party in a notice to the Issuer; or, in the case of the Issuer, at
such other address as the Issuer may designate in a notice to the Investor
and all other Holders.
(b) All such notices, requests and other
communications shall be: (i) personally delivered, sent by courier
guaranteeing overnight delivery or sent by registered or certified mail,
return receipt requested, postage prepaid, in each case given or addressed
as aforesaid; and (ii) effective upon receipt.
15.04 Expenses, Etc. The Issuer agrees to pay or
reimburse the Investor and the Holders for: (a) all reasonable
out-of-pocket costs and expenses of the Investor and the Holders (including
the reasonable fees and expenses of Millbank, Tweed, Hadley & McCloy,
special New York counsel to the Investor), in connection with (i) the
negotiation, preparation, execution and delivery of this Agreement and the
issuance of Warrants hereunder, and (ii) any amendment, modification or
waiver of (or consents in respect of) any of the terms of this Agreement or
the Warrants; and (b) all reasonable costs and expenses of the Investor and
the Holders (including reasonable legal fees and expenses) in connection
with (i) any default by the Issuer hereunder or under the Warrants or any
enforcement proceedings resulting therefrom, and (ii) the enforcement of
this Section 15.04.
15.05 Amendments, Etc. This Agreement amends and
restates the Warrant Agreement dated as of June 30, 1997 between the
parties. Except as otherwise expressly provided in this Agreement, any
provision of this Agreement may be amended or modified only by an
instrument in writing signed by the Issuer and the holders of two-thirds of
the Warrant Stock issued or issuable upon exercise of the Warrants;
provided, however, that (a) the consent of the holders of any Warrant Stock
or Warrants shall not be required with respect to any amendment or waiver
which does not affect the rights or benefits of such class under this
Agreement, and (b) no such amendment or waiver shall, without the written
consent of all holders of such Warrant Stock and Warrants at the time
outstanding, amend this Section 15.05.
15.06 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
15.07 Survival. All representations and warranties
made by the Issuer herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered
to have been relied upon by the Investor and shall survive the issuance of
the Warrants or the Warrant Stock regardless of any investigation made by
or on behalf of the Investor. All statements in any such certificate or
other instrument so delivered shall constitute representations and
warranties by the Issuer hereunder. All representations and warranties made
by the Investor herein shall be considered to have been relied upon by the
Issuer and shall survive the issuance to the Investor of the Warrants or
the Warrant Stock regardless of any investigation made by the Issuer or on
its behalf.
15.08 Specific Performance. Damages in the event of
breach of this Agreement by a Holder or the Issuer would be difficult, if
not impossible, to ascertain, and it is therefore agreed that each Holder
and the Issuer, in addition to and without limiting any other remedy or
right it may have, will have the right to an injunction or other equitable
relief in any court of competent jurisdiction, enjoining any such breach,
and enforcing specifically the terms and provisions hereof, and each Holder
and the Issuer hereby waives any and all defenses it may have on the ground
of lack of jurisdiction or competence of the court to grant such an
injunction or other equitable relief. The existence of this right will not
<PAGE>
preclude the Holders or the Issuer from pursuing any other rights and
remedies at law or in equity which the Holders or the Issuer may have.
15.09 Captions. The captions and section headings
appearing herein are included solely for convenience of reference and are
not intended to affect the interpretation of any provision of this
Agreement.
15.10 Counterparts. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute
one and the same instrument and any of the parties hereto may execute this
Agreement by signing any such counterpart signature page or counterpart.
15.11 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the law of the State of New
York without giving effect to the conflicts of law principles thereof,
except to the extent that New York conflicts of laws principles would apply
the Delaware General Corporation Law to matters relating to corporations
organized thereunder.
15.12 Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present
or future law, and if the rights or obligations of any party hereto under
this Agreement will not be materially and adversely affected thereby, (a)
such provision will be fully severable, (b) this Agreement will be
construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (c) the remaining provisions
of this Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of
this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.
15.13 Entire Agreement. This Agreement supersedes
all prior discussions and agreements between the parties with respect to
the subject matter hereof, and together with the Warrant contains the sole
and entire agreement between the parties hereto with respect to the subject
matter hereof.
(Signature Page Follows)
[SIGNATURE PAGE WARRANT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have duly executed
this Warrant Agreement as of the date first above written.
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joseph Sortais
------------------------------------
Name: Joseph Sortais
---------------------------------
Title: Chief Financial Officer
--------------------------------
CHASE MANHATTAN CAPITAL, L.P.
By: /s/ John M.B. O'Connor
------------------------------------
Name: John M.B. O'Connor
----------------------------------
Title: General Partner
---------------------------------
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
425 South Ninth Avenue
City of Industry, California 91746
Telephone: (626) 968-8531 Facsimile: (626) 336-4605
January 8, 1998
The Gordon + Morris Group
Suite 600
840 Newport Center Drive
Newport Beach, California 92660
Re: Amended and Restated Management Services Agreement
Dear Sirs:
This letter will confirm our agreement whereby The Gordon + Morris
Group will provide financial advisory, consulting and other management
services to Outsourcing Services Group, Inc. ("OSG") and each of its
following operating subsidiaries, Aerosol Services Company, Inc. ("ASC"),
Piedmont Laboratories, Inc. ("Piedmont"), and Kolmar Laboratories, Inc. and
each of its subsidiaries, Kolmar Canada Inc., Kolmar de Mexico, S.A. de
C.V., and Kolmar (Aust.) Pty Ltd. (collectively, "Kolmar") (each, an "OSG
Company," and collectively, the "OSG Companies"). For such services, the
OSG Companies shall pay you:
(a) a combined financial advisory fee of $350,000 per annum, payable in
equal quarterly installments in arrears on the first day of each
April, July, October and January, commencing April 1, 1998, which
fee is subject to adjustment in the event of further acquisitions
and/or dispositions (based upon one and one-half percent (1.5%) of
the EBITDA of the company being acquired or sold for the twelve
months prior to closing), provided you and your affiliates continue
to hold at least 33% of the greatest number of shares of OSG held by
you and your affiliates (after adjustments for stock splits and
similar events;
(b) upon the closing of the Kolmar acquisition, a fee of $800,000;
(c) an acquisition fee, upon the closing of any acquisition subsequent
to the Kolmar acquisition (including acquisitions structured as a
merger or consolidation of or with another corporation or entity),
or the acquisition of all or substantially all of the assets of
another entity by, any of the OSG Companies, to be equal to one
percent (1%) of the total consideration to third parties, including
assumption of debt involved in the transaction, or such other
percentage or amount (not to exceed two percent (2%)) as agreed by
The Gordon + Morris Group and the OSG Companies, but no such
transaction after which you and entities under your control no
longer hold an ownership interest in the OSG Companies shall be an
acquisition for purposes of this letter;
(d) a fee, upon the sale by OSG of any OSG Company, or of all or
substantially all the assets of any OSG Company, equal to one
percent (1%) of the total consideration received (including
assumption of debt), or such other percentage or amount (not to
exceed two percent (2%)) as agreed by The Gordon + Morris Group and
the OSG Companies;
(e) a debt refinancing fee, upon the closing of a debt refinancing
transaction involving any of the OSG Companies (but not with respect
to any refinancing which is part of a transaction for which a fee is
paid under paragraph (b) or (c) above), to be equal to one-half
percent (0.5%) of the amount refinanced, or such other percentage or
amount (not to exceed one percent (1%)) as agreed by The Gordon +
Morris Group and the OSG Companies; and
(f) reasonable out-of-pocket expenses for travel, meals, lodging, and
other items customarily reimbursed by clients to advisors and
consultants incurred in connection with the performance of services
hereunder, including without limitation reasonable fees and expenses
of counsel and accountants incurred in the performance of your
services to the OSG Companies.
The fees due hereunder shall be the joint and several obligations of all
OSG Companies. Upon the acquisition of any additional subsidiary of a OSG
Company, such subsidiary shall join in this agreement and be a OSG Company.
Upon sale of any OSG Company or any other transaction which results in such
entity not being controlled by OSG, such entity shall incur no further
liability under the Agreement.
Notwithstanding anything to the contrary contained herein, following
written notice to the OSG Companies and you by BT Commercial Corporation,
no such payments shall be made at any time at which payment of fees by the
OSG Companies is prohibited by Section 8.19 of the Credit Agreement to
which certain of the OSG Companies, BT Commercial Corporation, as Agent,
and Heller Financial, Inc., as Co-Agent, are parties, dated as of January
<PAGE>
8, 1998, or the comparable terms of a successor agreement. Such items not
paid shall continue to accrue and shall be payable as soon as the Credit
Agreement no longer blocks or prohibits the payment of your fees.
This agreement may be terminated by OSG on 15 days written notice if you
no longer own any outstanding voting securities of the OSG Companies. On
such termination, any unearned fees shall be refunded to us.
This agreement amends and restates in its entirety, the Management
Services Agreement, dated as of June 30, 1997, by and among The Gordon +
Morris Group and certain of the OSG Companies.
Addendum A attached hereto sets forth certain rights and obligations of
the parties hereto with respect to any losses, claims, damages or
liabilities relating to or arising out of this agreement.
[Signature Page Follows]
[SIGNATURE PAGE -- MANAGEMENT SERVICES AGREEMENT]
If you are in agreement with the foregoing, please so indicate by
signing the enclosed copy of this letter and returning it to us, whereupon
it shall become a binding agreement between you and us as of the date first
written above. Upon payment of all amounts due under the separate
Management Services Agreements dated as of February 14, 1994, September 30,
1996 and June 30, 1997 to which you and one or more of the OSG Companies
are parties, such prior agreements shall be superseded by this agreement.
Very truly yours,
OUTSOURCING SERVICES GROUP, INC.
By:/s/ Joseph Sortais
-------------------------------------
Title: Chief Financial Officer
----------------------------------
AGREED and ACCEPTED as of this
date first above written:
THE GORDON + MORRIS GROUP AEROSOL SERVICES COMPANY, INC.
By:/s/ Michael Gordon By:/s/ Joseph Sortais
------------------------- -------------------------------------
Title: Chairman Title: Chief Financial Officer
--------------------- ---------------------------------
PIEDMONT LABORATORIES, INC.
By:/s/ Jospeh Sortais
-------------------------------------
Title: Chief Financial Officer
--------------------------------
[Signature Page Continues]
[SIGNATURE PAGE TO MANAGEMENT
SERVICES AGREEMENT CONTINUED]
KOLMAR LABORATORIES, INC.
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
---------------------------------
KOLMAR CANADA INC.
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
---------------------------------
KOLMAR DE MEXICO, S.A. de C.V.
<PAGE>
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
---------------------------------
KOLMAR (AUST.) PTY LTD.
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
--------------------------------
Provided that it is in no
way liable for the $800,000
Kolmar acquisition fee.
ADDENDUM A
In connection with our engagement described in the foregoing letter
dated January 8, 1998 (the "Letter") to which this Addendum A is attached,
Outsourcing Services Group, Inc., Aerosol Services Company, Inc., Piedmont
Laboratories, Inc., Kolmar Laboratories, Inc., Kolmar Canada Inc., Kolmar
de Mexico, S.A. de C.V., and Kolmar (Aust.) Pty Ltd. (each, an "OSG
Company," collectively, the "OSG Companies") jointly and severally agree to
indemnify and hold harmless The Gordon + Morris Group and each of its
directors, officers, agents, employees and controlling persons (within the
meaning of the Securities Act of 1933, as amended) against any losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) related to or arising out of our engagement, and will reimburse
The Gordon + Morris Group and each other person indemnified hereunder for
all legal and other expenses as incurred in connection with investigations
or defending any such loss, claim, damage, liability, action or proceeding
whether or not in connection with pending or threatened litigation in which
The Gordon + Morris Group or any of its directors, officers, agents,
employees and controlling persons is a party; provided, however that none
of the OSG Companies will be liable in any such case (except cases arising
out of the use of information provided by any of them) for losses, claims,
damages, liabilities or expenses that a court of competent jurisdiction
shall have found in a final judgment to have arisen primarily from the
gross negligence or willful misconduct of The Gordon + Morris Group or the
party claiming a right to indemnification.
In case any proceeding shall be instituted involving any person in
respect of whom indemnity may be sought, such person (the "Indemnified
Party") shall promptly notify the OSG Companies, and the OSG Companies,
upon the request of the Indemnified Party, shall retain counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party
and any others the OSG Companies may designate in such proceeding and shall
pay as incurred the fees and expenses of such counsel related to such
proceedings. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel at its own expense, except that the OSG
Companies shall pay as incurred the fees and expenses of counsel retained
by the Indemnified Party in the event that (i) the OSG Companies and the
Indemnified Party shall have mutually agreed to the retention of such
counsel or, (ii) the named parties to any such proceeding (including any
impleaded parties) include the OSG Companies and the Indemnified Party and
representation of such parties by the same counsel would be inappropriate,
in the reasonable opinion of the Indemnified Party, due to actual or
potential differing interests between them.
No OSG Company shall be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or
if there be a final judgment for the plaintiff, the OSG Companies agree to
indemnify the Indemnified Party to the extent set forth in this Addendum A.
In addition, no OSG Company will, without the prior written consent of The
Gordon + Morris Group, settle or compromise or consent to the entry or any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not
The Gordon + Morris Group or any Indemnified Party is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of The
Gordon + Morris Group and each other Indemnified Party hereunder from all
liability arising out of such claim, action, suit or proceeding.
In the event a claim for indemnification under this Addendum A is
determined to be unenforceable by a final judgment of a court of competent
jurisdiction, then the OSG Companies shall contribute to the aggregate
losses, claims, damages or liabilities to which The Gordon + Morris Group
or its officers, directors, agents, employees or controlling persons may be
subject in such amount as is appropriate to reflect the relative benefits
received by the OSG Companies and the party seeking contribution on the one
hand and the relative faults of the OSG Companies and the party seeking
contribution on the other, as well as any other relevant equitable
considerations.
<PAGE>
The indemnification provided herein shall survive termination of our
agreement and shall be binding upon any successors or assigns of each of
the OSG Companies.
Acknowledged and Agreed:
OUTSOURCING SERVICES GROUP, AEROSOL SERVICES COMPANY, INC.
INC.
By:/s/ Joseph Sortais By:/s/ Joseph Sortais
------------------------ -------------------------------
Title: Chief Financial Title: Chief Financial
Officer Officer
--------------------- ----------------------------
PIEDMONT LABORATORIES, INC.
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
---------------------------
KOLMAR LABORATORIES, INC.
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
---------------------------
KOLMAR CANADA INC.
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
KOLMAR DE MEXICO, S.A. de C.V
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
----------------------------
KOLMAR (AUST.) PTY LTD.
By:/s/ Joseph Sortais
--------------------------------
Title: Chief Financial Officer
-----------------------------
Provided that it is in no
way liable for the $800,000
Kolmar acquisition fee.
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
425 South Ninth Avenue
City of Industry, California 91746
January 8, 1998
HarbourVest Partners LLC
Attention: Robert Wadsworth
One Financial Center
44th Floor
Boston, Massachusetts 02111
Re: Advisory and Financial Services Fees
Gentlemen:
In consideration for your agreeing to provide a representative
to serve on our Board of Directors and for rendering financial and business
advice to our Company from time to time, as needed, we have agreed with you
as follows:
1. We will reimburse you or the individual serving on the
Board of Directors of our Company and its subsidiaries for all reasonable
expenses incurred in connection with attending meetings of the Board of
Directors or committees thereof, on the same basis as such expenses are
reimbursed to other directors from time to time.
2. For as long as HarbourVest Venture Partners IV - Direct
Fund LP and/or an affiliate thereof ("Fund IV") holds at least 33% of the
greatest number of shares of our common stock owned by you and your
affiliates (after adjustment for stock splits and similar events), we will
annually pay to you a financial advisory fee of $115,000, commencing with
the year 1998. Of the $115,000 financial advisory fee, $50,000 will be
paid in cash in equal quarterly installments of $12,500 each unless payment
of fees to outside directors is prohibited by our financing arrangements
and the balance ($65,000 per year, or such amount as is incurred during any
applicable portion of the year) will be accrued on the Company's financial
statements. Such amount shall continue as a liability of the Company but
shall not bear interest or otherwise increase by reason of nonpayment and
shall be due and payable only following the repayment (i) of all
indebtedness under the Senior Subordinated Credit Agreement dated as of
January 8, 1998, among Outsourcing Services Group, Inc., as borrower,
various lenders and Bankers Trust Company, as agent, or any refinancing
thereof which does not increase the principal amount (the "Subordinated
Agreement"), and (2) of all indebtedness under that certain Credit
Agreement dated as of January 8, 1998, among us, various institutions and
BT Commercial Corporation, as agent (the "Senior Credit Facility").
Further, the accrued amounts shall not be paid except following one of the
listed events:
(i) A sale of the Company's assets or substantially all of
such assets;
(ii) An initial public offering providing proceeds
sufficient to repay the indebtedness described in the preceding paragraph
and provide net proceeds to the Company thereafter; and
(iii) A merger or similar transaction in which (A) the
Company's shareholders before such transaction, including the Gordon +
Morris Investment Partnership, L.P., Fund IV and ASC Investment Partners,
L.P., control less than 50% of the stock they hold on the present date, and
(B) the shareholders of the Company prior to such transaction continue,
following such transaction, to hold less than 50% of the shares of the
surviving entity.
If in the future we increase the management fees paid to The
Gordon + Morris Group, your fee will increase by one third of the increase
given The Gordon + Morris Group. The increase will be paid currently and
not deferred.
You will also receive, in cash, a fee equal to one-third of any
fee received by The Gordon + Morris Group or any of its affiliates on the
sale of OSG or any of its subsidiaries or, if approved by the Company's
Board of Directors, any other transaction described in paragraph (c) of our
Management Services Agreement with The Gordon + Morris Group dated as of
January 8, 1998.
Addendum A attached hereto sets forth certain rights and
obligations of the parties hereto with respect to any losses, claims,
damages or liabilities relating to or arising out of this agreement.
To confirm our understanding that these are all of the
management and advisory financial advisory fees which you shall receive in
the future, please sign below in the space indicated and return a copy to
the Company.
Very truly yours,
Joseph Sortais
<PAGE>
Chief Financial Officer
ACCEPTED, CONFIRMED AND AGREED
HARBOURVEST PARTNERS LLC
By:
---------------------------
Robert Wadsworth
ADDENDUM A
In connection with our engagement described in the foregoing letter
dated January 8, 1998 (the "Letter") to which this Addendum A is attached,
Outsourcing Services Group, Inc., Aerosol Services Company, Inc., Piedmont
Laboratories, Inc., Kolmar Laboratories, Inc., Kolmar Canada Inc., Kolmar
de Mexico, S.A. de C.V., and Kolmar (Aust.) Pty Ltd. (each, an "OSG
Company," collectively, the "OSG Companies") jointly and severally agree to
indemnify and hold harmless HarbourVest Partners LLC and each of its
directors, officers, agents, employees and controlling persons (within the
meaning of the Securities Act of 1933, as amended) against any losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) related to or arising out of our engagement, and will reimburse
HarbourVest Partners LLC and each other person indemnified hereunder for
all legal and other expenses as incurred in connection with investigations
or defending any such loss, claim, damage, liability, action or proceeding
whether or not in connection with pending or threatened litigation in which
HarbourVest Partners LLC or any of its directors, officers, agents,
employees and controlling persons is a party; provided, however that none
of the OSG Companies will be liable in any such case (except cases arising
out of the use of information provided by any of them) for losses, claims,
damages, liabilities or expenses that a court of competent jurisdiction
shall have found in a final judgment to have arisen primarily from the
gross negligence or willful misconduct of HarbourVest Partners LLC or the
party claiming a right to indemnification.
In case any proceeding shall be instituted involving any person in
respect of whom indemnity may be sought, such person (the "Indemnified
Party") shall promptly notify the OSG Companies, and the OSG Companies,
upon the request of the Indemnified Party, shall retain counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party
and any others the OSG Companies may designate in such proceeding and shall
pay as incurred the fees and expenses of such counsel related to such
proceedings. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel at its own expense, except that the OSG
Companies shall pay as incurred the fees and expenses of counsel retained
by the Indemnified Party in the event that (i) the OSG Companies and the
Indemnified Party shall have mutually agreed to the retention of such
counsel or, (ii) the named parties to any such proceeding (including any
impleaded parties) include the OSG Companies and the Indemnified Party and
representation of such parties by the same counsel would be inappropriate,
in the reasonable opinion of the Indemnified Party, due to actual or
potential differing interests between them.
No OSG Company shall be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or
if there be a final judgment for the plaintiff, the OSG Companies agree to
indemnify the Indemnified Party to the extent set forth in this Addendum A.
In addition, no OSG Company will, without the prior written consent of
HarbourVest Partners LLC settle or compromise or consent to the entry or
any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or not
HarbourVest Partners LLC or any Indemnified Party is an actual or potential
party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of HarbourVest
Partners LLC and each other Indemnified Party hereunder from all liability
arising out of such claim, action, suit or proceeding.
In the event a claim for indemnification under this Addendum A is
determined to be unenforceable by a final judgment of a court of competent
jurisdiction, then the OSG Companies shall contribute to the aggregate
losses, claims, damages or liabilities to which HarbourVest Partners LLC or
its officers, directors, agents, employees or controlling persons may be
subject in such amount as is appropriate to reflect the relative benefits
received by the OSG Companies and the party seeking contribution on the one
hand and the relative faults of the OSG Companies and the party seeking
contribution on the other, as well as any other relevant equitable
considerations.
The indemnification provided herein shall survive termination of our
agreement and shall be binding upon any successors or assigns of each of
the OSG Companies.
Acknowledged and Agreed:
<PAGE>
OUTSOURCING SERVICES GROUP, AEROSOL SERVICES COMPANY, INC.
INC.
By: /s/ Joseph Sortais By: /s/ Joseph Sortais
--------------------------- ------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
----------------------- ---------------------------
PIEDMONT LABORATORIES, INC.
By: /s/ Joseph Sortais
------------------------------
Title: Chief Financial Officer
--------------------------
KOLMAR LABORATORIES, INC.
By: /s/ Joseph Sortais
------------------------------
Title: Chief Financial Officer
---------------------------
KOLMAR CANADA INC.
By: /s/ Joseph Sortais
-----------------------------
Title: Chief Financial Officer
--------------------------
KOLMAR DE MEXICO, S.A. de C.V
By: /s/ Joseph Sortais
-----------------------------
Title: Chief Financial Officer
--------------------------
KOLMAR (AUST.) PTY LTD.
By: /s/ Joseph Sortais
-----------------------------
Title: Chief Financial Officer
--------------------------
<PAGE>
EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement") is
made as of this 31st day of December, 1997, by and between OUTSOURCING
SERVICES GROUP, INC., a Delaware corporation having its principal place of
business at 425 South Ninth Avenue, City of Industry, California 91716-3382
(the "Company"), and its subsidiaries Aerosol Services Company, Inc.,
Piedmont Laboratories, Inc., Kolmar Laboratories, Inc. (the "Subsidiaries")
and CHRISTOPHER DENNEY, whose address is __________________________________
(the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged or proposed to be engaged, through the
Subsidiaries, in the business of providing aerosol and liquid filling of
cosmetics, toiletries and skin care products and related packaging services
and has need for management personnel with experience in said business;
WHEREAS, the Employee is experienced in the business of providing
aerosol and liquid filling, packaging of cosmetics, toiletries and skin
care products, and related services and in the management of such business;
WHEREAS, the Company and the Subsidiaries desire to employ the
Employee an executive capacity upon the terms and conditions hereinafter
set forth; and
WHEREAS, the Employee is willing to enter into this Agreement with
respect to the Employee's employment and services upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing recitals and the
promises herein contained, the parties agree as follows:
1. TERM
SECTION 1.01. Employment. Subject to the provisions of Section 4.01
hereof, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company for a period of three (3) years
beginning on January 1, 1998 and terminating at the close of business on
December 31, 2000 (the "Employment Term") , including service at Company's
principal executive offices located in the Eastern United States. The
Employment Term may be extended by a mutual agreement in writing for
additional years on the same or mutually agreeable terms, but if no such
mutual agreement is executed prior to December 31, 2000 the Employment Term
shall expire. If the employment of Employee is terminated pursuant to
Article 4 of this Agreement or by reason of the death or disability of such
Employee, the time during which the Employee is actually employed shall be
referred to as the "Employee's Employment."
2. DUTIES
SECTION 2.01. General Duties. The Employee shall serve as the
President and Chief Executive Officer of the Company during the Employee's
Employment and as President and Chief Executive Officer of the Company's
Kolmar Division, including the Company's subsidiary Kolmar Laboratories,
Inc. Further, Employee shall serve as a member of the Board of Directors of
the Company, and its subsidiaries Aerosol Services Company, Inc., Piedmont
Laboratories, Inc. and Kolmar Laboratories, Inc. and, if requested by the
Board of Directors, of other subsidiaries. The Employee shall, during
Employee's Employment, subject to the policies of the Board of Directors of
the Company, manage and direct the business of the Company, being directly
responsible to manage and direct the Kolmar Division and to supervise the
persons managing the Aerosol Division, performing those acts and doing
those things customarily done by the Chief Executive Officer for companies
comparable to the Company. The Company shall indemnify the Employee for
such service to the maximum extent permitted by applicable law.
SECTION 2.02. Devotion of Time to the Company's Business. The Employee
agrees during Employee's Employment, to devote his best efforts to his
employment, and perform such duties consistent with his capacity as Chief
Executive Officer of the Company as shall be determined by the Board of
Directors of the Company. The Employee further agrees to (i) devote
substantially all his business time to fulfill the duties of his office to
the business and affairs of the Company, (ii) devote his time and resources
to the recruitment, training and development of a team of focused
professionals capable of managing and directing the business of the
Company, and (iii) faithfully observe his duties to preserve as
confidential all trade and other secrets of the Company. The Employee shall
not, during Employee's Employment, unless otherwise agreed to in advance
and in writing by the Company, seek or accept other employment, become
self-employed in any other capacity, or engage in any activities which are
detrimental to the business of the Company. Notwithstanding the foregoing,
the Employee may engage in personal investment activities which do not
interfere with the Employee's duties under this Agreement.
3. COMPENSATION
<PAGE>
SECTION 3.01. Base Salary. As compensation for his services hereunder,
during the Employment Term, the Employee shall receive an annual base
salary of Two Hundred Fifty Thousand Dollars ($250,000). Such base salary
shall be payable in cash at the times and in the installments consistent
with the Company's payroll practices. Company shall review such salary on
at least an annual basis with a view to consider increases considering,
among other factors, Company performance and cost-of-living increases.
SECTION 3.02. Bonus Plans.
(a) The Employee shall be a full participant in any performance bonus
plan made available to senior executives of the Company. It is intended for
such plans to include a stock ownership/purchase plan and an annual cash
bonus plan. Attached as Exhibit A is an outline of the proposed plan
submitted to the Company's board. Company intends to adopt a plan on or
prior to June 30, 1998.
(b) Upon effectiveness of this Agreement, as described in
Article VII, Employee shall receive options (the "Options") to purchase
eighty-five thousand (85,000) shares of Company's common stock at the price
of $10 per share. The Options shall be exercisable on the earlier of (A)
the third anniversary of the Effective Date described below and (B) the
date, if any, prior to such third anniversary on which (i) the Company's
common stock becomes publicly traded on a national securities exchange or
the Nasdaq stock market, (ii) the Company completes an initial public
offering of its common stock with proceeds in excess of $15,000,000, (iii)
the Company, or its assets or business, is sold substantially as an
entirety. The Options are further subject to the terms and conditions set
forth in the Stock Option Agreement by and between Employee and the Company
dated of even date (the "Option Agreement").
(c) For each of the first five years after the Effective Date,
Employee shall participate, along with other executives, in a stock option
program providing for the annual award, to all such participants in the
aggregate, of options to purchase up to 50,000 shares of Company stock.
(d) Company shall assume, if legally permissible, Employee's
current pension benefits plan and, if that is not legally possible, shall
provide for Employee a pension program providing the same economic
benefits.
(e) Company shall continue in effect the terms of its current
certificate of incorporation and bylaws which provide for indemnification
of officers and directors to the maximum extent provided by law. Company
currently carries directors' and officers' liability insurance with a
deductible of $100,000 and a maximum coverage of $5 million but reserves
the right to change such coverage if Company's directors so determine.
SECTION 3.03. Continuation of Salary. If the Employee dies or becomes
disabled during the Employment Term so that he is unable to perform his
duties hereunder, if Company terminates this Agreement for any reason
except as specified in Section 4.01, or if Employee resigns for "good
reason" as described in Section 4.02, the Company agrees to continue to pay
the Employee or his estate his base salary monthly, but not beyond the end
of the Employment Term, and to continue to provide the benefits described
in Section 3.04.
SECTION 3.04. Benefits. During the Employment Term, the Employee shall
be entitled to insurance benefits substantially similar to those now
provided under the Kolmar Laboratories, Inc. employee health benefit plan
as now in effect, and may continue such benefits after any termination of
this Agreement by paying the applicable premium to the extent allowed by
applicable law. However, the Company may cease providing such benefits if
any law or regulation prohibits making benefits available except on an
equal basis for all employees and if the benefits now provided Employee are
not so available.
4. TERMINATION
SECTION 4.01. Termination by the Company. Any of the following acts or
omissions shall constitute grounds for the Company to terminate this
Agreement:
(a) Employee's failure to perform the duties of his office or
to conduct and manage the Business of the Company in a manner reasonably
consistent with the criteria established by the Board of Directors;
(b) Conduct on the part of the Employee which constitutes the
breach of any statutory or common law duty of loyalty to the Company which
has a material adverse effect on Company;
(c) Any illegal act by the Employee (as evidenced by a
conviction) which materially and adversely affects the business of the
Company; or
(d) Intentional wrongful engagement in any competitive
activity prohibited by Section 5.01 or 5.02 hereof or employment in another
business in a manner not permitted by Section 2.02.
It shall be presumed that the Employee's participation in a business
enterprise other than the Company (except for service on boards of
<PAGE>
directors approved by the Company) constitutes cause for termination under
clause (d) of this section. Termination by the Company shall be
accomplished by written notice to the Employee and, if pursuant to
paragraph (a) above, shall be preceded by a written notice providing a
reasonable opportunity for the Employee to correct his conduct, if the
conduct in question can be corrected.
SECTION 4.02. Resignation for Good Reason. Employee may resign for
"good reason" and thereby terminate Employee's Employment (but not his
other obligations hereunder) as a result of the following:
(a) Without the Employee's prior written consent, a reduction
in his current salary;
(b) The taking of any action by the Company that would
substantially diminish the aggregate value of the benefits provided to the
Employee under the Employee's medical, health, accident, disability, life
insurance, thrift and retirement plans in which he was participating on the
date of this Agreement, other than any such reduction which is (i) required
by law, (ii) implemented in connection with a general concessionary
arrangement affecting all employees or affecting the group of employees
(senior management) of which the Employee is a member or (iii) generally
applicable to all beneficiaries of such plans;
(c) An involuntary relocation of the Employee's place of
employment to a place other than the general Toronto, Ontario or New York,
New York areas;
(d) Resignation as a result of unlawful discrimination or
other unlawful acts committed against employee, as evidenced by a
settlement, arbitration award or final court order; or
(e) A reduction in duties and responsibilities which results
in the Employee no longer having the customary duties of a chief executive
officer.
Provided Company continues to make the payments provided for in Section
3.03, none of the actions specified in clauses (a) through (e) above shall
constitute a breach of this Agreement.
SECTION 4.03. Damages for Breach of Contract. In the event of a breach
of this Agreement by either the Company or the Employee resulting in
damages to the other party, that party may recover from the party breaching
this Agreement any and all damages that may be sustained, excluding
incidental, consequential and punitive damages.
SECTION 4.04. Arbitration. With the exception of suits for specific
enforcement of the provisions of Sections 5.01 and 5.02, any controversy,
dispute or claim arising out of, relating to, or concerning this Agreement,
the breach of this Agreement, the employment of the Employee, or the
termination of the Employee's employment will be resolved pursuant to this
Section 4.04. This includes all claims, whether arising in tort or
contract, and whether arising under statute or common law. Any such
controversy, dispute or claim will be submitted to the American Arbitration
Association ("AAA") in New York, New York for final and binding arbitration
in accordance with its Employment Dispute Rules then existing; provided
that, if the rules of the AAA differ from those in this section, the
provisions of this section will control. Any demand for resolution of such
a matter must be sent to the AAA and served on the other party within the
period covered by the applicable statute of limitations. No arbitrator will
have any authority to extend, modify, or suspend any of the terms of this
Agreement. The arbitrator must make his award in writing and must accompany
it with an opinion discussing the evidence and setting forth the reasons
for the award. The decision of the arbitrator within the scope of the
submission will be final and binding on both parties, and any right to
judicial action on any matter subject to resolution by arbitration
hereunder hereby is waived unless otherwise required by applicable law,
except suit to enforce an award by the arbitrator or in the event
resolution by an arbitrator is not available for any reason. This Section
4.04 will be specifically enforceable. Judgment upon any award rendered by
the AAA and/or any other arbitrator may be entered in any court having
jurisdiction.
SECTION 4.05. Attorneys' Fees and Costs. If any action in law or in
equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party or parties shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled, to the extent awarded or allocated by the
court or arbitrator.
5. RESTRICTIVE COVENANTS
The following restrictive covenants shall apply to this Agreement:
SECTION 5.01. Confidentiality. Employee acknowledges and agrees that
the Company's formulas, sources of supply, cost and financial data,
customer arrangements, marketing plans and other non-public data have a
unique nature and value, derived in part from their status as non-public
and proprietary information. Employee agrees, during the Employment Term
and thereafter, to preserve and protect the confidential nature of said
information, and not to disclose to any third parties, or use for anyone's
<PAGE>
benefit except the benefit of the Company, any non-public information about
the Company or its business.
SECTION 5.02. No Adverse Acts. During the Employment Term and
continuing for two (2) years after the date of the expiration of Employee's
Employment, the Employee will not directly or indirectly, solicit, take
away, or attempt to solicit or take away any customer or employee of the
Company either on the Employee's behalf or on behalf of any other person or
entity which competes with Company. If the Company terminates this
Agreement on a basis not specified in Section 4.01, or on a basis described
in Section 4.01(a), Employee shall not be required to honor this Section
5.02 unless Company continues to pay Employee's salary and benefits for the
balance of the Term even if such payments would not otherwise be required.
6. MISCELLANEOUS
SECTION 6.01. Notices. Any notices to be given hereunder by either
party to the other shall be in writing and may be effected by personal
delivery, by courier, or by mail (registered or certified), postage prepaid
with return receipt requested, or by facsimile confirmed by mail. Mailed
notices shall be addressed to the parties at the addresses appearing in the
introductory paragraph. Mailed notices shall be deemed communicated as of
four (4) calendar days after mailing. Notices delivered personally or by
courier shall be deemed delivered when actually received.
Section 6.02. Entire Agreement. This Agreement supersedes any and all
other agreements (other than the Option Agreement), either oral or in
writing, between the parties hereto with respect to the employment of the
Employee by the Company and contains all of the covenants and agreements
between the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or otherwise,
have been made by any party, which are not embodied herein, and that no
other prior agreement, statement or promise not contained in this Agreement
shall be valid and binding. Any modification of this Agreement, statement
or promise not contained in this Agreement shall not be valid or binding.
Any modification of this Agreement will be effective only if it is in
writing signed by the party to be charged.
Section 6.03. Partial Invalidity. If any provision in this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
Section 6.04. Law Governing Agreement. This Agreement shall be
governed by and construed in accordance with the law of the State of New
York.
Section 6.05. Currency. All amounts described in this Agreement are in
United States Dollars.
Section 6.06. Successors and Assigns. The rights and obligations of
the Company and the Employee under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the
Company.
Section 6.07 Work Permit. The Company shall, at its expense, assist
Employee to file all forms and take all other actions needed to apply for a
permit or visa permitting him to work in the United States.
Section 6.08. No Conflict. The Company hereby represents and warrants
to Employee that this Agreement and the Company's obligations hereunder do
not violate or conflict with the terms, conditions or covenants of the
Company's (and certain of its subsidiaries') financing agreements entered
into on or about the Effective Date.
Section 6.09. Waiver. Either party's failure to enforce any provision
or provisions of this Agreement shall not in any way be construed as a
waiver of any such provision or provisions, nor prevent that party
thereafter from enforcing each and every other provision of this Agreement.
The rights granted both parties herein are cumulative and shall not
constitute a waiver of either party's right to assert all other legal
remedies available to it under the circumstances.
7. EFFECTIVE DATE
Section 7.01. This Agreement shall become effective upon the closing
contemplated by the Share and Asset Purchase Agreement among CCL
Industries, Inc., CCL Industries Corporation and Outsourcing Services
Group, Inc. dated October 28, 1997. Provided such closing occurs, the
"Effective Date" for purposes of this Agreement shall be December 31, 1997.
[SIGNATURES ON FOLLOWING PAGE]
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
<PAGE>
on the day and year first above written.
AEROSOL SERVICES COMPANY, INC. "Company"
By: /s/ Joseph Sortais OUTSOURCING SERVICES GROUP, INC.
---------------------------
Name: Joseph Sortais
-------------------------
Title: Chief Financial Officer
-------------------------
PIEDMONT LABORATORIES, INC. By: /s/ Joseph Sortais
------------------------------
By: /s/ Joseph Sortais Name: Joseph Sortais
---------------------------- ----------------------------
Name: Joseph Sortais Title: Chief Financial Officer
-------------------------- ---------------------------
Title: Chief Financial Officer "Employee"
-------------------------
/s/ Christopher Denney
--------------------------------
KOLMAR LABORATORIES, INC. CHRISTOPHER DENNEY
By: /s/ Joseph Sortais
----------------------------
Name: Joseph Sortais
--------------------------
Title: Chief Financial Officer
-------------------------
<PAGE>
SHARE AND ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made the 28th day of October, 1997.
BETWEEN:
CCL INDUSTRIES INC.,
a corporation incorporated under the laws of Canada
(herein called "CCL")
- and -
CCL INDUSTRIES CORPORATION,
a corporation incorporated under the laws of the State of
Delaware
(hereinafter called "CCL Delaware")
- and -
OUTSOURCING SERVICES GROUP, INC.
a corporation incorporated under the laws of Delaware
(hereinafter called the "Purchaser")
WHEREAS CCL Delaware, a wholly-owned indirect subsidiary of CCL, owns all
of the issued and outstanding shares of Kolmar Laboratories, Inc., a
corporation incorporated under the laws of the State of Delaware
("Kolmar");
AND WHEREAS Kolmar and its wholly-owned subsidiaries, Kolmar de Mexico,
S.A. de C.V., Kolmar (Aust.) Pty. Limited and Designed Cosmetics, Inc.
carry on the business of manufacturing and packaging of cosmetics,
toiletries and skin care products in the United States, Mexico and
Australia;
AND WHEREAS CCL, through its operating division, Kolmar Canada (the
"Division") carries on the business of manufacturing and packaging of
cosmetics, toiletries and skin care products at the Division's facilities
located in Barrie, Ontario;
AND WHEREAS the Purchaser desires to purchase from CCL Delaware and CCL
Delaware desires to sell to the Purchaser all of the issued and outstanding
shares of Kolmar;
AND WHEREAS the Purchaser desires to purchase from CCL and CCL desires to
sell to the Purchaser substantially all of the assets of the Division and
in connection therewith, the Purchaser will assume certain liabilities of
the Division;
THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants,
agreements, warranties and payments herein set out, the parties hereto
respectively covenant and agree as follows:
ARTICLE I - INTERPRETATION
1.1 Where used herein the following terms shall have the following
meanings:
(a) "Accounts Receivable" has the meaning set out in subsection 4.1(b);
(b) "Adjustment Amount" has the meaning set out in subsection 5.2(e) and
"Adjustment Request" has the meaning set out in subsection 5.2(c);
(c) "Assignable Permits" has the meaning set out in subsection 4.1(g);
(d) "Assumed Liabilities" has the meaning set out in Section 4.3;
(e) "Barrie Facility" means the real property located at Barrie, Ontario
as described in Schedule 6.8 - Real Property, and the buildings,
structures and fixtures thereon or thereto and the equipment used in
the Business located on such property;
(f) "Business" means collectively, the business of manufacturing and
packaging of cosmetics, toiletries and skin care products carried on
by the Division, Kolmar and the Subsidiaries;
(g) "CCL's Accountants" means KPMG, Chartered Accountants;
(h) "Closing" means the consummation of the transaction of purchase and
sale as contemplated herein in accordance with Article XII;
(i) "Closing Statement of Net Assets" means the audited statement of net
assets of the Business as of the Closing Date, prepared on a basis
consistent with the preparation of the Reference Pro Forma Statement
of Net Assets;
<PAGE>
(j) "Closing Date" means December 31, 1997 or such other date as the
parties hereto may mutually agree;
(k) "Code" means the United States Internal Revenue Code of 1986, as
amended;
(l) "Customer Owned Inventory" means all raw materials, work-in-progress,
finished goods and other materials used in the business of the
Division and owned by customers of or suppliers to the Division;
(m) "Division" means Kolmar Canada, a division of CCL;
(n) "Division Contracts" means the Division's agreements, contracts,
leases or commitments relating to the Business, as of the Closing Date
described in subsection 4.1(f) hereof;
(o) "Environmental Laws" means all applicable laws in effect on the
Closing Date which regulate or relate to (i) the protection or clean-
up of the environment; (ii) the use, treatment, storage,
transportation, generation, manufacture, processing, distribution,
handing or disposal of, or emission, discharge or other release of
Hazardous Substances or otherwise dangerous substances, wastes,
pollution or materials (whether gas, liquid or solid); or (iii) the
preservation or protection of waterways, groundwater, drinking water,
air, wildlife, plants or other natural resources;
(p) "ERISA" means the Employee Retirement Income Securities Act of 1974,
as amended;
(q) "ERISA Affiliate" of any person means only other person that together
with such person as of the relevant hearing date under ERISA, was or
is required to be treated as a single employer under Section 414 of
the Code;
(r) "Excluded Assets" has the meaning set out in Section 4.2;
(s) "Excluded Liabilities" has the meaning set out in Section 4.4;
(t) "Financial Statements" means the audited historical financial
statements of the Business, for the years ended December 31, 1995 and
1996, and the nine months ended September 30, 1997 copies of which are
attached hereto as Schedule 1.1(t) - Financial Statements;
(u) "GAAP" means generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled "The Meaning of
Present Fairly in Conformance with Generally Accepted Accounting
Principles in the Independent Auditors Reports" issued by the Auditing
Standards Board of American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the
date of determination;
(v) "Governmental Entity" means any government, governmental agency,
bureau, board, commission, department or regulatory agency;
(w) "Hazardous Substances" shall mean any substance, material or waste
that is subject to regulation, control or remediation under any
Environmental Laws;
(x) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended;
(y) "Independent Accountants" has the meaning set out in subsection
5.2(c);
(z) "Intellectual Property" has the meaning set out in Section 6.15;
(aa) "Inventories" means all finished goods, work-in-progress and raw
materials used in the Business;
(bb) "Liens" means all mortgages, claims, charges, liens, security
interests, adverse claims and other restrictions of any kind and
nature whatsoever;
(cc) "Net Asset Value" means the amount by which the assets exceed the
liabilities of the Business as determined from the Reference Balance
Sheet or the Closing Balance Sheet, as the case may be;
(dd) "Offsite Locations" has the meaning set out in subsection 9.1(c);
(ee) "Purchaser's Accountants" means Deloitte & Touche, LLP;
(ff) "Purchaser Party" shall have the meaning given in Section 9.1;
(gg) "Permitted Liens" means those liens set forth on Schedule 1.1 (gg) -
Permitted Liens;
(hh) "Purchased Assets" has the meaning set out in Section 4. l;
(ii) "Purchased Shares" means all of the issued and outstanding shares of
Kolmar;
<PAGE>
(jj) "Real Property" has the meaning set out in Section 6.8;
(kk) "Reference Pro Forma Statement of Net Assets" means the estimated pro
forma statement of net assets of the Business as of December 31, 1997
attached hereto as Schedule 1.1 (kk) - Reference Pro Forma Statement
of Net Assets;
(ll) "Subsidiaries" means, collectively, Kolmar de Mexico, S.A. de C.V.
("Kolmar Mexico"), Kolmar (Aust.) Pty. Limited ("Kolmar Australia")
and Designed Cosmetics, Inc.;
(mm) "Taxes" means all taxes, including, without limitation, payroll and
other taxes or charges related to employment, customs duties, rates,
levies, assessments, reassessments and other charges together with all
penalties, interest and fines with respect thereto, payable to any
federal, provincial, state, municipal, local or other government or
government agency or authority, domestic or foreign; and
(nn) "Time of Closing" means 10:00 a.m. on the Closing Date.
1.2 For purposes of this Agreement "business day" means a day other than
Saturday, Sunday or a statutory holiday in the Province of Ontario, the
State of New York or the State of California.
1.3 "Agreement, "this Agreement", "hereto", "hereof", "herein",
"hereunder" and similar expressions refer to this Agreement including its
Schedules and not to any particular Article, Section, paragraph, clause or
other portion of this Agreement and include every amendment or instrument
supplementary hereto or in implementation hereof.
1.4 All dollar amounts referred to herein are in lawful currency of the
United States of America.
1.5 Except where the context otherwise indicates, words importing the
singular number only shall include the plural, and vice versa, and words
importing the masculine gender shall include the feminine gender and
"persons" shall include individuals, partnerships, joint ventures,
associations, corporations, unincorporated organizations and all other
forms of legal or business organizations, governments, regulatory or
governmental agencies, commissions, departments or instrumentalities.
1.6 The headings of all Articles hereof are inserted for convenience of
reference only and shall not affect the construction or interpretation
hereof.
ARTICLE II - SCHEDULES AND EXHIBITS
The following are the Schedules and Exhibits to this Agreement:
Schedule 1.1(t) - Financial Statements
Schedule 1.1 (gg) - Permitted Liens
Schedule 1. 1 (kk) - Reference Pro Forma Statement of Net Assets
Schedule 4. 1 (f) - Division Contracts
Schedule 4.1(g) - Permits
Schedule 4.1(i) - Pension Plan
Exhibit 5.2 - Excluded Indebtedness
Schedule 5.3 - Allocation of Purchase Price
Schedule 6.7 - Consents
Schedule 6.8 - Real Property
Schedule 6.9 - Financial Statement Exceptions
Schedule 6.10 - Material Changes
Schedule 6.11 - Contracts
Schedule 6.12 - Litigation
Schedule 6.13 - Employment Agreements
Schedule 6.14 - Compliance with Laws
Schedule 6. 15 - Intellectual Property
Schedule 6.16 - Taxes
Schedule 6. 17 - Benefit Plans
Schedule 8.4 - Environmental Insurance
Schedule 9. 1 - Environmental Matters
Exhibit 12.2 - Opinion of Counsel to CCL
Exhibit 12.3 - Opinion of Counsel to the Purchaser
Schedule 13.11 - Hands-Off
ARTICLE III - PURCHASE OF PURCHASED SHARES
3.1 Subject to the terms and conditions hereof, CCL covenants and
agrees to cause CCL Delaware and CCL Delaware covenants and agrees to sell,
assign and transfer to the Purchaser and the Purchaser covenants and agrees
to purchase from CCL Delaware at Closing, all but not less than all of the
Purchased Shares.
ARTICLE IV -
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
4.1 Subject to the terms and conditions hereof, CCL covenants and
agrees to sell, assign and transfer to the Purchaser and the Purchaser
covenants and agrees to purchase from CCL, effective as of the close of
business on the Closing Date, the following property and assets of the
<PAGE>
Division wheresoever located as a going concern (collectively, the
"Purchased Assets") with good and marketable title therein and thereto,
free and clear of all Liens except for Permitted Liens:
(a) the Barrie Facility;
(b) all accounts receivable, trade accounts, notes receivable, book
debts, credits, rebates and allowances and other debts due or
accruing due to CCL with respect to the Division and the full
benefit of all security for such accounts, notes and debts
("Accounts Receivable");
(c) all Inventories of the Division, other than Customer Owned
Inventory;
(d) all machinery, equipment, vehicles, fixtures, storage tanks, jigs,
dies, molds, material handling equipment, spare parts, data
processing equipment, computer software, office equipment,
furniture and furnishings located at the Division or for use at the
Division but under repair or maintenance at third party premises
(collectively the "Division Equipment");
(e) the prepaid expenses and deposits of the Division;
(f) the full benefit of:
(i) the contracts, agreements and commitments described in Schedule
4.l (f) - Division Contracts;
(ii) all executory agreements entered into by CCL with respect to the
Division in the ordinary course of business of the Division on
normal commercial terms for the provision of services or goods to
the Division;
(iii) all executory agreements entered into by CCL with respect to
the Division in the ordinary course of the business of the
Division on normal commercial terms for the sale of
Inventories or the provision of services by the Division; and
(iv) all employment and collective bargaining agreements;
(g) the licenses, permits, approvals, consents, registrations,
certificates and other authorizations described in Schedule 4.1(g)
- Permits and noted thereon as being assignable or transferable to
the Purchaser whether with or without the consent of any person
(the "Assignable Permits");
(h) all trade marks and trade names, patents, copyrights, know-how,
trade secrets, technology and industrial or intellectual property
rights related thereto described in Schedule 6.15 - Intellectual
Property as owned by or licensed to the Division;
(i) the pension plan described in Schedule 4.1(i) - Pension Plan;
(j) all books, records, files and documents of the Division, including,
without limitation, (i) all operations or other manuals pertaining
to the Division and its business, product and component
specifications, (ii) lists of customers of or suppliers of or goods
and services to the Division, (iii) sales catalogues, advertising
material, manufacturing data, production records, quality control
and product recall records, inventory and supply records and
equipment manufacturer records, employee manuals and personnel
records (and the copyright pertaining thereto), (iv) all other
records pertaining to the Division and its business, (together
with, in the case of any such information that is stored
electronically, the media on which same is stored), (v) all
restrictive or negative covenant agreements, non-competition
agreements or non-solicitation agreements which CCL has with past
or present employees of the Division and (vi) all letters (or
extracts therefrom pertaining to the Division) from attorneys,
accountants and consultants; and
(k) the goodwill of the Division and its business, including the right
to the use of the name "Kolmar" in Canada.
4.2 Except as set out in Section 4.1 and except for the Purchased
Shares, the Purchaser is not purchasing or acquiring any property or assets
of CCL or the Division or any entity affiliated with CCL (collectively the
"Excluded Assets").
4.3 The Purchaser covenants and agrees to assume and thereafter
discharge, fulfill and perform in accordance with their terms, from and
after the Closing Date, all of the liabilities and obligations of the
Division (except Excluded Liabilities) including without limitation the
following liabilities and obligations of CCL with respect to the Division
(the "Assumed Liabilities"):
(a) all liabilities of the Division related to the Business included
in, reserved against or accrued in the Closing Balance Sheet;
(b) all liabilities or obligations of CCL under the Division Contracts
and the Assignable Permits;
<PAGE>
(c) all employment obligations as provided for in Section 10.7; and
(d) all product warranty obligations as provided in Section 10.8.
4.4 Except as set out in Section 4.3, the Purchaser is not assuming any
other liabilities or obligations of CCL (collectively the "Excluded
Liabilities").
ARTICLE V - PAYMENT AND ALLOCATION OF THE PURCHASE PRICE
5.1 In consideration for the purchase of the Purchased Shares and the
Purchased Assets, at the Time of Closing the Purchaser shall assume the
Assumed Liabilities and shall pay $80,000,000 (the "Purchase Price") by
certified cheque or wire transfer of immediately available finds payable to
or to the order of CCL or as CCL may otherwise in writing direct the
Purchaser.
5.2(a) CCL shall prepare or cause to be prepared as soon as possible
after the Closing Date, the Closing Statement of Net Assets
and the Purchaser covenants and agrees to provide to CCL all
reasonable access to the premises and records of the Business
and all necessary assistance to permit CCL to complete the
Closing Statement of Net Assets on a timely basis. The Closing
Statement of Net Assets shall be prepared from the books and
records of the Business in accordance with GAAP applied on a
basis consistent with the preparation of the Reference Pro
Forma Statement of Net Assets. In particular, the Closing
Statement of Net Assets will use the same rate of exchange for
conversion into U.S. dollars as was used in the preparation of
the Reference Pro Forma Statement of Net Assets. In addition,
the Closing Statement of Net Assets shall be prepared on the
basis that all cash of the Business as at the Closing Date
belongs to CCL and the indebtedness described in Schedule 5.2
- Excluded Indebtedness as at December 31, 1997 has been
eliminated by CCL in a manner acceptable to the Purchaser
acting reasonably.
(b) CCL shall cause CCL's Accountants to audit the Closing Statement
of Net Assets and review the estimated Adjustment Amount of the
Business and shall, within 45 days after the Closing Date deliver
the Closing Statement of Net Assets to the Purchaser, along with a
report concerning the computation of the Adjustment Amount. CCL and
Kolmar shall cooperate fully and completely in responding to
questions and requests for information submitted by CCL's
Accountants in connection with their audit of the Closing Statement
of Net Assets and, with reasonable prior notice, provide them with
full access to all books and records of the Business to the extent
related to their audit of the Closing Statement of Net Assets or
the computation of the Adjustment Amount. CCL shall cause CCL's
Accountants, (i) to provide Purchaser's Accountants with full
access to all work papers of CCL's Accountants prepared in
connection with their audit of the Closing Statement of Net Assets
and the report concerning the computation of the Adjustment Amount
and (ii) to fully cooperate with all reasonable requests by
Purchaser's Accountants for the purpose of expediting and simplying
the review of the Closing Statement of Net Assets and the review of
the computation of the Adjustment amount to be performed by
Purchaser's Accountants pursuant to Section 5.2(c).
(c) Purchaser's Accountants shall have the longer of 30 days following
the delivery of the Closing Statement of Net Assets or 45 days
following the Closing in which to review the Closing Statement of
Net Assets and the computation of the Adjustment Amount at
Purchaser's expense, and if, in Purchaser's Accountants' reasonable
judgment, the Closing Statement of Net Assets does not fairly
present the Net Asset Value of the Business as at the Closing Date
as adjusted as described in subsection 5.2(e) or the computation of
the Adjustment amount is not correct, then Purchaser's Accountants
and Purchaser shall, within such 30-day period or 45-day period, as
the case may be, deliver to CCL and CCL's Accountants a proposed
adjustment to the Closing Statement of Net Assets and the
Adjustment Amount in writing (the "Adjustment Request") setting
forth (x) the amount of the proposed adjustment, (y) the item or
items to which such proposed adjustment relates, and (z) the facts
and circumstances supporting the reasonableness and propriety of
such adjustment; provided, however, that no proposed adjustments
shall be delivered to CCL or CCL's Accountants under this
subsection 5.2(c) unless, and then only to the extent that, the
aggregate of all adjustments proposed under this subsection 5.2(c)
exceeds $250,000 on a net basis. CCL shall cause CCL's Accountants
and the Purchaser shall cause Purchaser's Accountants to use their
best efforts for 15 days after the delivery of the Closing
Statement of Net Assets Adjustment Request to agree upon any
proposed adjustments to the Closing Statement of Net Assets or the
Adjustment Amount. Upon the expiration of such 15-day period, CCL
or Purchaser may submit in writing for resolution to Price
Waterhouse, Certified Public Accountants (the "Independent
Accountants") any dispute with respect to the Closing Statement of
Net Assets or the computation of the Adjustment Amount which has
not been resolved. As promptly as practicable, but in no event
later than 30 days after such submission, CCL shall cause CCL's
<PAGE>
Accountants and the Purchaser shall cause Purchaser's Accountants
to deliver to the Independent Accountants written submissions in
support of their respective positions with respect to such dispute,
and CCL and the Purchaser shall cause the Independent Accountants
to resolve such dispute based solely on such written submissions
without any independent investigation of the books and records of
the Business. The costs of the Independent Accountants with
respect to the Closing Statement of Net Assets or the computation
of the Adjustment Amount shall be divided equally between CCL and
the Purchaser. The decision of the Independent Accountants with
respect to the Closing Statement of Net Assets or the computation
of the Adjustment Amount shall be final and binding on each of the
parties hereto.
(d) In connection with the preparation of the Closing Statement of Net
Assets, a physical inventory shall be taken at such time as CCL
and the Purchaser mutually agree pursuant to which all
Inventories will be counted as to quantity by personnel of CCL
and the Purchaser, using procedures normally used by Kolmar to
take inventory. The Inventory count will be rolled forward to
the Closing Date. For purposes of determining the value of the
Inventories (including the roll-forward), Kolmar's cost
accounting systems and methodology shall be utilized. Any
disputes as to physical count, usability or saleability of any
item of the Inventories will, if possible, be resolved which
such physical inventory is being taken. Any unresolved disputes
regarding the foregoing not resolved by the date on which CCL
is required to provide the Closing Statement of Net Assets to
the Purchaser pursuant to subsection 5.2(b) will be settled in
the same manner as provided for in subsection 5.2(c).
(e) The Adjustment Amount shall equal the Net Asset Value as of the
Closing Date as shown on the Closing Statement of Net Assets
less the Net Asset Value as reflected on the Reference Pro
Forma Statement of Net Assets. Subject to subsection 5.2(c), if
the Net Asset Value as of the Closing Date exceeds the Net
Asset Value as reflected on the Reference Pro Forma Statement
of Net Assets, the Purchase Price shall be increased by such
excess amount and if the Net Asset Value as of the Closing Date
is less than the Net Asset Value as reflected on the Reference
Pro Forma Statement of Net Assets, the Purchase Price will be
reduced by the amount of such deficiency. Subject to subsection
5.2(c), the Adjustment Amount shall be paid by the Purchaser to
CCL if the Purchase Price is to be increased, or by CCL to the
Purchaser if the Purchase Price is to be reduced, two business
days following the day on which the Closing Pro Forma Statement
of Net Assets is finalized pursuant to the provisions of this
Section 5.2.
5.3 The Purchase Price shall be allocated between the Purchased Shares
and the Purchased Assets and among the Purchased Assets as set out in
Schedule 5.3 - Allocation of Purchase Price, but such allocation will be
subject to adjustment following determination of the Adjustment Amount.
5.4 The Purchaser shall be liable for and shall pay all federal and
provincial sales taxes (including any land transfer taxes) properly payable
in respect of the transfer of the Purchased Assets by CCL to the Purchaser.
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF CCL
CCL represents and warrants to the Purchaser as follows and acknowledges
that the Purchaser is relying upon such representations and warranties in
connection with the completion of the transactions herein contemplated:
6.1 Each of CCL, CCL Delaware, Kolmar and the Subsidiaries is a
corporation duly incorporated and subsisting under the laws of its
jurisdiction of incorporation, has all necessary corporate power and
authority to own and lease its property and to carry on its business as now
being conducted by it and is duly qualified, licensed or registered to
carry on its business as now being conducted in all jurisdictions in which
the nature of the business conducted by it or the property owned or leased
by it makes such qualification, licensing or registration necessary.
6.2 Each of CCL and CCL Delaware has all necessary corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly authorized, executed and
delivered by each of CCL and CCL Delaware and constitutes the legal, valid
and binding obligation of each of CCL and CCL Delaware, enforceable against
CCL and CCL Delaware, in accordance with its terms.
6.3 CCL is the beneficial owner of the Purchased Assets, free and clear
of all Liens, except Permitted Liens. CCL Delaware is the registered and
beneficial owner of the Purchased Shares free and clear of all Liens.
Kolmar and the Subsidiaries are the beneficial owners of all of their
respective assets, free and clear of all Liens except Permitted Liens, and
such assets, plus the Purchased Assets, constitute all the assets needed to
carry on the Business as currently conducted. Except for the Purchaser
under this Agreement, no person has any written or oral agreement or option
or any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase or acquisition:
(i) from CCL, of any of the Purchased Assets, other than in the ordinary
course of the business of the Division; (ii) from CCL Delaware, of any of
<PAGE>
the Purchased Shares; (iii) from Kolmar any shares of a Subsidiary or (iv)
from Kolmar or any of the Subsidiaries, for the purchase, subscription,
allotment or issuance of any shares (whether issued or unissued) or
securities convertible into shares of Kolmar or any of the Subsidiaries or
(except for sales of inventory in the ordinary course of business) any
material assets of Kolmar or any of the Subsidiaries.
6.4 Kolmar is the registered and beneficial owner of all of the shares
of the Subsidiaries, free and clear of all Liens.
6.5(a) The authorized capital of Kolmar consists of 1,000 common shares,
of which 2 common shares are, and will be at the Time of Closing,
issued and outstanding as fully paid and non-assessable and
registered in the name of CCL Delaware, free and clear of all
Liens;
(b) The authorized capital of Kolmar Mexico consists of 151,615 common
shares, of which 151,615 common shares are, and will be at the Time
of Closing, issued and outstanding as fully paid and non-assessable
and registered in the name of Kolmar (or in respect of one share,
its nominee), free and clear of all Liens;
(c) The authorized capital of Kolmar Australia consists of 49,900
preferred shares and 1,000 ordinary shares, of which 24,000
preferred shares and 1,000 ordinary shares are, and will be at the
Time of Closing, issued and outstanding as fully paid and non-
assessable and registered in the name of Kolmar, free and clear of
all Liens; and
(d) The authorized capital of Designed Cosmetics, Inc. consists of
1,000 common shares, of which 200 common shares are and will be at
the Time of Closing, issued and outstanding as fully paid and non-
assessable and registered in the name of Kolmar, free and clear of
all Liens.
6.6 Neither the execution and delivery of this Agreement nor the
consummation of the transactions herein contemplated will result in:
(a) a breach or violation of any provision of the charter documents,
by-laws or resolutions of the board of directors (or any committee
thereof) or shareholders of CCL or CCL Delaware;
(b) a breach of, or a default under, any term or provision of any
material contract to which CCL, CCL Delaware, Kolmar or the
Subsidiaries is a party or by which any of them are bound which
would give a third party the right to terminate or materially
modify such agreement or claim damages in an amount material in
relation to such contract;
(c) a violation by CCL or CCL Delaware of any statute, regulation,
rule, order, judgment, injunction, decree or award of any court or
governmental body having jurisdiction, which violation would have a
material adverse effect on the Business or on CCL and CCL
Delaware's ability to consummate the transactions contemplated
hereby, subject to preparing the requisite filing and obtaining the
requisite consents under the HSR Act;
(d) an imposition of any material Liens or other restriction on the
Business or on any of the Purchased Assets, the Purchased Shares,
on the assets of Kolmar or on the assets of the Subsidiaries; or
(e) a requirement for the consent, authorization or approval of any
person in addition to those described in Schedule 6.7 - Consents.
6.7 No consent, approval or authorization of, or declaration, filing or
registration with any person is required to be made or obtained by CCL or
CCL Delaware except for the filings, notifications and applications set out
in Schedule 6.7 - Consents or that relates solely to the identity of the
Purchaser. There is no requirement under any material contract relating to
the Business, the Purchased Shares or the Purchased Assets to which CCL,
CCL Delaware, Kolmar or any of the Subsidiaries is a party or by which it
is bound to give any notice to or to obtain the consent or approval of any
party to such agreement relating to the consummation of the transactions
herein contemplated, except for those notifications, consents and approvals
set out in Schedule 6.7.
6.8 Schedule 6.8 - Real Property provides an accurate and complete
description of (i) all real property owned by or leased to Kolmar and the
Subsidiaries; and (ii) the real property included in the Purchased Assets:
(collectively the real properties referred to in (i) and (ii) herein are
referred to as the "Real Property"). The Real Property includes all real
estate used to conduct the Business as presently conducted. Each of Kolmar
and the Subsidiaries and CCL in respect of the Division's Barrie Facility,
has good and marketable title to the Real Property specified as owned by it
in Schedule 6.8 - Real Property, free and clear of Liens except as set out
in Schedule 6.8 - Real Property and except for Permitted Liens. To the
knowledge of CCL, none of the Real Property is subject to any expropriation
or condemnation proceedings which would preclude the use of any such
properties by Kolmar, the Subsidiaries or the Division for the purposes for
which it is currently used. All leases of Real Property specified as leased
to Kolmar, the Subsidiaries or CCL in respect of the Division, are in good
<PAGE>
standing in all material respects and none of Kolmar, the Subsidiaries or
CCL is in material default thereunder.
6.9 CCL has delivered to the Purchaser the Financial Statements,
accompanied by the unqualified opinion of CCL's accountants. The Financial
Statements (a) are prepared in accordance with GAAP consistently applied as
at the dates and for the periods covered thereby, and except as otherwise
noted therein, (b) fairly present the financial condition and results of
operations of the Business as of the dates and for the periods then ended,
and (c) in all material respects (i) are in agreement with the books and
records of the Division, Kolmar and the Subsidiaries, (ii) contain and
reflect adequate provisions for all liabilities and all taxes, federal,
state, local or foreign, with respect to the periods then ended and in all
prior periods, (iii) with respect to contracts and commitments, contain and
reflect adequate reserves for all reasonably anticipated losses and costs
and expenses, and (iv) contain and reflect adequate allowances for excess
and obsolete Inventory. Except as set forth in Schedule 6.9 hereto, neither
the Division, Kolmar nor any of the Subsidiaries has any liabilities or
obligations, either accrued, contingent or otherwise, which, individually
or in the aggregate, are material to the Business or which individually or
in the aggregate could cause any material adverse change in the financial
condition or results of operations of the Business and which have not been
reflected in the Financial Statements. Neither the Division, Kolmar nor any
Subsidiary is in default in respect to any material term or condition of
any indebtedness or liability.
6.10 Except as contemplated by this Agreement and except as set out in
Schedule 6.10 - Material Changes, since September 30, 1997:
(a) the Business has been conducted only in the ordinary and usual
course;
(b) there has been no material adverse change to the Business;
(c) there has been no amendment, modification or termination of any
contract listed on Schedule 6. 11 - Contracts;
(d) there has been no increase (other than the usual yearly increase)
in the compensation (including, without limitation, the rate of
commissions) payable to, or any payment of a cash salary bonus to,
any officer, director or employee of, or consultant to the Business
receiving remuneration of more than $75,000 per annum; and
(e) there has been no material alteration in the manner of keeping the
books, accounts or records of the Business, or in the accounting
practices therein reflected.
6.11 Schedule 6.11 - Contracts provides an accurate and complete list of
all contracts, other than purchase orders for the sale of inventory or the
purchase of supplies in the ordinary course of business, related to the
Business and involving the payment of an amount (whether in a lump sum or
in a series of installments) in excess of $250,000 per annum or which have
more than one year remaining in the term thereof. Except as set out in
Schedule 6.11, there has not been any material default by CCL, Kolmar or
the Subsidiaries, or to the knowledge of CCL, by any other party under any
of such contracts nor any event which with notice or lapse of time or both
would constitute a material default or material breach by CCL, Kolmar or
any of the Subsidiaries, or to the knowledge of CCL, by any other party
under any such contracts.
6.12 Except as described in Schedule 6.12 - Litigation, there are no
actions, suits or proceedings pending or to the knowledge of CCL,
threatened against or affecting the Division, Kolmar or the Subsidiaries,
or any of their respective properties or rights or any of the Purchased
Assets or the Purchased Shares involving claims (exclusive of legal costs)
individually exceeding $250,000.
6.13 Schedule 6.13 - Employment Agreements lists all collective
bargaining agreements and employment contracts with respect to the
Business, copies of which have been furnished to the Purchaser. The
Purchaser has been provided with a complete list of the names, positions
and annual salaries of the officers of Kolmar and the Subsidiaries, the
divisional management team and the site general managers.
6.14 To the knowledge of CCL and except as noted in Schedule 6.14 -
Compliance with Laws, the current operation of the Business is in
compliance in all material respects with all applicable laws, including
without limitation, Environmental Laws and regulations of the United States
Food and Drug Administration or its equivalent in other countries. Each of
CCL (with respect to the Division), Kolmar and the Subsidiaries holds all
material governmental licenses and permits for the carrying on of the
Business and none of CCL, Kolmar or the Subsidiaries has received any
notice that any appropriate governmental authority intends to cancel,
terminate or not renew any material license or permit.
6.15 Schedule 6.15 - Intellectual Property provides a complete and
accurate list of all trademarks, licenses, patents, business names and
copyrights included in the Purchased Assets or owned by CCL, any CCL
affiliate, Kolmar or the Subsidiaries and used in the Business except for
the name "CCL" (collectively the "Intellectual Property") and the
Intellectual Property is owned by or validly licensed to, CCL, Kolmar or
the Subsidiaries, as the case may be, and the Division, Kolmar or the
<PAGE>
Subsidiaries have the right to use the same. To the knowledge of CCL, the
conduct of the Business does not infringe upon the patents, licenses,
trademarks, trade names, service marks, copyrights or similar intellectual
property rights of any other person. The Intellectual Property includes
all intellectual property used in the Business other than the name "CCL".
6.l6(a) CCL has duly filed within the times and in the manner
prescribed by law all Tax returns and reports required to be
filed by it in respect of the Business and such returns and
reports are true and correct in all material respects. CCL
has paid all Taxes in respect of the Business which are due
and payable by it other than as specifically disclosed and
accrued for in the Financial Statements and other than
amounts or assessments being contested in good faith and for
which appropriate - reserves are established as identified
on Schedule 6.16 - Taxes. CCL has withheld from each payment
made by it in respect of the Division the amount of all
applicable Taxes and other deductions required to be
withheld therefrom and has paid the same to the proper
taxing or other authority within the time prescribed under
applicable legislation or regulation.
(b) Each of Kolmar and each of the Subsidiaries has duly filed within the
times and in the manner prescribed by law all returns and reports in
respect of Taxes required to be filed by it and such returns and
reports are true and correct in all material respects. Each of Kolmar
and the Subsidiaries has paid all Taxes which are due and payable by
it, other than as specifically disclosed and provided for in the
Financial Statements and other than amounts or assessments being
contested in good faith and for which appropriate reserves are
established as identified on Schedule 6.16 - Taxes. (c) There are no
actions, suits, proceedings, audits, written inquiries or claims now
pending against Kolmar or any of the Subsidiaries in respect of Taxes
or against CCL in respect of Taxes or against CCL in respect of Taxes
relating to the Business.
(c) There are no agreements, waivers or other arrangements providing for
the extension of time with respect to the filing of any return or
report or payment of Taxes by Kolmar or any Subsidiaries or the period
of assessment or reassessment of Taxes in respect of Kolmar or any of
the Subsidiaries. Each of Kolmar and each of the Subsidiaries has
withheld from each payment made by it the amount of all applicable
Taxes and other deductions required to be withheld therefrom and has
paid the same to the proper taxing or other authority within the time
prescribed under applicable legislation or regulation.
6.17 Schedule 6. 17 - Benefit Plans provides a complete list of the
pension, retirement, profit sharing and other employee benefit plans
established by or for the employees of the Division, Kolmar and the
Subsidiaries (collectively the "Employee Plans").
(a) Each of the Employee Plans has been registered under and is in
compliance with all applicable legislation and has been maintained in
compliance with its terms.
(b) No individual shall accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Benefit Plan,
including the right to receive any parachute payment, as defined in
Section 280G of the Code or any similar legislation, or become
entitled to severance, termination allowance or similar payments as a
direct result of the transactions contemplated by this Agreement.
(c) No Employee Plan has participated in, engaged in or been a party to
any non-exempt Prohibited Transaction, and neither CCL, Kolmar nor and
of its ERISA Affiliates has had asserted against it any claim for
taxed under Chapter 43 Subtitle A of the Code, Section 5000 of the
Code, or for penalties under ERISA Section 502(c), (I) or (l), with
respect to any Employee Plan nor is there a basis for any such claim.
No officer, director or employee of CCL, Kolmar or any Subsidiary has
committed a material breach of any responsibility or obligation
imposed upon fiduciaries by Title I of ERISA with respect to any
Employee Plan.
(d) Other than routine claims for benefits, there is no claim pending, or
to the knowledge of CCL, Kolmar and the Subsidiaries threatened,
involving any Employee Plan by any person against such plan or CCL,
Kolmar or any ERISA Affiliate. There is no pending or to the knowledge
of CCL, Kolmar and the Subsidiaries threatened, proceeding involving
any Employee Plan before the Internal Revenue Service, the U.S.
Department of Labor or any other governmental authority.
(e) There is no violation of any reporting or disclosure requirement
imposed by ERISA or the Code with respect to any Employee Plan.
(f) Each Employee Plan has at all times prior hereto been maintained in
all material respects, by its terms and in operation, in accordance
with ERISA and the Code. CCL, Kolmar, each Subsidiary and their
respective ERISA Affiliates have made full and timely payment of all
amounts required to be contributed under the terms of each Employee
Plan and applicable law or required to be paid as expenses under such
Employee Plan, and shall continue to do so through the Closing. Each
<PAGE>
Employee Plan intended to be qualified under Code Section 401(a) has
received a determination letter to that effect from the Internal
Revenue Service and no event has occurred and no amendment has been
made that would adversely affect such qualified status.
(g) With respect to any group health plans maintained for the benefit of
employees of the Business, CCL, Kolmar and each Subsidiary and its
respective ERISA Affiliates have complied in all material respects
with the provisions of Part y of Title I of ERISA and 4980B of the
Code. The Business is not obligated to provide health care benefits
of any kind of its retired employees pursuant to any Employee Plan,
including without limitation any group health plan, or pursuant to any
agreement or understanding.
(h) The Purchaser has received a copy of the three (3) most recently filed
Federal Form 5500 series and accountant's opinion's, if applicable,
for each Employee Plan and all applicable Internal Revenue Service
determination letters.
6.18 To the knowledge of CCL and subject to the reserve for doubtful
accounts set out on Closing Balance Sheet, all Accounts Receivable are good
and collectible.
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to CCL and CCL Delaware as follows
and acknowledges that CCL and CCL Delaware are relying upon such
representations and warranties in connection with the completion of the
transactions herein contemplated:
7.1 The Purchaser is a corporation duly incorporated and subsisting under
the laws of its jurisdiction of incorporation and has all necessary
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated herein.
7.2 This Agreement has been duly authorized, executed and delivered by the
Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms.
7.3 Neither the execution and delivery of this Agreement nor the
consummation of the transactions herein contemplated will result in:
(a) a breach or violation of the constating documents, by-laws or
resolutions of the board of directors (or any committee thereof) or
shareholders of the Purchaser;
(b) a violation by the Purchaser of any statute, regulation, rule, order,
judgment, injunction, decree or award of any court or governmental
body having jurisdiction which would have a material adverse effect on
the Purchaser's ability to consummate the transactions contemplated
hereby; or
(c) a requirement for the consent, authorization or approval of any person
other than under the HSR Act.
7.4 The Purchaser has the requisite cash and cash equivalents or financing
available under existing committed credit facilities in the aggregate
amount of not less than the Purchase Price available to consummate the
transactions contemplated hereby and such cash, cash equivalents or
financing will be available to the Purchaser at the Time of Closing to pay
the Purchase Price.
ARTICLE VIII - SURVIVAL AND LIMITATION OF REPRESENTATIONS,
WARRANTIES AND COVENANTS
8.1 The representations and warranties of each of CCL on the one hand, and
the Purchaser, on the other, contained in this Agreement or contained in
any document or certificate delivered pursuant to this Agreement shall
survive the Closing and notwithstanding the Closing, shall continue in full
force and effect for the benefit of the Purchaser or CCL and CCL Delaware,
as the case may be, for the following periods:
(a) with respect to those representations and warranties of CCL set out in
Section 6.14 relating to compliance with Environmental Laws, until the
fifth anniversary of the Closing Date;
(b) with respect to all other representations and warranties of CCL or the
Purchaser, until the earlier of 18 months after the Closing Date and
delivery of the audited financial statements of the Business for the
year ending December 31, 1998;
(c) with respect to Taxes and statements relating to Taxes, until the
expiration of the applicable statute of limitations; and
(d) with respect to the title of CCL to a Purchased Asset, Purchased
Shares, or with respect to the title of Kolmar and the Subsidiaries to
their respective assets, indefinitely.
8.2 The covenants of the parties hereto (other than the indemnities of the
<PAGE>
parties as shall hereinafter be provided) shall survive the Closing and
notwithstanding the Closing, shall continue in full force and effect
without limitation.
8.3 Any claim by a party hereunder for a breach of representation,
warranty or covenant or indemnification with respect thereto shall be
preserved despite the subsequent occurrence of the termination of the
applicable survival period hereunder provided notice of such claim is given
in accordance with Section 9.4 prior to the termination of the survival
peri0d.
8.4 The amount of any damages which may be claimed by the Purchaser for
indemnification for a breach of a representation or warranty by CCL shall
be calculated to be the cost or loss to the Purchaser after giving effect
to any insurance proceeds available to the Purchaser, Kolmar and the
Subsidiaries in relation to the matter which is the subject of the claim
and after giving effect to the value of any related tax benefits realized
or which may reasonably be anticipated to be realized by the Purchaser,
Kolmar or any of the Subsidiaries in relation to the matter which is the
subject of the claim. To the extent that insurance is available on
reasonable commercial terms, the Purchaser agrees to cause the assets and
the operations of the Business as conducted by it to be insured by
reputable insurers against risks of the nature normally insured against by
corporations in the same or similar lines of business and in coverage
amounts normally carried by such corporations in the ordinary course of
business. In addition and provided that CCL has agreed to any Phase II
testing or investigatory work pursuant to Section l0. 1, the Purchaser
agrees to purchase and maintain a policy of environmental liability
insurance on the terms set out in Schedule 8.4 - Environmental Insurance
and such policy shall name CCL and its affiliates, directors, officers,
employees and agents as named insureds.
8.5(a) Notwithstanding any other provision of this Agreement, but
save and except in respect of the Offsite Locations, the Purchaser shall
not be entitled to make any claim for breach of representation, warranty or
covenant or indemnity with respect thereto until and only to the extent
that the aggregate amount of all damages, costs, expenses, liabilities,
penalties or losses (collectively, "Losses") incurred by the Purchaser,
after taking into account the provisions of Section 8.4 hereof, exceeds
$750,000 (the "Threshold Amount") (with Losses in an aggregate amount equal
to the first $750,000 treated as a deductible and not paid); provided that
the Threshold Amount shall not apply and there shall be no maximum
indemnity limit with respect to Losses arising under Sections 6.3, 6.4 and
6.8; and provided that there shall be no maximum indemnity limit with
respect to Losses arising under Section 6.16 (other than for Taxes
disclosed in the Closing Balance Sheet or any schedule hereto);
(b) In respect of all Losses incurred or expenditures required to be made
by the Purchaser, Kolmar or any of the Subsidiaries pursuant to
Environmental Laws (save and except in respect of the Offsite
Locations) and whether or not the Threshold Amount has been exceeded,
the Purchaser covenants and agrees to pay or cause to be paid by
Kolmar or the Subsidiaries the first $250,000 in such remedial
expenditures and CCL's obligation to indemnify and save harmless the
Purchaser relating to Environmental Laws will only arise when and to
the extent that the aggregate expenditures made by the Purchaser,
Kolmar and the Subsidiaries to remediate the matter or matters giving
rise to a Claim or Claims relating to Environmental Laws exceeds
$250,000 (with remedial expenditures in an aggregate amount equal to
the first $250,000 treated as a deductible and not paid); and
(c) The maximum aggregate liability of CCL to the Purchaser in respect of
all breaches, non-performance, claims and indemnities howsoever
arising under this Agreement will be limited to $6,500,000, save and
except in respect of the offsite Locations and as provided in
subsection 8.5(a).
ARTICLE IX - INDEMNIFICATION
9.1 Subject to the provisions of Sections 8.4 and 9. 10, CCL covenants and
agrees to indemnify and save harmless the Purchaser, Kolmar and the
Subsidiaries and their respective officers, directors and their employees
(the "Purchaser Parties") from all damages, costs, expenses, liabilities,
penalties or losses (collectively, "Losses") suffered or incurred by the
Purchaser as a result of or arising directly or indirectly out of or in
connection with:
(a) any breach by CCL of or any inaccuracy of any representation or
warranty of CCL contained in this Agreement provided that CCL shall
not be required to indemnify and save harmless the Purchaser Parties
in respect of any breach of a representation or warranty unless the
Purchaser shall have provided notice to CCL in accordance with Section
9.4 on or prior to the expiry of the survival period for such
representation and warranty as set out in Section 8.1 hereof;
(b) any breach or non-performance by CCL or CCL Delaware of any covenant
to be performed by it that is contained in this Agreement or in any
agreement, certificate or document delivered pursuant hereto; and
(c) any obligations imposed upon any Purchaser Party pursuant to
Environmental Laws that arise in respect of those properties and
<PAGE>
facilities listed in Schedule 9. 1 - Environmental Matters
(collectively, such scheduled properties and facilities are herein
referred to as "Offsite Locations").
9.2 The obligations of indemnification by CCL pursuant to this Article IX
are subject to the limitations with respect to the survival of the
REPRESENTATIONS and warranties referred to in Section 1 and to the
limitations referred to in Sections 8.4 and 8.5 hereof.
9.3 The Purchaser covenants and agrees to indemnify and save harmless CCL
and CCL Delaware from all Losses suffered or incurred by CCL or CCL
Delaware as a result of or arising directly or indirectly out of or in
connection with:
(a) any breach by the Purchaser of or any inaccuracy of any representation
or warranty of the Purchaser contained in this Agreement, provided
that the Purchaser shall not be required to indemnify or save harmless
CCL and CCL Delaware in respect of any breach of any representation or
warranty unless CCL shall have provided notice to the Purchaser in
accordance with Section 9.4 on or prior to the expiry of the survival
period for such representation and warranty as set out in Section 8.1
hereof;
(b) any breach or non-performance by the Purchaser of any covenant to be
performed by it that is contained in this Agreement or in any
agreement, certificate or other document delivered pursuant hereto,
including without limitation, any failure by the Purchaser to pay,
satisfy, discharge, perform or fulfill any of the Assumed Liabilities;
(c) any obligations or liabilities relating to the Business or the Real
Property imposed upon CCL (or any of its affiliates) by any party
hereto, any Governmental Entity or any other entity, whether pursuant
to the terms of this Agreement or otherwise in respect of
Environmental Laws (other than in respect of the Offsite Locations) to
the extent that such obligations or liabilities relate only to actions
or occurrences after the Closing Date and the aggregate of all such
obligations and liabilities exceeds $6,500,000; and
(d) any other matter relating to the Business or the Purchased Assets and
arising based on acts or occurrences after the Closing that is not
subject to indemnification by CCL pursuant to Section 9. 1 of this
Agreement.
9.4 In the event that a party (the "Indemnified Party") shall become aware
of any claim, proceeding or other matter (a "Claim") in respect of which
the other party (the "Indemnifying Party") has agreed to indemnify the
Indemnified Party pursuant to this Agreement, the Indemnified Party shall
promptly give written notice thereof to the Indemnifying Party. Such
notice shall specify whether the Claim arises as a result of a claim by a
person against the Indemnified Party (a "Third Party Claim") or whether the
Claim does not so arise (a "Direct Claim"), and shall also specify with
reasonable particularity (to the extent that the information is available)
the factual basis for the Claim and the amount of the Claim, if known. If,
the Indemnified Party does not notify the Indemnifying Party of any Claim
in time to effectively contest the determination of any liability
susceptible of being contested, the Indemnifying Party shall be entitled to
set off against the amount claimed by the Indemnified Party the amount of
any Losses incurred by the Indemnifying Party resulting from the
Indemnified Party's failure to give such notice on a timely basis.
9.5 With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have 60 days
to make such investigation of the Claim as is considered necessary or
desirable. For the purpose of such investigation, the Indemnified Party
shall make available to the Indemnifying Party the information relied upon
by the Indemnified Party to substantiate the Claim, together with all such
other information as the Indemnifying Party may reasonably request. If both
parties agree at or prior to the expiration of such 60-day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the indemnified
Party the full agreed upon amount of the Claim, failing which the matter
shall be referred to binding arbitration pursuant to Section 13.6.
9.6 With respect to any Third Party Claim, the Indemnifying Party shall
have the right, at its expense, to participate in or assume control of the
negotiation, settlement or defence of the Claim and, in such event, the
Indemnifying Party shall reimburse the Indemnified Party for all of the
Indemnified Party's out-of-pocket expenses as a result of such
participation or assumption. If the Indemnifying Party elects to assume
such control, the Indemnified Party shall have the right to participate in
the negotiation, settlement or defence of such Third Party Claim and to
retain counsel to act on its behalf, provided that the fees and
disbursements of such counsel shall be paid by the Indemnified Party unless
the Indemnifying Party consents to the retention of such counsel or unless
the named parties to any action or proceeding include both the Indemnifying
Party and the Indemnified Party and a representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate due to the actual or potential differing interests between
them (such as the availability of different defenses). If the Indemnifying
Party, having elected to assume such control, thereafter fails to defend
the Third Party Claim within a reasonable time, the Indemnified Party shall
be entitled to assume such control and the Indemnifying Party shall be
<PAGE>
bound by the results obtained by the Indemnified Party with respect to such
Third Party Claim. If any Third Party Claim is of a nature such that the
Indemnified Party is required by applicable law to make a payment to any
person (a "Third Party") with respect to the Third Party Claim before the
completion of settlement negotiations or related legal proceeding, the
Indemnified Party may make such payment and the Indemnifying Party shall,
forthwith after demand by the Indemnified Party, reimburse the Indemnified
Party for such payment. If the amount of any liability of the Indemnified
Party under the Third Party Claim in respect of which such payment was
made, as finally determined, is less than the amount that was paid by the
Indemnifying Party to the Indemnified Party, the Indemnified Party shall,
forthwith after receipt of the difference from the Third Party, pay the
amount of such difference to the Indemnifying Party.
9.7 If the Indemnifying Party fails to assume control of the defence of
any Third Party Claim, the Indemnified Party shall have the exclusive right
to contest, settle or pay the amount claimed. Whether or not the
Indemnifying Party assumes control of the negotiation, settlement or
defence of any Third Party Claim, the Indemnifying Party shall not settle
any Third Party Claim without the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld or delayed, provided such
settlement includes a full release of the indemnified Party; provided,
however, that the liability of the Indemnifying Party shall be limited to
the proposed settlement amount if any such consent is not obtained for any
reason.
9.8 The Indemnified Party and the Indemnifying Party shall co-operate
fully with each other with respect to Third Party Claims, and shall keep
each other fully advised with respect thereto (including supplying copies
of all relevant documentation promptly as it becomes available).
9.9(a) With respect to any Losses relating to or arising from any
Environmental Laws for which the Purchaser seeks indemnity, CCL
shall have the right to control and investigate and/or remediate,
at CCL's cost, any condition giving rise to a claim or demand for
indemnification by the Purchaser under this Agreement. CCL
(including its employees, contractors, representatives and agents)
shall have reasonable access (in time, manner and scope) to the
Real Property and, to the extent under Purchaser's control, the
Offsite Locations, as the case may be, for the purpose of
conducting any investigation and/or remediation, including any
sampling or monitoring which may be required to be performed by
CCL.
(b) The Purchaser shall use its best efforts to cooperate with CCL to
minimize costs with respect to Losses arising pursuant to
Environmental Laws.
(c) Each party shall give prompt written notice to the other of any report
or other document submitted, whether voluntarily or by requirement of
any Governmental Entity which describes any environmental condition
existing prior to the Closing Date on any of the Real Property or on
any of the offsite Locations. Each party shall have the right to
review and comment upon any submission made by the other to a
Governmental Entity which describes or addresses any environmental
condition for which a party is claiming indemnification from the other
hereunder, and each party, to the extent reasonable, shall revise such
submission in accordance with the other's comments thereon. Each party
shall give the other prompt written notice of, and each party and its
representatives shall have the right at its cost to participate in,
any telephone call or meeting with any Governmental Entity at which
any environmental condition for which such party is claiming
indemnification from the other party hereunder is to be discussed or
addressed in any manner.
(d) CCL will not have any obligation to indemnify the Purchaser from and
against any Losses arising from or related to Environmental Laws: (i)
which are not asserted by a third party (including government
entities); (ii) which do not relate to an environmental condition on a
Real Property or one of the offsite Locations and which condition
existed prior to the Closing Date; (iii) arising with respect to any
release or disposal of any Hazardous Substances by the Purchaser; (iv)
resulting, directly or indirectly, from the Purchaser, its employees,
contractors, representatives or agents, voluntarily conducting an
investigation, sampling or monitoring of the Offsite Locations after
the Closing unless required to do so by a Governmental Entity; (v)
resulting from, directly or indirectly, any voluntary or involuntary
after the Closing action by or omission of the Purchaser, its
employees, contractors, representatives or agents to accelerate or
delay the timing, to increase the cost or to further cause,
exacerbate, contribute to or aggravate the leaking, migration or
release of any Hazardous Substances at the Offsite Locations or on a
Real Property; or (vi) in the event the Purchaser fails to give notice
as required by Section 9.4 of this Agreement prior to, in respect of
the Real Property, the fifth anniversary of the Closing Date. The
Purchaser acknowledges and agrees that nothing contained herein
absolves it of any obligation under any Environmental Laws for Losses
arising from any condition that did not exist as of the Closing Date
or with respect to violations of Environmental Laws by the Purchaser,
its employees, contractors, representatives or agents.
9.10 Neither party hereto will be liable to the other under this Agreement
<PAGE>
for any punitive, consequential or incidental damages (including loss of
revenue or income, business interruption, cost of capital or loss of
business reputation or opportunity) relating to any Claim for which either
such party may be entitled to recover under this Agreement (other than
indemnification of amounts paid or payable to third parties in respect of
any Third Party Claim for which indemnification hereunder is required).
9.11 The provisions of this Article IX shall apply to any Claim for breach
of any representation, warranty, covenant or other provision of this
Agreement or any agreement, certificate or other document delivered hereto
(other than a claim for specific performance or injunctive relief) with the
intent that all such Claims shall be subject to the limitations and other
provisions contained in this Article IX.
ARTICLE X - COVENANTS
10.1 CCL shall make available to the Purchaser and their authorized
representatives, to the CCL is logically able to do so, all title
documents, contracts, agreements, leases, customer lists, financial
statements, plans, reports, licenses, orders, permits, books of account,
accounting records and other information and data relating to the Business,
the Division, Kolmar and the Subsidiaries. CCL shall afford the Purchaser
and its authorized representatives reasonable access to the Purchased
Assets and to the property, assets, undertaking, properties, records and
documents of the Division, Kolmar and the Subsidiaries and any other
records of CCL pertaining to the Business. All information shall be
provided to the Purchaser in such form as such information may presently
exist or be readily available. In particular, without limitation, CCL shall
permit the Purchaser's representatives or consultants to conduct all such
Phase I testing and inspection (but no Phase II testing or investigatory
work unless (i) required in order to obtain the policy of insurance
contemplated by Section 8.4 and (ii) consented to in writing by CCL acting
reasonably) in respect of environmental matters at the Real Property as the
Purchaser may determine, in its sole discretion, to be required by the
Purchaser to satisfy itself in respect of such martyrs.
10.2(a) If, prior to the Closing Date, the Purchaser obtains
knowledge that a representation and warranty of CCL is
materially untrue or inaccurate or that a covenant is
breached, the Purchaser shall immediately provide notice of
same to CCL. The giving of notice shall not constitute a
release of CCL or CCL Delaware from their obligations under
this Agreement. The parties hereto agree to negotiate in
good faith during the seven days immediately following
delivery of such notice to CCL to determine the consequences
of such disclosure and if the parties hereto fail to reach
agreement during such seven-day period, either of CCL or the
Purchaser may, in its sole and absolute discretion, elect to
terminate this Agreement after the expiration of such seven-
day period, in which event each of the parties hereto will
be released from all obligations and liabilities under this
Agreement (other than pursuant to Section 13.8).
(b) CCL will deliver to the Purchaser as soon as possible after the date
hereof drafts of the Schedules and Exhibits referred to in Article II.
The Purchaser shall have 15 days after receipt of the last of the
Schedules and Exhibits to be delivered by CCL to the Purchaser (other
than Schedule 1.1(t) - Financial Statements and Schedule 1.1 (kk) -
Reference Proforma Statement of Net Assets) to advise CCL as to
whether or not it accepts such Schedules and Exhibits. With respect to
each of Schedule 1.1(t) - Financial Statements and Schedule 1.l (kk) -
Reference Proforma Statement of Net Assets the Purchaser shall have 15
days after delivery of such Schedule as to whether it accepts such
Schedule. In the event the Purchaser does not accept a Schedule or
Exhibit, the parties will negotiate in good faith during the 7 day
period immediately following the delivery of such Schedules and
Exhibits as set out above to settle the contents of such Schedules and
Exhibits. If the parties are unable to reach such an agreement within
such 7 day period, then either CCL or the Purchaser may, in its sole
and absolute discretion, elect to terminate this Agreement as to the
expiration of such 7 day period, in which event each of the parties
hereto will be released from all obligations and liabilities under
this Agreement (other than pursuant to Section 13.8).
(c) CCL will deliver to the Purchaser at last two business days prior to
the Closing Date, a written update or supplement to the Schedules
attached to this Agreement reflecting events occurring and material
contracts and agreements entered into in the ordinary course of the
operations of the Business from the date of this Agreement through the
Closing Date. All changes from the Schedules attached to this
Agreement will be marked clearly on such updated or supplemental
Schedules. To the extent that such updated or supplemental Schedules
reflect matters or events which have occurred after the date of this
Agreement in the ordinary course of the Business, which do not
constitute a violation of any of CCL's covenants set forth in this
Article X and which do not, alone or in the aggregate, represent a
material adverse change in the business financial condition or results
of operations of the Business, then the Schedules shall be deemed to
be amended as of the Closing Date to include the information set forth
on such updated or supplemental Schedules. To the extent that such
<PAGE>
updated or supplemental Schedules reflect matters or events which have
occurred after the date of this Agreement and which alone or in the
aggregate, represent a material adverse change in the business,
financial condition or results of operations of the Business then: (i)
the parties will negotiate in good faith during the seven-day period
immediately following the delivery of the updated or supplemental
Schedules to determine the consequences of such disclosures; (ii) the
Schedules attached to this Agreement will be amended only to the
extent that the parties mutually agree as a result of such
negotiation; and (iii) either of CCL or the Purchaser may, in its sole
and absolute discretion, elect to terminate this Agreement after the
expiration of such seven-day period, in which event each of the
parties hereto will be released from all obligations and liabilities
under this Agreement (other than pursuant to Section 13.8).
10.3 During the period from the date of this Agreement until Closing:
(a) CCL will or will cause the Business to be conducted in the ordinary
and normal course thereof, consistent with past practices and will not
take any action inconsistent therewith or with the consummation of the
Closing;
(b) CCL will use reasonable commercial efforts to obtain, at or prior to
Closing, all the consents and approvals described in Schedule 6.7 -
Consents and to make all such filings and submissions under applicable
laws, regulations and rules as may be required for CCL and CCL
Delaware to consummate the transactions herein contemplated, provided
that CCL will not be obligated hereunder to pay any consideration to
the third party from whom such approval or consent is required;
(c) CCL will take or cause to be taken all necessary corporate action and
proceedings to approve and authorize the valid and effective transfer
of the Purchased Assets and the Purchased Shares to the Purchaser;
(d) CCL will cause all of the directors of Kolmar and the Subsidiaries to
resign in favour of the nominees of the Purchaser; and
(e) CCL will cause to be delivered the closing documentation of CCL and
CCL Delaware referred to in Article XII hereof.
10.4 CCL and the Purchaser covenant and agree:
(a) to make all necessary notification and filings under the HSR Act and
to use their reasonable efforts to obtain early termination of the
applicable waiting period and to make all further filings pursuant
thereto as may be necessary or desirable;
(b) on Closing, to jointly execute and promptly file with Revenue Canada
an election under Section 22 of the Income Tax Act (Canada) as to the
sale of the Accounts Receivable included in the Purchased Assets and
such election will designate the portion of the Purchase Price
allocated to the Accounts Receivable as the consideration paid
therefor by the Purchaser; and
(c) on Closing, to jointly elect and to file, within the required time,
under subsection 167(1) of the Excise Tax Act (Canada) that no tax be
payable pursuant to Part IX of the Excise Tar Act (Canada) with
respect to the sale by CCL to the Purchaser of the Purchased Assets.
10.5 The Purchaser hereby waives compliance by CCL with the Bulk Sales Act
(Ontario) CCL shall indemnify the Purchaser with respect to all Losses
which the Purchaser incurs as a result of CCL's non-compliance with such
legislation except to the extent that such Losses arise from the
Purchaser's failure to pay and satisfy any of the Assumed Liabilities.
10.6 The Purchaser covenants and agrees to deliver or cause to be delivered
the Purchaser's closing documentation referred to in Article XII hereof.
10.7 As of the Closing Date, the Purchaser covenants and agrees to make
bona fide offers of employment to each employee of CCL who is employed by
the Division (collectively the "Transferred Employees"). Such offers of
employment shall be substantially on the same terms and conditions
(including, without limitation, rights and entitlements with respect to
benefits) as CCL provided immediately prior to the Closing Date as
disclosed by CCL to the Purchaser in writing. The Purchaser shall
recognize the length of service with CCL or its affiliates of the
Transferred Employees, including entitlement to vacation, notice of
termination or pay in lieu hereof and severance pay, entitlement to
benefits, including the vesting of pension benefits and recognition of
deductible amounts previously paid by Transferred Employees in respect of
health insurance and other benefit plans, such that the employment of the
Transferred Employees shall not be deemed terminated for purposes of
applicable law. The Purchaser shall be liable for all pay and benefits
payable to Transferred Employees which relate to periods on or after the
Closing Date and for all other obligations assumed pursuant hereto and
shall indemnify and hold harmless CCL from any and all liabilities or
obligations relating to any such Transferred Employees assumed or agreed to
be performed hereunder or arising on or after the Closing Date. The
Purchaser shall not have any responsibility or liability with respect to
any employee of the Division who does not accept the Purchaser's offer of
employment.
<PAGE>
10.8 At and as of the Closing Date, the Purchaser covenants and agrees to
assume and agrees to perform, all liabilities and obligations which exist
as of the Closing Date, or which arise thereafter, for repairs,
replacements, returns or allowances and related services required by the
terms and conditions of all warranties, express or implied, of CCL or the
Division with respect to:
(a) products manufactured and shipped to a purchaser or user by the
Division, or services performed by the Division on or prior to the
Closing Date, and
(b) all products manufactured by the Division prior to or the manufacture
of which by the Division is in process on, the Closing Date and which
are shipped to a purchaser or user after the Closing Date.
10.9 As soon as possible after the Closing Date, William M. Mercer
Incorporated (the "Actuary") shall determine the amount of unfunded
liabilities or surplus, if any, of the Employee Plans using assumptions
consistent with those to determine unfunded liabilities or surplus for the
year 1995. The final report of the Actuary shall be final and binding on
all parties hereto unless objected to by the Purchaser within 30 business
days after review by its own actuary and the parties hereto agree that the
aggregate amount of unfunded liabilities, or aggregate surplus, as the case
may be, shall constitute a reduction in the Purchase Price, in the case of
an unfunded liability, or an increase in the Purchase Price, in the case of
a surplus. Such surplus shall be paid by the Purchaser to CCL in such
amounts and at such times as matches the timing of the funding the
Purchaser would otherwise be required to make if such surplus did not exist
if the calculations for funding requirements were made on the same basis as
used to determine the surplus. Such reduction shall be paid by CCL to the
Purchaser in such amounts and at such times as matches the timing of the
funding by the Purchaser of such reduction without acceleration thereof if
the calculations for funding requirements were made on the same basis as
used to determine the amount of such unfunded liabilities. CCL and the
Purchaser shall each pay one-half of the fees and expenses charged by the
Actuary.
10.10 CCL agrees to provide such reasonable assistance as the Purchaser
may request (and the Purchaser shall reimburse CCL for its reasonable costs
in connection therewith) in connection with an orderly transition of the
Business.
ARTICLE XI - CONDITIONS OF CLOSING
11.1 The purchase and sale of the Purchased Assets and the Purchased Shares
are subject to the following terms and conditions for the exclusive benefit
of the Purchaser to be fulfilled and/or performed at or prior to Closing
except in the case of paragraph (h) below which must be fulfilled by
November 7, 1997 or such later date as CCL shall approve acting reasonably:
(a) the Purchaser shall be satisfied that the representations and
warranties of CCL contained in this Agreement shall be true and
correct in all material respects on the date hereof, except those
representations and warranties that are qualified by the word
"material", which representations shall be true and correct in all
respects as of the date hereof;
(b) the representations and warranties of CCL contained in this Agreement
shall be true and correct on and as of the Closing Date in all
material respects, except those representations and warranties that
are qualified by the word "material", which representations and
warranties shall be true and correct in all respects and the Purchaser
shall have received on the Closing Date a certificate dated the
Closing Date, in form reasonably satisfactory to counsel for the
Purchaser, executed by CCL to the foregoing effect;
(c) CCL shall have fulfilled and/or complied with, in all material
respects, its obligations, covenants and agreements herein contained
to be performed or caused to be performed by it and CCL shall have
executed and delivered a certificate dated the Closing Date to the
foregoing effect;
(d) the consents and approvals referred to in Schedule 6.7 - Consents
shall have been obtained in form and on terms satisfactory to the
Purchaser, acting reasonably;
(e) there is available to the Purchaser a policy of environmental
liability insurance on substantially the terms set out in Schedule 8.4
- Environmental Insurance;
(f) all Liens, except Permitted Liens, shall have been discharged;
(g) no action or proceeding shall be pending or to the knowledge of CCL or
the Purchaser, threatened by any person to enjoin, restrict or
prohibit and no order shall have been obtained by any person
enjoining, restricting or prohibiting the sale of any of the Purchased
Assets or of the Purchased Shares to the Purchaser or the right of
Kolmar and the Subsidiaries to continue to conduct the Business; and
(h) Mr. Christopher Denney shall have entered into an employment.
<PAGE>
arrangement with the Purchaser satisfactory to the Purchaser acting
reasonably.
If any of the foregoing conditions shall not be fulfilled and/or performed
at or before the Time of Closing or in the case of paragraph (h) by
November 7, 1997 or such later date as CCL shall approve acting reasonably,
the Purchaser may terminate this Agreement by written notice to CCL and, in
such event, the Purchaser shall be released from all obligations hereunder
(other than pursuant to Section 13.8) without prejudice to any rights or
remedies that the Purchaser may have against CCL and CCL Delaware, provided
however that the Purchaser may waive compliance with any of such conditions
in whole or in part, without prejudice to any of its rights of termination
in the event of non fulfillment or non performance of any other condition,
obligation or covenant, any such waiver to be binding on the Purchaser only
if the same is in writing.
11.2 The obligation of CCL to sell the Purchased Assets and of CCL Delaware
to sell the Purchased Shares are subject to the following terms and
conditions for the exclusive benefit of CCL and CCL Delaware to be
fulfilled and/or performed at or prior to Closing:
(a) the representations and warranties of the Purchaser contained in this
Agreement shall be true and correct, in all material respects, on the
date hereof and shall be true and correct, in all material respects,
on and as of the Closing Date and CCL and CCL Delaware shall have
received on the Closing Date a certificate dated the Closing Date, in
form and content reasonably satisfactory to counsel for CCL and CCL
Delaware, executed by the Purchaser to the foregoing effect;
(b) the Purchaser shall have fulfilled and/or complied with, in all
material respects, its obligations, covenants and agreements herein
contained to be performed or caused to be performed by it and the
Purchaser shall have executed and delivered a certificate dated the
Closing Date to the foregoing effect;
(c) the consents and approvals referred to in Schedule 6.7 - Consents
shall have been obtained in form and on terms satisfactory to CCL and
CCL Delaware, acting reasonably; and
(d) no action or proceeding shall be pending, or to the knowledge of the
Purchaser or CCL, threatened by any person to enjoin, restrict or
prohibit, and no order shall have been obtained by any person
enjoining, restricting or prohibiting the sale of any of the Purchased
Assets or the Purchased Shares to the Purchaser or the right of Kolmar
and the Subsidiaries to continue to conduct the Business.
If any of the foregoing conditions shall not be fulfilled and/or performed
at or before the Time of Closing, CCL and CCL Delaware may terminate this
Agreement by written notice to the Purchaser and, in such event, CCL and
CCL Delaware shall be released from all obligations hereunder (other than
pursuant to Section 13.8) without prejudice to any rights or remedies that
CCL and CCL Delaware may have against the Purchaser, provided, however,
that CCL and CCL Delaware may waive compliance with any of such conditions,
in whole or in part, without prejudice to their rights of termination in
the event of the non-fulfillment or nonperformance of any other condition
or conditions, any such waiver to be binding on CCL and CCL Delaware only
if the same is in writing.
ARTICLE XII - CLOSING ARRANGEMENTS
12.1 The Closing of the transactions contemplated by this Agreement shall
take place at the Time of Closing on the Closing Date at the offices of
Lang Michener, Suite 2500, BCE Place, 181 Bay Street, Toronto, Ontario.
12.2 At the Time of Closing, CCL shall deliver to the Purchaser actual
possession of the Purchased Assets and CCL and CCL Delaware shall deliver
to the Purchaser the following documents duly executed by all persons other
than the Purchaser, or do the following acts or things which delivery and
performance constitute a condition precedent in favour of the Purchaser to
the completion of the transactions herein provided for:
(a) assignments of the Purchased Assets and any necessary notices and
consents to perfect such assignments in form and content acceptable to
the Purchaser, acting reasonably;
(b) the share certificates evidencing all of the Purchased Shares duly
endorsed for transfer in favour of the Purchaser together with the
share certificates evidencing the issued and outstanding shares of the
Subsidiaries registered in the name of Kolmar;
(c) the approvals and consents referred to in subsection 10.3(b);
(d) the certificates referred to in subsection 11.1(b) and (c);
(e) a certified copy of the resolutions duly adopted by the board of
directors of CCL authorizing the execution, delivery and performance
of this Agreement by CCL, together with a certificate as to the
incumbency and signatures of the officers executing this Agreement and
the other documents executed pursuant hereto;
(f) a certified copy of the resolutions duly adopted by the board of
<PAGE>
directors of CCL Delaware authorizing the execution, delivery and
performance of this Agreement by CCL Delaware, together with a
certificate as to the incumbency and signatures of the officers
executing this Agreement and the other documents executed pursuant
hereto;
(g) a certified copy of the resolutions duly adopted by the board of
directors of Kolmar authorizing the transfer of the Purchased Shares
to the Purchaser:
(h) the resignations referred to in subsection 10.3(d);
(i) the minute books, securities registers and corporate seals of Kolmar
and the Subsidiaries;
(j) an opinion of counsel to CCL in the form attached as Schedule 12.2 -
Opinion of Counsel to CCL; and
(k) all other documents and instruments, conveyances and transfers
reasonably required by the Purchaser to vest in or confirm to the
Purchaser good and marketable title to the Purchased Assets and the
Purchased Shares as contemplated by this Agreement.
12.3 Subject to the satisfaction and fulfillment of all conditions provided
for in this Agreement (unless waived in writing by the Purchaser at the
Time of Closing), the Purchaser shall deliver to CCL and CCL Delaware the
following documents duly executed by all persons other than CCL and CCL
Delaware or do the following acts or things which delivery and performance
constitute a condition precedent in favour of CCL and CCL Delaware to the
completion of the transactions herein provided for:
(a) an assumption of the Assumed Liabilities in form and content
acceptable to CCL acting reasonably;
(b) the certificates referred to in subsections 11.2(a) and (b);
(c) a certified copy of the resolutions duly adopted by the board of
directors of the Purchaser authorizing the execution, delivery and
performance of this Agreement by the Purchaser, together with a
certificate as to the incumbency and signature of the officers of the
Purchaser executing this Agreement and the other documents executed
pursuant hereto;
(d) the payment and deliveries referred to in Section 5.l hereof due on
Closing; and
(e) an opinion of counsel the form of opinion attached hereto is Schedule
12.3 - Opinion of Counsel to the Purchaser.
ARTICLE XIII - GENERAL
13.1 Any announcement with respect to this Agreement by any of the parties
hereto shall be submitted in advance for the comments of the other parties
hereto where practicable; provided always that nothing herein contained
shall prevent or restrict CCL from making any announcement with respect to
this Agreement which it is required by law or by any stock exchange to
make.
13.2 Any notice required or permitted to be given for purposes of this
Agreement shall be in writing and shall be sufficiently given if personally
delivered at the applicable address set out below, or sent by registered
letter, postage prepaid or transmitted by telecopy:
(a) if to the Purchaser:
The Gordon + Morris Group
840 Newport Center Drive, Suite 600
Newport Beach, California
92660
Attention: Drew Adams
Telecopy No. (714) 759-7628
and with a copy to its counsel at:
Law Offices of Paul, Hastings, Janofsky & Walker LLP
Seventeenth Floor
695 Town Center Drive
Costa Mesa, California
92626-1924
Attention: Peter J. Tennyson
Telecopy No. (714) 979-1921
(b) if to CCL or CCL Delaware addressed to it as follows:
CCL Industries Inc.
105 Gordon Baker Road
Willowdale, Ontario
M2H3P8
Attention: President
Telecopy No. (416) 756-8555
<PAGE>
and with a copy to its counsel at:
Lang Michener
Barristers & Solicitors
Suite 2500, BCE Place
181 Bay Street
Toronto, Ontario
M5J2T7
Attention: Geofrey Myers
Telecopy No. (416) 365-1719
or at such other address as the party to whom such writing is to be given
shall have notified the party giving the same in the manner provided in
this Section. Any notice delivered to the party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on
the date it is so delivered at such address, provided that if such day is
not a business day, then a notice shall be deemed to have been given and
received on the next business day following such day. Any notice mailed as
aforesaid shall be deemed to have been given and received on the fifth
business day next following the date of its mailing. Any notice transmitted
by telecopy shall be deemed given and received on the first business day
after its transmission.
13.3 Time shall be of the essence of this Agreement.
13.4 This Agreement, including the Schedules and Exhibits hereto, and the
confidentiality agreement dated August l, 1997 between CCL and the
Purchaser, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. There are not and shall not be any
verbal statements, representations, warranties, undertakings or agreements
between the parties with respect to the purchase and sale of the Purchased
Shares and the Purchased Assets and this Agreement may not be amended or
modified in any respect except by written instrument signed by the parties
hereto.
13.5 No waiver of any of the provisions of this Agreement shall be deemed
to constitute a waiver of any other provision (whether or not similar) nor
shall such waiver be effective or binding unless in writing and, unless
otherwise provided, shall be limited to the specific breach waived.
13.6 This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario without reference to conflicts or
choice of law principles. Any dispute between the parties arising under
this Agreement or the transactions contemplated by this Agreement
(including without limitation any claim based on contract, tort or statute)
shall be decided by arbitration as provided in this Section 13.6 and not by
lawsuit (other tan disputes arising under Section 5.2, which shall be
resolved as set forth therein). The arbitration shall be conducted in New
York, New York, by a mutually acceptable single arbitrator, and shall be
administered by the American Arbitration Association (the "ACP / AWP") in
accordance with its then existing commercial arbitration rules, except as
otherwise provided in this Section 13.6. In the event that the parties are
unable to agree on a single arbitrator, the arbitration shall be conducted
by an arbitrator agreed upon by CCL and Purchaser from a panel of five
potential arbitrators selected by the ACP / AWP, with each of CCL and
Purchaser being entitled to reject up to two arbitrators on the panel
selected by the ACP / AWP. The parties shall strike arbitrators from the
panel alternately, with CCL striking first. The parties shall not be
entitled to conduct discovery except as permitted by the commercial
arbitration rules of the ACP / AWP. The prevailing party, if any, will be
entitled to recover reasonable fees and costs if awarded by the arbitrator.
The parties to the dispute shall share equally the payment of the fees of
the arbitrator, though the arbitrator, in his or her sole discretion, may
order the non-prevailing party to pay the prevailing party's shall be
signed by the arbitrator and shall include a statement of the basis of the
award. Judgment on the award may be entered in any court having
jurisdiction thereof. The arbitrator may not award punitive damages, and
the parties hereby irrevocably waive any right to punitive damages.
13.7 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns but
shall not be assignable by any of the parties hereto without the prior
written consent of the other parties hereto, provided that the Purchaser
may assign this Agreement and its rights and obligations hereunder to an
affiliate of the Purchaser provided that such affiliate enters into a
written agreement with CCL and CCL Delaware to be bound by the provisions
of this Agreement in all respects and to the same extent as the Purchaser
is bound and provided that the Purchaser shall continue to be bound by all
of the obligations hereunder as if such assignment had not occurred and
perform such obligations to the extent that such affiliate fails to do so.
For purposes hereof, a corporation is an affiliate of another if one of
them, directly or indirectly, is the subsidiary of the other or both are
subsidiaries of the same corporation.
<PAGE>
13.8 Except as specified herein, each party hereto shall pay its own legal,
accounting and other expenses arising in respect of this Agreement and to
any action taken by such party in preparation for carrying this Agreement
into effect. The Purchaser shall pay all costs of applying for new permits
and all costs of obtaining the transfer of existing Assignable Permits.
13.9 This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement, and each of which
shall be deemed an original.
13.10 For a period of six years after the Closing Date, the Purchaser
agrees to permit CCL to have reasonable access to and to make copies of the
books and records of the Division, Kolmar and the Subsidiaries relating to
periods prior to the Closing Date, as may be necessary or desirable and
reasonable in connection with the prosecution or defense of any claims,
actions or proceedings by or against CCL or CCL Delaware which relate to
the period prior to the Closing Date and for which CCL or CCL Delaware has
or may have liability or for tax compliance purposes with respect to
periods prior to the Closing Date. In connection with the right of access
hereby granted, the Purchaser agrees to not intentionally discard, destroy
or dispose of any such records or files without providing CCL with a
reasonable right to take, at its own expense, possession of any such
records or files or copies thereof.
13.11 For a period of three years after the Closing Date, CCL on its own
behalf, and on behalf of its subsidiaries, agrees that neither it nor its
subsidiaries will solicit for employment any of the individuals named in
Schedule 13.11 - Hands-Off.
13.12 Each of the parties hereto upon the request of the other, whether
before or after the Time of Closing shall do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged or delivered all such
further acts, deeds, documents, transfers, assignments, conveyances and
assurances as may be reasonably necessary or desirable to effect complete
consummation of the transactions contemplated by this Agreement.
IN WITNESS WHEREOF this Agreement has been executed and delivered by
the parties hereto on the date first above written.
CCL INDUSTRIES, INC.
By: /s/ Mel Snider
------------------------------------
By: /s/ Steven Lancaster
------------------------------------
CCL INDUSTRIES CORPORATION
By: /s/ Mel Snider
------------------------------------
By: /s/ Steven Lancaster
------------------------------------
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joe Sortais, CFO
------------------------------------
By: /s/ Walter K. Lim
------------------------------------
<PAGE>
OUTSOURCING SERVICES GROUP, INC
425 South Ninth Avenue
City of Industry, California 91746
Telephone: (626) 968-8531 Facsimile: (626) 336-5605
January 1, 1998
CCL INDUSTRIES INC.
105 Gordon Baker Road, Suite 800
Willowdale, Ontario M2H 3P8
Attention: President
CCL INDUSTRIES CORPORATION
105 Gordon Baker Road, Suite 800
Willowdale, Ontario M2H 3P8
Attention: President
Re: Amendment to Share and Asset Purchase Agreement ("Agreement")
Gentlemen:
Our Agreement, dated October 28, 1997, is modified in the
following respects:
1. Purchase Price and Closing. The Purchase Price described in
Section 5.1 shall be $78,000,000, paid by the assumption of any items on
Schedule 5.2 which remain outstanding and the balance in cash. Of this
amount $4.5 million shall be withheld if, on the Funding Date, Kolmar has
not received a binding title commitment insuring its title to the entire
Port Jervis, New York, facility. Such amount shall be paid within two
Business Days of the date such record title is confirmed by the issuance of
a binding title insurance commitment for the property comprising such
facility. Purchaser agrees to use its best efforts to cause its title
insurer to accept a CCL indemnity with respect to such property. The
Closing shall be effective as of the opening of business on January 1,
1998. However, whenever in this Agreement, as amended, an act is to be
performed a specified number of days before or after the "Closing" or the
"Closing Date," the date used to determine the date of such action shall be
the actual date on which the Purchase Price is paid to CCL (the "Funding
Date"), which shall be not later than January 9, 1998.
2. Ownership and Transfer of Shares; Capitalization. Purchaser
acknowledges that, despite the language of the first "Whereas" clause in
the Agreement, the language of Section 3.1, the language in Section 6.3,
and the language of Section 6.5(a), CCL Delaware was on the date the
Agreement was signed only the indirect owner of the Purchased Shares. The
Purchased Shares were actually owned by CCL No. 1 Funding Corp. and CCL No.
2 Funding Corp., each Delaware corporations.
a. CCL and CCL Delaware each covenant and agree to cause
CCL No. 1 Funding Corp. and CCL No. 2 Funding Corp. to be dissolved and
wound-up, so that CCL Delaware may transfer to Purchaser all the Purchased
Shares, free and clear of all Liens.
b. Subsection 6.5(a) of the Agreement is amended to read
as follows:
The authorized capital of Kolmar consists of 52,000 shares of
common stock, no par value, and 500 shares of preferred stock
having a par value of $100.00 per share, of which 5 shares of
common stock are outstanding as fully paid and nonassessable,
and registered in the name of CCL Delaware, free and clear of
all Liens;
c. Subsection 6.5(c) of the Agreement as amended to read
as follows:
The authorized capital of Kolmar Australia consists of 149,900
preference shares, par value $2.00 per share and 1,000 ordinary
shares, par value $0.20 per share of which 25,700 preference
shares and 1,000 ordinary shares are, and will be at the Time of
Closing, issued and outstanding as fully paid and non-assessable
and registered in the name of Kolmar, free and clear of all Liens;
3. Settlement of Cash Accounts. Notwithstanding any other
provision of the Agreement, as modified by this letter:
a. All balances in the bank accounts of the Division,
Kolmar and the Subsidiaries identified on Schedule A will be computed as of
December 31, 1997. After such computation no transfers to CCL or any of
its affiliates or for the benefit of CCL or any of its affiliates will be
made except as provided in Paragraph 4 below.
b. Within forty-five (45) days following the Closing,
Purchaser and CCL shall reconcile the bank accounts and determine the
actual amount of cash or cash equivalent transferred to Purchaser's control
as of the Closing Date (net of $130,000). In performing such
reconciliation (i) the following rates of exchange for conversion into U.S.
<PAGE>
dollars shall be used: for Australian dollars, $0.6581, for Mexican pesos,
$0.1239, and for Canadian dollars, $0.6991 and (ii) only deposits made as
of December 31, 1997 shall be considered and any amounts "swept" or
transferred to a CCL account shall not be included. Purchaser or CCL, as
the case may be, shall promptly pay to the other the amount shown to be due
by reason of such reconciliation, it being the intent that Purchaser shall
pay CCL for the net cash received as of December 31, 1997.
4. Funding from January 1, 1998 Forward. From January 1, 1998
through the Funding Date, CCL shall continue to support the working capital
needs of Kolmar, the Subsidiaries and the Division, but shall keep a record
of all funds received from, and advanced on behalf of, Kolmar, the
Subsidiaries and the Division. No funds received from, or advanced to,
Kolmar, the Division or a Subsidiary shall increase or decrease the amount
of the intercompany indebtedness as of December 31, 1997 which shall be
settled pursuant to Paragraph 5 below. All amounts received from, or
advanced to, Kolmar, the Division or a Subsidiary shall be reconciled and
OSG or CCL, as appropriate, shall within 45 days following the Closing pay
the other the excess of the amounts received over the amounts advanced.
5. Settlement of Intercompany Accounts. At the Closing, CCL
shall, in a manner satisfactory to Purchaser, cause the satisfaction,
settlement or payment of all indebtedness owing, as of the close of
business on December 31, 1997, from the Business (including the Division,
Kolmar and the Subsidiaries) to CCL or any affiliate or subsidiary of CCL
which is not Kolmar, the Division or a Subsidiary, except "trade payables."
As used in this paragraph 5, "trade payables" means amounts actually
representing the purchase price of goods sold and delivered to the
Division, Kolmar or a Subsidiary by CCL or one of its affiliates or
subsidiaries (excluding Kolmar and its subsidiaries), and reimbursements
due, in accordance with practice prior to September 27, 1997, for services
paid for by CCL or one of its affiliates or subsidiaries (excluding Kolmar
and its subsidiaries), but rendered for the benefit of the Division, Kolmar
or a Subsidiary. In interpreting this paragraph 5, payments of taxes and
charges for the use of money shall not be regarded as services, and amounts
due in respect thereof shall not be "trade payables." "Trade payables"
owing to the Division, Kolmar and the Subsidiaries from CCL or any of its
other subsidiaries or affiliates shall remain outstanding. For this
purpose, any unearned portion of any insurance charge or premium, including
payments to in-house or "captive" insurance programs, shall be deemed a
trade payable due to CCL and paid within thirty (30) days after the
Closing.
6. Pending Litigation. CCL shall have control or "carriage"
of, and shall retain responsibility to defend, and to pay any amounts
representing judgments or settlements with respect to, all items identified
on Schedule 6.12, provided that no payment shall be due with respect to the
case titled William F. McCord vs. Kolmar Laboratories, Inc. and CCL
Industries, Inc. unless and until the costs related to such case exceed the
$134,000 reserved therefor on the Kolmar balance sheet as of September 27,
1997. All amounts paid to defend, settle or satisfy any claim arising from
such matters (except for the first $134,000 paid with respect to the McCord
case, which amount shall be paid by Kolmar) shall be paid whether or not
the $750,000 amount of Losses provided in Section 8.5(a) has been exceeded
and shall not be subject to the limit imposed pursuant to Section 8.5(c).
Any failure to pay such amount shall not be treated as a "Loss" under
Article 8 but may be directly claimed and enforced by OSG without regard to
the provisions of Article 8.
7. Subsidiaries. CCL and CCL Delaware agree to transfer all
issued and outstanding shares of Now Plastics, Inc. and Kolmar Warehouse
Incorporated to a CCL affiliate prior to the Funding Date and to indemnify
OSG and Kolmar against any and all Losses related to or arising from or in
connection with the ownership of such Subsidiaries without regard to the
restrictions of Sections 8.5(a) or 8.5(c). CCL confirms that Designed
Cosmetics, Inc. has been wound up and dissolved.
8. Environmental Matters.
a. Section 1.1(o) shall be amended and restated in its
entirety to read as follows:
"Environmental Laws" means all applicable laws in effect on or
prior to the Closing Date which regulate or relate to (i) the
protection or clean up of the environment; (ii) the use,
treatment, storage, transportation, generation, manufacture,
processing, distribution, handling, or disposal of, or emission,
discharge, or other release of Hazardous Substances, or
otherwise dangerous substances, wastes, pollution, or materials
(whether gas, liquid, or solid); or (iii) the preservation or
protection of soil, waterways, ground water, drinking water,
air, wildlife, plants, or other natural resources;
b. Section 1.1(w) shall be amended and restated in its
entirety to read as follows:
"Hazardous Substances" shall mean any substance, material, or
waste that is subject to regulation, control or remediation
under any Environmental Laws, including, but not limited to,
hazardous substances, hazardous wastes, toxic substances,
petroleum substances, pesticides, and pollutants;
<PAGE>
c. The introductory phrases of subsections 8.5(a) and
8.5(c) shall be amended to read as follows:
Notwithstanding any other provision of this Agreement, but save
and except in respect of the Offsite Locations and the
Additional Locations . . .
d. Section 8.5(b) shall be amended and restated in its
entirety to read as follows:
In respect of all Losses incurred or expenditures made by the
Purchaser, Kolmar, or any of the Subsidiaries, pursuant to
Environmental Laws, by reason of environmental conditions
existing prior to the Closing Date (save and except in respect
of the Offsite Locations and the Additional Locations) and
whether or not the Threshold Amount has been exceeded, the
Purchaser covenants and agrees to pay or cause to be paid by
Kolmar or the Subsidiaries the first $250,000 in such Losses and
expenditures, and CCL's obligation to indemnify and save
harmless the Purchaser relating to such Losses incurred or
expenditures made relating to Environmental Laws will only arise
when and to the extent that the aggregate Losses and
expenditures of the Purchaser, Kolmar and the Subsidiaries
(including for this purpose Kolmar Canada Inc.) relating to
Environmental Laws exceed $250,000 (with such Losses and
expenditures in an aggregate amount equal to the first $250,000
treated as a deductible and not paid); and
e. Section 9.1(c) shall be amended and restated in its
entirety to read as follows:
Any Losses of any Purchaser Party pursuant to Environmental Laws
("Environmental Losses") (i) that arise in respect of those
properties and facilities listed in Schedule 9.1(A) -
Environmental Matters (formerly Schedule 9.1 and redesignated
Schedule 9.1A) (collectively, such schedule of properties and
facilities are herein referred to as "Locations") or (ii) that
arise in respect of those properties and facilities that are
listed on Schedule 9.1(B) (the "Additional Locations"), provided
that as to the Additional Locations the obligation to indemnify
shall arise only when and to the extent the aggregate Losses and
expenditures of the Purchaser, Kolmar, Kolmar Canada Inc. and
the Subsidiaries relating to the Additional Locations exceed
$500,000 (which shall be treated as a deductible) and the
obligation to indemnify with respect to Environmental Losses
relating to the Additional Locations shall be limited to $12,000,000.
f. Section 9.9(d) shall be amended and restated to read
as follows:
CCL will not have any obligation to indemnify the Purchaser from
and against any Losses arising from or related to Environmental
Laws: (i) which are not asserted or required by a third party
(including government entities) or required to bring a property
into compliance with the Environmental Laws; (ii) which do not
relate to an environmental condition on a Real Property or one
of the Offsite Locations or Additional Locations or required to
bring a property into compliance with Environmental Laws,
(iii) arising with respect to any release or disposal of any
Hazardous Substances by the Purchaser; (iv) resulting directly
or indirectly, from the Purchaser, its employees, contractors,
representatives or agents, voluntarily conducting an
investigation, sampling or monitoring of the Offsite Locations
or Additional Locations after the Closing unless required to do
so by a Governmental Entity; (v) resulting from, directly or
indirectly, any voluntary or involuntary after the Closing
action by or omission of the Purchaser, its employees,
contractors, representatives or agents to accelerate or delay
the timing, to increase the cost or further cause, exacerbate,
contribute to or aggravate the leaking, migration or release of
any hazardous Substances at the Offsite Locations or Additional
Locations or on a Real Property; (vi) in the event the Purchaser
fails to give notice as required by Section 9.4 of this
Agreement prior to, in respect of the Real Property, the fifth
anniversary of the Closing Date. The Purchaser acknowledges and
agrees that nothing contained herein absolves it of any
obligation under any Environmental Laws for Losses arising from
any condition that did not exist as of the Closing Date or with
respect to violations of Environmental Laws by the Purchaser,
its employees, contractors, representatives or agents.
9. Certain Deletions.
a. Section 10.9 of the Agreement is hereby deleted in its
entirety.
b. Subsection 1.1(i) and Subsection 1.1 (kk) and all
references to the Closing Statement of Net Assets and the Reference Pro
Forma Statement of Net Assets are hereby deleted in their entirety.
c. Section 5.2 is hereby deleted in its entirety but
Schedule 5.2 shall remain a part of the Agreement.
<PAGE>
10. Certain Additions.
a. CCL agrees not to permit Kolmar de Mexico, S.A. de
C.V. to sell any real estate prior to the Funding Date.
b. CCL agrees to pay all out-of-pocket costs and expenses
relating to the resignation, severance or termination of Craig Hunter and
Peter Bohm, and not to directly or indirectly charge such amounts to
Kolmar, the Division or a Subsidiary. The $100,000 payment to Peter Bohm
on January 4, 1998 in consideration of his covenant not to compete shall be
paid $50,000 by Kolmar and $50,000 by CCL, and the portion paid by CCL
shall not be considered as an advance for purposes of paragraph 4 of this
Amendment. Within two business days of the payment of special bonuses to
Linel Barela and Ronald Yakupcin in an aggregate amount not to exceed
$50,000, CCL shall reimburse Kolmar for such amount.
c. A new sentence shall be added to Section 10.1 as
follows:
CCL agrees not to make any claims, on behalf of itself or any
Subsidiary or Affiliate, against KPMG Peat Marwick which are
based solely on KPMG Peat Marwick allowing Deloitte & Touche LLP
access to the KPMG Peat Marwick work papers pertaining to
Kolmar, the Division and the Subsidiaries.
d. A new sentence shall be added to Section 13.11 as
follows:
Purchaser agrees on behalf of itself and its subsidiaries not to
solicit for employment any of the individuals named on Schedule
13.11A of this Amendment.
e. A new Section 13.13 shall be added to the Agreement,
to read as follows:
13.13 For a period of six years after the Closing Date, CCL
agrees to grant to Purchaser and its representatives reasonable
access to the records of CCL pertaining to the Business, and to
permit the making of copies or extracts from such records, to the
extent needed to file tax returns, respond to inquiries or audits
from tax or other governmental agencies, or to prepare or review
financial statements. All such information shall be used only for
the purpose indicated and shall be preserved as confidential except
as disclosure is required for tax or financial statement purposes.
Nothing in this Section 13.13 is intended to reduce the obligations
of any party under Section 13.12.
11. Conveyance of Division Assets and Assumption of Division
Liabilities. The assets and liabilities to be transferred and assumed
pursuant to Sections 4.1 and 4.3 of the Agreement shall be transferred to
and assumed by Kolmar Canada Inc., a newly formed subsidiary which
Purchaser intends to contribute to Kolmar as of the Closing. Purchaser
guarantees the assumption by Kolmar Canada Inc. of the Assumed Liabilities,
and shall remain directly liable for such assumption. Purchaser represents
and warrants to Sellers that the representations and warranties in Sections
7.1, 7.2 and 7.3 are true, as of the Closing, with respect to Kolmar Canada
Inc. For purposes of Article 8 and Article 9, Kolmar Canada Inc. shall be
a Subsidiary and a part of the Business following the Closing.
To identify the assumed liabilities:
a. The introductory language of Section 4.3 and Subsection
4.3(a) shall be amended to read as follows:
4.3 The Purchaser covenants and agrees to assume and thereafter
discharge, fulfill and perform in accordance with their terms, from and
after the Closing Date, all of the liabilities and obligations of the
Division as of December 31, 1997 and thereafter (except Excluded
Liabilities) including without limitation the following liabilities and
obligations of CCL with respect to the Division (the "Assumed Liabilities"):
(a) all liabilities of the Division related to the
Business included in, reserved against or accrued in
the Division's balance sheet as of December 31, 1997
(b) all liabilities or obligations of CCL under the
Division Contracts and the Assignable Permits;
(c) all employment obligations as provided for in Section
10.7; and
(d) all product warranty obligations as provided in
Section 10.8.
b. CCL shall prepare or cause to be prepared as soon as possible
after the Closing Date, but on or before February 15, 1998 a Division
balance sheet as of December 31, 1997 and the Purchaser covenants and
agrees to provide to CCL all reasonable access to the premises and records
of the Business and all necessary assistance to permit CCL to complete
such balance sheet on a timely basis. The Division balance sheet shall be
<PAGE>
prepared from the books and records of the Business in accordance with
GAAP applied on a basis consistent with the preparation of the Financial
Statements, but will use $0.6991 as the rate of exchange for conversion
into U.S. dollars.
c. Purchaser (with assistance from its accountants if desired)
shall have 15 days following the delivery of the Division balance sheet in
which to review the Division balance sheet, and if, in Purchaser's
Accountants' reasonable judgment, the Division balance sheet does not
fairly present the financial position of the Division as at the close of
business on December 31, 1997, Purchaser shall, within such 15 day period,
deliver to CCL a proposed adjustment to the Division balance sheet. CCL
and the Purchaser shall use their best efforts after the delivery of any
adjustment request to agree upon any proposed adjustments to the Division
balance sheet. If unable to agree, CCL or Purchaser may submit in writing
for resolution to Price Waterhouse, Certified Public Accountants (the
"Independent Accountants") any dispute with respect to the Division
balance sheet which has not been resolved. As promptly as practicable, but
in no event later than 30 days after such submission, CCL and Purchaser
shall deliver to the Independent Accountants written submissions in
support of their respective positions with respect to such dispute, and
CCL and the Purchaser shall cause the Independent Accountants to resolve
such dispute based solely on such written submissions without any
independent investigation of the books and records of the Business. The
costs of the Independent Accountants with respect to the Division balance
sheet shall be divided equally between CCL and the Purchaser. The decision
of the Independent Accountants with respect to the Division balance sheet
shall be final and binding on each of the parties hereto.
d. Upon finalization of the Division balance sheet as of
December 31, 1997, the liabilities included in, reserved against or
accrued therein shall be Assumed Liabilities.
12. Matters Related to Possible Encroachment at Barrie
Facility. CCL agrees to make application, at its cost, to the Committee of
Adjustment of the City of Barrie for approval of any non-compliance of the
existing side yard set-back of the Barrie Facility. CCL will expeditiously
make such application and will pursue all available appeals should the
application not be approved. CCL agrees to keep the Purchaser's solicitors
advised as to the status of the application. In the event the application
is successful, then after expiration of the applicable appeal periods (with
no appeals having been filed), CCL shall have no further obligations with
respect to this matter. In the event the application is unsuccessful
(after exhausting all appeals thereof), CCL shall, at its option and at its
cost, either:
a. make such alterations and reconstruction to the side
of the building where such is in violation of the set-back
requirements as may be required to comply with the current zoning by-
law and any applicable minor variances. The plans for such
alterations and reconstruction shall be subject to the prior approval
of the Purchaser, such approval not to be unreasonably withheld. CCL
shall coordinate its construction schedule with the Purchaser (each
party agreeing to act reasonably) and all work will be completed in a
good and workmanlike manner and in such manner as minimizes the
interference with the Purchaser's activities; or
b. CCL shall obtain title insurance in favor of the
Purchaser and any mortgagees from a reputable title insurer licensed
in Canada which specifically insures over the violation of the side
yard set-back and in an amount satisfactory to the Purchaser, acting
reasonably.
13. Additional Real Property Issues.
CCL agrees to forthwith request from the City of Barrie (the
"City") a Quit Claim Deed of the property described as Part 1 on Plan 51R-
27385. If the City agrees to deliver such Quit Claim Deed, CCL will
deliver such to the Purchaser for registration. If the City agrees to
deliver a Quit Claim Deed only of the approximately 6 inch strip at the
west boundary of the lands described in Instrument No. 01173152 (the
"Strip"), CCL will, at its cost, arrange for a new Reference Plan to be
registered describing the Strip and will deliver such Quit Claim Deed to
the Purchaser for registration. If the City has not delivered either Quit
Claim Deed within six (6) months of Closing CCL will, at its cost, arrange
for a new Reference Plan to be registered describing the Strip (or,
alternatively describing separately both the Strip and the remainder of the
Barrie Facility) and will deliver a Correcting Deed to the Purchaser
conveying only such remainder of the Barrie Facility and quit claiming any
interest in the Strip.
14. Miscellaneous.
a. Capitalized terms used in this letter without
definition are used as defined in the Agreement. The term "Agreement" as
used herein and in the Agreement shall mean the initial Agreement as
modified by this Amendment.
b. Any releases executed by the Purchaser, Kolmar or a
Subsidiary in favor of a director of Kolmar or a Subsidiary shall not
release CCL, CCL Delaware or any Affiliate from any obligations under the
Agreement.
<PAGE>
c. All references in this letter to sections or
paragraphs are, unless clearly indicated to the contrary, references to
the corresponding sections or paragraphs of the Agreement.
In all other respects, the Agreement is confirmed.
Sincerely,
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Joseph Sortais
------------------------------
Title: Chief Financial Officer
[SIGNATURE PAGE CONTINUES]
CONFIRMED AND AGREED:
CCL INDUSTRIES INC.
By: Mel Snider Dated: January 1, 1998
-------------------------------
Title: Senior VP of Finance and
Administration
CCL INDUSTRIES CORPORATION
By: Steven Lancaster Dated: January 1, 1998
----------------
Title: Treasurer
Accepted by Kolmar Canada Inc. to evidence its agreement to
assume the Assumed Liabilities and accept the Purchased Assets.
KOLMAR CANADA INC.
By: David S. Brown Dated: January 1, 1998
--------------------------
Title: Assistant Secretary
Schedule A
Bank Accounts
KOLMAR CANADA:
BANK ACCOUNT
Montreal 2313-1038-318
Montreal 0002-4621-548
KOLMAR:
BANK ACCOUNT
Harris 315-399-6
Wells Fargo 0344-185780
Wells Fargo 0344-220426
Harris 298-377-3
Harris 298-376-5
PNC Bank 9190942226
Harris 315-261-8
Harris 315-350-9
LA Bank 0762329614
Wilmington Trust 36600-6
<PAGE>
Bank of NY 022-4001875
Bank of NY 224-650002
M&I Trust 00-02-7006
MEXICO:
BANK ACCOUNT
Banamex 731555-7
Banamex 731554-9
Bital 4004854-196
Banamex 7461023-5
Banamex 7461018-3
M&I Bank 00300-92546
AUSTRALIA:
BANK ACCOUNT
Westpac 032285550132
AGC 80233107
SCHEDULE 9.1B
1. Imperial Cosmetics, East Stroudsburg, Pennsylvania
2. 45-47 King Road, Hornsby, New South Wales, Australia
3. 149 Victoria Street, Barrie, Ontario
4. Port Jervis, New York, King, Neversink and Skyline Divisions
5. Tlalnepantla, Mexico
6. Adirud, Iscalli, Mexico
7. Milwaukee, Wisconsin
8. Other TSD facilities
a. Omega Rec. Services, Whittier, California
b. Casmalia Resources, Casmalia, California
c. AIMCO, Milton, Ontario
d. Barrie Landfill, Barrie, Ontario
e. RPR Environmental, Stone Creek, Ontario
f. Chem King, Inc., Barrie, Ontario
g. Lynx Environmental, Bowmanville, Ontario
h. Battery Disposal Technology, Clarence, New York
i. Chem-Met Services, Inc., Wyandotte, Michigan
j. Phillip Environmental, Inglewood, California
k. Phillip Environmental, Barrie, Ontario
l. Pyramid Paint Company, Brooklyn, N.Y.
m. Lucas Heights Landfill, Lucas Heights, Australia
n. Environmental Recovery Services, Albury, Australia
o. Liquid Waste Treatment Facility, Lidcomb, Australia
p. Chemical Waste, Silverwater, Australia
SCHEDULE 13.11A
The Hands-Off List provided by CCL is as follows:
<PAGE>
Charlie Argianas Gunter Berk Roger Bos
Paul Cummings Ed Czerwinski Claire Demers
Ron Davis Peter Elleman Antonia Forero
Roger Gieseke Dan Griffin Darren Herrmann
Al Hintz George Inman Howard Isenberg
Steve Lancaster Don Lounsbury Randy Masbruch
Dave Reed Dick Reed Mary Roy
John Scruton Bo Sirota Harry Tourville
Ken Turko John Vogt Janis Wade
Brenda White Andrew Wignall Dan Renn
John Ahrendt Brian Madill
<PAGE>
MODIFICATION AGREEMENT
This confirms our agreement that the site described in a letter
from Geofrey Myers, Esq. to Peter Tennyson, Esq. dated November __, 1997
will be treated as an "Offsite Location" and indemnified pursuant to
Sections 8.5(b) and 9.1 of the Share and Asset Purchase Agreement dated
October 28, 1997 by and among CCL Industries, Inc., CCL Industries
Corporation and Outsourcing Services Group, Inc. even though such site is
not listed on Schedule 9.1 to such Agreement.
December __, 1997 CCL INDUSTRIES, INC.
By: /s/ Its Solicitors Lang, Michener
---------------------------------------------
By: /s/ Geoffrey Myers I have authority to bind
---------------------------------------------
December __, 1997 CCL INDUSTRIES CORPORATION
By: /s/ Its Solicitors Lang, Michener
---------------------------------------------
By: /s/ Geoffrey Myers I have authority to bind
---------------------------------------------
December __, 1997 OUTSOURCING SERVICES GROUP, INC.
By:
--------------------------------------------
By: /s/ Drew Adams
--------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Merger Agreement") is
entered into as of June 20, 1997, by and between AEROSOL COMPANIES HOLDING
CORPORATION, a Delaware corporation ("ACHC"), and AEROSOL SERVICES HOLDING
CORPORATION, a Delaware corporation ("ASHC").
RECITALS:
A. ACHC and ASHC are each corporations duly organized and
existing under the laws of the State of Delaware.
B. On the date of this Merger Agreement, ACHC's authorized
capital consists of 1,000,000 shares of Common Stock, par value $.01 per
share (the "ACHC Common Stock"), of which 700,000 shares are issued and
outstanding.
C. On the date of this Merger Agreement, ASHC's authorized
capital consists of 1,000,000 shares of Common Stock, par value $.001 per
share (the "ASHC Common Stock"), of which 629,842 shares are issued and
outstanding, and 30,000 shares of Preferred Stock, par value $.001 per
share (the "ASHC Preferred Stock"), all of which are issued and
outstanding.
D. The respective Boards of Directors of ACHC and ASHC have
determined that it is advisable and in the best interests of each such
corporation that ACHC merge with and into ASHC upon the terms and subject
to the conditions of this Merger Agreement.
E. The respective Boards of Directors of ACHC and ASHC have,
by resolutions duly adopted, approved this Merger Agreement. The
respective stockholders of ACHC and ASHC have, by a majority of the shares
of each of ACHC and ASHC outstanding, adopted and approved this Merger
Agreement.
F. The parties intend by this Merger Agreement to effect a
"reorganization" under Section 368 of the Internal Revenue Code of 1986,
as amended.
TERMS AND PROVISIONS:
In consideration of the foregoing recitals and of the following
terms and provisions, and subject to the following conditions, it is
agreed:
1. MERGER. At the Effective Time (as defined in this Section
l), ACHC shall be merged with and into ASHC (the "Merger"), ASHC shall be
the surviving corporation of the Merger (hereinafter sometimes referred to
as the "Surviving Corporation"), and the separate corporate existence of
ACHC shall cease. The Merger shall become effective on the date that a
Certificate of Merger is filed with the Secretary of State of the State of
Delaware. The date and time when the Merger shall become effective is
herein referred to as the "Effective Time."
2. GOVERNING DOCUMENTS.
a. The Certificate of Incorporation of ASHC as in effect
immediately prior to the Effective Time shall constitute the Certificate of
Incorporation of the Surviving Corporation without change or amendment
until thereafter amended in accordance with the provisions thereof and
applicable law, except that the Certificate of Incorporation of ASHC shall
be amended at the Effective Time to:
(1) change the name of the Surviving Corporation to
Outsourcing Services Group, Inc.; and
(2) increase the authorized number of shares of ASHC
Common Stock to 2,000,000, and to amend the terms of the
ASHC Preferred Stock to, among other things, authorize
3,750 shares of Series A Preferred Stock (the "ASHC Series
A Preferred Stock") and 26,250 shares of Series B
Preferred Stock (the "ASHC Series B Preferred Stock") as
more fully described in the Certificate of Merger.
b. The Bylaws of ASHC as in effect immediately prior to
the Effective Time shall constitute the Bylaws of the Surviving Corporation
without change or amendment until thereafter amended in accordance with the
provisions thereof and applicable law.
3. OFFICERS AND DIRECTORS. The persons who are listed below
as officers and directors of ASHC shall, after the Effective Time, be the
officers and directors of the Surviving Corporation, without change until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws and
applicable law.
Officers Position
Walter K. Lim Chairman, President
<PAGE>
Samuel D. Garretson Vice Chairman
Howard C. Lim Executive Vice President
John G. Hewson Chief Operating Officer
Joseph W. Sortais Chief Financial Officer,
Treasurer, Secretary
Directors
Walter K. Lim
Samuel D. Garretson
Howard C. Lim
Frank Edelstein
Michael S. Gordon
Joseph A. Marino
John H. Morris
Robert M. Wadsworth
4. NAME. The name of the Surviving Corporation shall be
changed to Outsourcing Services Group, Inc.
5. SUCCESSION. At the Effective Time, the separate corporate
existence of ACHC shall cease, and the Surviving Corporation shall possess
all the rights, privileges, powers and franchises of a public or private
nature and be subject to all the restrictions, disabilities and duties of
ACHC; and all the rights, privileges, powers and franchises of ACHC, and
all property, real, personal and mixed, and all debts due to ACHC on
whatever account, as well as for share subscriptions and all other things
in action, shall be vested in the Surviving Corporation; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving
Corporation as they were of ACHC, and the title to any real estate vested
by deed or otherwise shall not revert or be in any way impaired by reason
of the Merger; but all rights of creditors and liens upon any property of
ACHC shall be preserved unimpaired, and all debts, liabilities and duties
of ACHC shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and
duties had been incurred or contracted by it; provided, however, that such
liens upon property of ACHC will be limited to the property affected
thereby immediately prior to the Merger. All corporate acts, plans,
policies, agreements, arrangements, approvals and authorizations of ACHC,
its stockholders, Board of Directors and committees thereof, officers and
agents which were valid and effective immediately prior to the Effective
Time, shall be taken for all purposes as the acts, plans, policies,
agreements, arrangements, approvals and authorizations of the Surviving
Corporation and shall be as effective and binding thereon as the same were
with respect to ACHC.
6. FURTHER ASSURANCES. From time to time, as and when required
or requested by the Surviving Corporation or by its successors and
assigns, there shall be executed and delivered on behalf of ACHC such
deeds, assignments and other instruments, and there shall be taken or
caused to be taken by it all such further and other action, as shall be
appropriate or necessary in order to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation the title to and possession of all
property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of ACHC and otherwise to carry out the purposes of
this Merger Agreement, and the officers and directors of the Surviving
Corporation are fully authorized in the name and on behalf of ACHC or
otherwise, to take any and all such actions and to execute and deliver any
and all such deeds, assignments and other instruments.
7. CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof:
a. Each share of ASHC Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into, and shall become, 0.756478 fully paid and nonassessable shares of
ASHC Common Stock, rounded to the nearest whole share.
b. Each share of ACHC Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into, and shall become, 1.219115 fully paid and nonassessable shares of
ASHC Common Stock, rounded to the nearest whole share.
c. Each share of ASHC Preferred Stock issued to Nancy N.
Lim and outstanding immediately prior to the Effective Time shall be
converted into, and shall become, one fully paid and nonassessable share of
ASHC Series A Preferred Stock. All accrued and unpaid dividends payable to
Nancy N. Lim on the ASHC Preferred Stock immediately prior to the Effective
Time shall continue to be payable in accordance with the terms of the ASHC
Series A Preferred Stock.
d. Each share of ASHC Preferred Stock issued to Walter
K. Lim and Howard C. Lim and outstanding immediately prior to the Effective
Time shall be converted into, and shall become, one fully paid and
nonassessable share of ASHC Series B Preferred Stock. All accrued and
unpaid dividends payable to Walter K. Lim and Howard C. Lim, respectively,
on the ASHC Preferred Stock immediately prior to the Effective Time shall
be paid to Walter K. Lim and Howard C. Lim upon redemption of the ASHC
Series B Preferred Stock as part of the liquidation dividend preference on
<PAGE>
the Series B Preferred Stock.
8. STOCK CERTIFICATES. At and after the Effective Time, all
of the outstanding certificates which immediately prior to the Effective
Time represented shares of ACHC Common Stock, ASHC Common Stock and ASHC
Preferred Stock shall be deemed for all purposes to evidence ownership of,
and to represent shares of, the ASHC Common Stock, ASHC Series A Preferred
Stock and ASHC Series B Preferred Stock into which the shares formerly
represented by such certificates have been converted as herein provided.
The registered owner on the books and records of ASHC, ACHC or their
transfer agent(s) of any such outstanding stock certificate shall, until
such certificate has been surrendered for transfer or otherwise accounted
for to the Surviving Corporation or its transfer agent, have and be
entitled to exercise any voting or other rights with respect to and to
receive any dividends and other distributions upon the shares of ASHC
Common Stock, ASHC Series A Preferred Stock or ASHC Series B Preferred
Stock evidenced by such outstanding certificate as above provided.
9. REPRESENTATIONS AND WARRANTIES.
a. ACHC hereby represents and warrants to ASHC as
follows:
(1) ACHC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has full corporate power and authority to perform this Agreement and to
conduct its business as it is presently being conducted.
(2) The execution and delivery of this Agreement by
ACHC and the performance of its obligations hereunder have been duly
authorized by the directors and stockholders of ACHC, and no other
corporate action or approval by ACHC is necessary for the execution,
delivery or performance of this Agreement by ACHC. This Agreement has been
duly executed and delivered by ACHC, and is a valid and binding obligation
of ACHC, enforceable against it in accordance with its terms, except as
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, relating to or limiting creditors' rights generally, and (b)
general principles of equity (whether considered in an action in equity or
at law).
b. ASHC hereby represents and warrants to ACHC as follows:
(1) ASHC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has full corporate power and authority to perform this Agreement and to
conduct its business as it is presently being conducted.
(2) The execution and delivery of this Agreement by
ASHC and the performance of its obligations hereunder have been duly
authorized by the directors and stockholders of ASHC, and no other
corporate action or approval by ASHC is necessary for the execution,
delivery or performance of this Agreement by ASHC. This Agreement has been
duly executed and delivered by ASHC, and is a valid and binding obligation
of ASHC, enforceable against it in accordance with its terms, except as
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, relating to or limiting creditors' rights generally, and (b)
general principles of equity (whether considered in an action in equity or
at law).
10. CONDITIONS. The consummation of the Merger and related
transactions are subject to satisfaction of the following conditions prior
to the Effective Time:
a. All necessary action shall have been taken to
authorize the execution, delivery and performance of the Merger Agreement
by ACHC and ASHC.
b. All regulatory approvals necessary or desirable in
connection with the consummation of the Merger and the transaction
contemplated thereby shall have been obtained.
c. No suit, action, proceeding or other litigation shall
have been commenced or threatened to be commenced which, in the opinion of
ACHC or ASHC would pose a material restriction on or impair the
consummation of the Merger, performance of this Merger Agreement or the
conduct of the business of the Surviving Corporation after the Effective
Time, or create a risk of subjecting ACHC or ASHC, or their respective
stockholders, officers or directors, to material damages, costs, liability
or other relief in connection with the Merger or this Merger Agreement.
11. GOVERNING LAW. This Merger Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware
applicable to contracts entered into and to be performed wholly within the
State of Delaware.
12. AMENDMENT. Subject to applicable law and subject to the
rights of the stockholders of ACHC or ASHC further to approve any amendment
which would have a material adverse effect on such stockholders, this
Merger Agreement may be amended, modified or supplemented by written
agreement of the parties hereto at any time prior to the Effective Time
<PAGE>
with respect to any of the terms contained herein.
13. DEFERRAL OR ABANDONMENT. At any time prior to the
Effective Time, this Merger Agreement may be terminated and the Merger may
be abandoned or the time of consummation of the Merger may be deferred for
a reasonable time by the Board of Directors of either ACHC or ASHC, or
both, notwithstanding approval of this Merger Agreement by the stockholders
of either ACHC or ASHC, or both, if circumstances arise which, in the
opinion of the Board of Directors of ACHC or ASHC, make the Merger
inadvisable or such deferral of the time of consummation advisable.
14. COUNTERPARTS. This Merger Agreement may be executed in
any number of counterparts, each of which when taken alone shall constitute
an original instrument and when taken together shall constitute one and the
same Agreement.
15. ASSURANCE. ACHC and ASHC agree to execute any and all
documents, and to perform such other acts, which may be necessary or
expedient to further the purposes of this Merger Agreement.
[Signature Page Follows]
[SIGNATURE PAGE - MERGER AGREEMENT]
IN WITNESS WHEREOF, ACHC and ASHC have caused this Merger
Agreement to be signed by their respective duly authorized officers and
delivered as of the date first written above.
AEROSOL COMPANIES HOLDING
CORPORATION, a Delaware corporation
By: /s/ Joseph Sortais
-------------------------------
Joseph W. Sortais
Chief Financial Officer
ATTEST:
By: /s/ Walter Lim
------------------------
Walter K. Lim, President
AEROSOL SERVICES HOLDING
CORPORATION, a Delaware corporation
By: /s/ Joseph Sortais
--------------------------------
Joseph W. Sortais
Chief Financial Officer
ATTEST:
By: /s/ Walter Lim
------------------------
Walter K. Lim, President
<PAGE>
STOCK PURCHASE AGREEMENT
Dated as of June 27, 1996
By and Among
AEROSOL COMPANIES HOLDING CORPORATION,
SAMUEL D. GARRETS0N,
GAERETSON, O'SULLIVAN CHARITABLE TRUST,
AND OTHER SHAREHOLDERS
and
PIEDMONT LABORATORIES, INC.
TABLE OF CONTENTS
Page
ARTICLE I GENERAL . . . . . . . . . . . . . . . . . . . . . 2
1.1 Sale and Purchase of Company Common Stock . . . . 2
1.2 Purchase Price . . . . . . . . . . . . . . . . . . 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
SELLERS AND COMPANY . . . . . . . . . . . . . . . 2
2.1 Organization . . . . . . . . . . . . . . . . . . . 2
2.2 Authorization . . . . . . . . . . . . . . . . . . 2
2.3 No Conflict . . . . . . . . . . . . . . . . . . . 3
2.4 Capitalization; No Subsidiaries . . . . . . . . . 4
2.5 Financial Statements . . . . . . . . . . . . . . . 4
2.6 Absence of Certain Facts or Events . . . . . . . . 5
2.7 Property, Leases and Liens . . . . . . . . . . . . 7
2.8 Contracts and Commitments . . . . . . . . . . . . 7
2.9 Permits and Authorizations . . . . . . . . . . . . 8
2.10 No Violations . . . . . . . . . . . . . . . . . . 9
2.11 Proceedings . . . . . . . . . . . . . . . . . . . 9
2.12 Insurance . . . . . . . . . . . . . . . . . . . . 10
2.13 Proprietary Information and Rights . . . . . . . . 10
2.14 Employee Benefits . . . . . . . . . . . . . . . . 10
2.15 Employment Laws . . . . . . . . . . . . . . . . . 13
2.16 Environmental Laws . . . . . . . . . . . . . . . . 14
2.17 Taxes . . . . . . . . . . . . . . . . . . . . . . 15
2.18 No Unlawful Contributions . . . . . . . . . . . . 16
2.19 No Insider Transactions . . . . . . . . . . . . . 16
2.20 Accounts Receivable; Customers . . . . . . . . . . 17
2.21 Inventories . . . . . . . . . . . . . . . . . . . 17
2.22 Bank Accounts . . . . . . . . . . . . . . . . . . 18
2.23 Warranties . . . . . . . . . . . . . . . . . . . . 18
2.24 Delivery of Documents . . . . . . . . . . . . . . 18
2.25 No Finders or Brokers . . . . . . . . . . . . . . 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
PURCHASER . . . . . . . . . . . . . . . . . . . . 18
3.1 Organization . . . . . . . . . . . . . . . . . . . 18
3.2 Authorization . . . . . . . . . . . . . . . . . . 19
3.3 No Conflict . . . . . . . . . . . . . . . . . . . 19
3.4 Investment Intent . . . . . . . . . . . . . . . . 19
3.5 No Finders or Brokers . . . . . . . . . . . . . . 20
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . 20
4.1 Confidentiality . . . . . . . . . . . . . . . . . 20
4.2 Delivery of Financial Statements . . . . . . . . . 21
4.3 Fulfillment of Conditions . . . . . . . . . . . . 21
4.4 Purchaser's Access to Records and
Inspection Rights . . . . . . . . . . . . . . . . 22
4.5 Operation in Ordinary Course . . . . . . . . . . . 22
4.6 Post-Closing Access by Sellers . . . . . . . . . . 22
<PAGE>
4.7 Termination of Affiliate Relationships . . . . . . 23
4.8 Bank Accounts . . . . . . . . . . . . . . . . . . 23
4.9 Indebtedness of Sellers to Company . . . . . . . . 23
ARTICLE V CONDITIONS OF CLOSING . . . . . . . . . . . . . . 23
5.1 Conditions of Obligations of Purchaser . . . . . . 23
(a) Representations and Warranties;
Performance of Obligations . . . . . . . 23
(b) Certificate and Deliveries by
Sellers . . . . . . . . . . . . . . . . 24
(c) No Injunction . . . . . . . . . . . . . 24
(d) Management Equity Purchase . . . . . . . 24
(e) Financing . . . . . . . . . . . . . . . 24
(f) Other Consents . . . . . . . . . . . . . 24
(g) Certificates and Instruments of
Transfer . . . . . . . . . . . . . . . . 24
(h) Stockholders Agreement . . . . . . . . . 25
(i) Employment and Non-Competition
Agreement . . . . . . . . . . . . . . . 25
(j) Opinion of Counsel to Sellers and
Company . . . . . . . . . . . . . . . . 25
(k) Due Diligence . . . . . . . . . . . . . 25
(l) No Material Adverse Change . . . . . . . 25
5.2 Conditions of Obligations of Sellers . . . . . . . 25
(a) Representations and Warranties;
Performance of Obligations . . . . . . . 25
(b) Certification by Purchaser . . . . . . . 26
(c) No Injunction . . . . . . . . . . . . . 26
(d) Employment and Non-Competition
Agreement . . . . . . . . . . . . . . . 26
(e) Opinion of Counsel to Purchaser . . . . 26
(f) Purchase Price . . . . . . . . . . . . . 26
(g) Release of Guaranties . . . . . . . . . 26
ARTICLE VI CLOSING DATE AND TERMINATION OF
AGREEMENT . . . . . . . . . . . . . . . . . . . . 27
6.1 Closing Date . . . . . . . . . . . . . . . . . . . 27
6.2 Termination of Agreement . . . . . . . . . . . . . 27
6.3 Effect of Termination . . . . . . . . . . . . . . 27
ARTICLE VII INDEMNIFICATION . . . . . . . . . . . . . . . . . 27
7.1 Indemnification by Sellers . . . . . . . . . . . . 27
7.2 Indemnification by Purchaser . . . . . . . . . . . 29
7.3 Survival of Representations and
Warranties; Reliance . . . . . . . . . . . . . . . 30
7.4 Sole Remedy . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . 31
8.1 Further Actions . . . . . . . . . . . . . . . . . 31
8.2 Expenses . . . . . . . . . . . . . . . . . . . . . 31
8.3 Entire Agreement . . . . . . . . . . . . . . . . . 32
8.4 Descriptive Headings . . . . . . . . . . . . . . . 32
8.5 Notices . . . . . . . . . . . . . . . . . . . . . 32
8.6 Governing Law . . . . . . . . . . . . . . . . . . 33
8.7 Assignability . . . . . . . . . . . . . . . . . . 34
8.8 Waivers and Amendments . . . . . . . . . . . . . . 34
8.9 Third Party Rights . . . . . . . . . . . . . . . . 34
8.10 Public Announcements . . . . . . . . . . . . . . . 34
8.11 Counterparts . . . . . . . . . . . . . . . . . . . 35
APPENDIX A
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . 38
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of June 27, 1996 (this
"Agreement") by and among AEROSOL COMPANIES HOLDING CORPORATION, a Delaware
corporation ("Purchaser"), SAMUEL D. GARRETSON, an individual ("Garretson")
<PAGE>
MICHAEL J. GARRETSON and GREGORY G. GARRETSON (together with GARRETSON (the
"Garretsons"), IAN GECKER ("Gecker"), CARL H. TRIESHMANN ("Trieshmann"),
GARRETSON, O'SULLIVAN CHARITABLE TRUST (the "Garretson Trust" and with
Garretsons, Trieshmann and Gecker the "Sellers") and PIEDMONT LABORATORIES,
INC., a Georgia corporation ("Company). Capitalized terms not otherwise
defined in this Agreement are used as defined in Appendix A hereto.
W I T N E S S E T H
WHEREAS, Sellers are the record and beneficial owners all issued
and outstanding shares of Common Stock, no par value per share (the
"Company Common stock"), of Company;
WHEREAS, Sellers desire to sell all outstanding Company Common
Stock to Purchaser upon the terms and conditions set forth below;
WHEREAS, Purchaser desires to purchase all Company Common Stock
from Sellers upon the terms and conditions set forth below; and
WHEREAS, Company expects to benefit from the consummation of the
transactions contemplated hereby and, to induce Purchaser to enter into
this Agreement, agrees to be bound by the terms and provisions in this
Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived and the representations and warranties, conditions and promises
herein contained, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I.
GENERAL
1.1 Sale and Purchase of Company Common Stock. At the Closing,
Sellers shall sell, transfer, assign and deliver unto Purchaser and its
successors and assigns forever, and Purchaser shall purchase, all
outstanding Company Common Stock for the purchase price hereinafter set
forth.
1.2 Purchase Price
Amount of Purchase Price. In consideration for the purchase
of Company Common Stock, Purchaser shall pay to Sellers at the Closing pro
rata based on the number of shares of Company Common Stock held by each at
the Closing, Thirteen Million Dollars ($13,000,000) (the "Purchase Price")
. Purchaser shall also obtain the releases of any guarantees of Company
indebtedness made by Sellers and acknowledges that the Company's
indebtedness to third parties will remain outstanding.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND COMPANY
A. Company and each of the Sellers hereby represent and warrant to
Purchaser as follows:
2.1 Organization. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Georgia and has the corporate power and authority to conduct its business
as it is presently being conducted and to own and lease its properties and
assets. Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which (i) such
qualification is necessary under the applicable law as a result of its
conduct of its business, and (ii) where the failure to be so qualified
would have a Material Adverse Effect.
2.2 Authorization. The execution and delivery of this Agreement
by Company and the performance of its obligations hereunder have been duly
authorized by the directors and the stockholders of Company and no other
corporate action or approval by Company is necessary for the execution,
delivery or performance of this Agreement by Company. This Agreement has
been- duly executed and delivered by Company and Sellers and is a valid and
binding obligation of Company and each Seller, enforceable against each of
them in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, relating to or limiting
creditors' rights generally and (b) general principles of equity (whether
considered in an action in equity or at law).
2.3 No Conflict. Neither the execution and delivery of this
Agreement by Company or any Seller nor the consummation of the transactions
contemplated hereunder nor the fulfillment by Company or any Seller of any
of its terms will, except as described on Schedule 2.3:
(a) conflict with or result in a breach by Company or any Seller
of, or constitute default by it under, or create an event that, with the
giving of notice or the lapse of time, or both, would be a default under or
breach of, any of the terms, conditions or provisions of (i) any indenture,
mortgage, lease, deed of trust, pledge, loan or credit agreement involving
<PAGE>
$25,000 or more, or any other material contract, arrangement or agreement
to which Company or Seller is a party or to which any material portion of
the assets of Company is subject, (ii) the Articles of Incorporation or
Bylaws of Company, or (iii) any judgment, order, writ, injunction, decree
or demand of any Governmental Entity which materially affects Sellers or
Company, or materially affects the Company's ability to conduct its
business or own or convey its assets;
(b) result in the creation or imposition of any lien, charge or
Encumbrance of any nature whatsoever upon any material portion of the
assets of Company or which materially affects the Company's ability to
conduct its business as conducted prior to the date of this Agreement; or
(c) cause a loss or adverse modification of any permit, license,
or other authorization granted by a Governmental Entity to or otherwise
held by Company which is necessary or materially useful to Company's
business.
Except for this Agreement, neither any Seller nor Company has any legal
obligation, absolute or contingent, to any other Person to sell any capital
stock, the business, or substantially all of the assets of Company or to
effect any merger, consolidation or other reorganization of Company or to
enter into any agreement with respect thereto.
2.4 Capitalization; No Subsidiaries. Company's authorized capital
stock consists of (a) 1,000 shares of Company Common Stock, of which 170
shares are issued and outstanding. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and non-assessable.
There are no outstanding options, warrants or other rights to acquire, or
any securities or obligations convertible into or exchangeable for, any
shares of the capital stock of Company which have been issued or granted by
or are binding upon Sellers or Company or, to the knowledge of Sellers, by
any other Person. Each Seller is the record and beneficial owner of the
number of shares of Company Common Stock set forth opposite such person's
name on Schedule 2.4, free and clear of all Encumbrances. Company has no
Subsidiaries. The delivery to Purchaser at Closing of certificates
evidencing all outstanding Company Common Stock will convey and transfer to
Purchaser, good, complete and marketable title to all capital stock of
Company, free and clear of restrictions or conditions to transfer or
assignment (other than restrictions on transfer imposed by federal or state
securities laws) and free and clear of all defects of title or
Encumbrances.
2.5 Financial Statements
(a) Company has delivered to Purchaser the audited balance sheets
of Company as of October 1, 1995, October 2, 1994, and October 3, 1993, and
the related statements of income and retained earnings and cash flows for
the fiscal years then ended, accompanied by the unqualified opinion of
Moore, Colson and Company, P.C., and the unaudited balance sheets and
related statements of income and retained earnings and cash flow for the
seven-month period ended May 4, 1996 (the "Financial Statements") . Except
as set forth in Schedule 2.5, the Financial Statements (i) are prepared in
accordance with GAAP consistently applied as at the dates and for the
periods covered thereby (except that the May 4, 1996 statements are subject
to year-end adjustments and are not accompanied by footnote disclosures),
(ii) present fairly in all material respects the financial position and
results of operations and cash flows of Company as of the dates and for the
periods then ended, (iii) are in agreement with the books and records of
Company in all material respects, and (iv) contain and reflect adequate
reserves, in accordance with GAAP, for all reasonably anticipated losses,
costs and expenses.
(b) Except as set forth in Schedule 2.5 hereto, Company has no
liabilities or obligations, either accrued, contingent or otherwise, which,
individually or in the aggregate, are material to Company, and which have
not been reflected in the Financial Statements. Except as set forth in the
Financial Statements or Schedule 2.5 hereto, there are no facts known to
Company or to any Seller or any other reasonable legal basis known to the
Company or any Seller which the Company or any Seller has recognized as
reasonably likely to give rise to any material claims against or
liabilities or obligations of Company.
(c) Company has, in accordance with good business practices,
maintained substantially complete and accurate books and records, including
financial records which fairly present its financial condition in all
material respects and substantially correct records of all its material
corporate proceedings.
2.6 Absence of Certain Facts or Events. Except as listed on
Schedule 2.6, since October l, 1995 there has not been:
(a) any material adverse change in (i) the financial condition of
Company from that shown on the October l, 1995 balance sheet, or (ii) the
results of operations of Company from that shown in the statements of
operations and cash flows of Company for the twelve-month period ended
October l, 1995;
(b) any material damage, destruction or loss to the assets or
business of Company, whether covered by insurance or not;
(c) any increase in the compensation payable or to become payable
<PAGE>
by Company to any employee, officer or director whose fiscal 1995 annual
remuneration exceeded $50,000, or in the coverage or benefits under any
bonus, insurance, pension or other Benefit Plan (excluding annual length-
of-service and similar adjustments to the benefits of individual
participants);
(d) any issuance of capital stock of Company or options or rights
to acquire capital stock of Company, any redemption or repurchase of
outstanding shares of capital stock of Company, any declaration, setting
aside or payment of any dividend or distribution thereon, any merger of
Company with any Person, any purchase or other acquisition by Company of
capital stock or other interest in any other Person, any purchase or other
acquisition by Company of all or substantially all of the business or
assets of any other Person, any transfer or sale of a substantial portion
of the Company's business or assets to any Person, any transaction between
Company and Sellers or their Affiliates, or any agreement to take any such
actions;
(e) any sale, assignment or transfer of any contractual rights,
claims or other assets of Company valued at more than $50,000 individually,
or more than $150,000 in the aggregate, other than in the ordinary course
of business consistent with past practice;
(f) any mortgage, pledge, or other lien placed on Company assets
to secure debt, or Encumbrance placed on assets of the Company which would
prevent or materially limit the use, modification or sale of an asset
valued at $50,000 or more;
(g) the incurrence of any obligation or liability of Company as a
result of borrowed money (except pursuant to existing credit agreements) or
any capital expenditure in either case, in excess of $20,000 and not
described as planned or contemplated on Schedule 2.6, or, to the knowledge
of Sellers or the Company, any commitment to borrow money entered into by
Company, or any increase in any loans made or agreed to be made by Company;
(h) any failure to pay or perform any obligation of Company
involving more than $50,000 as, when and to the extent due other than
pursuant to a good faith defense or right of setoff;
(i) any intentional or, to the knowledge of any Seller or the
Company, other waiver of any rights of substantial value to Company or any
amendment or termination of any agreement to which Company is a party which
materially adversely affects, or is reasonably likely to materially
adversely affect, the Company's results of operations or its financial
condition;
(j) any material transaction entered into or consummated by
Company, except in the ordinary course of business consistent with past
practice;
(k) any material addition to or modification of the Benefit Plans
of Company or other arrangements or practices affecting personnel of
Company (other than extensions of coverage thereunder to employees of
Company who became eligible after October l, 1995 in accordance with the
terms of such Benefit Plans); or
(l) any formal notification, or, to the best knowledge of Sellers
and the Company, any informal notice, from any customer of Company
identified on Schedule 2.20 that such customer anticipates its annual
purchases from Company to decrease in any material respect.
2.7 Property Leases and Liens
(a) Schedule 2.7 hereto accurately sets forth as of June 30, 1996
all owned or leased real properties and all items of equipment and other
personal property of Company having an individual book value in excess of
$1,000 which are used or necessary for the conduct of Company's business in
accordance with past practice (the "Properties") and contains with respect
to each of the Properties a list of (i) all leases, franchises and similar
agreements creating, or materially modifying or altering rights to such
Property, including zoning or use restrictions, and (ii) all Indebtedness
secured by any Encumbrance on any such Property, specifying the nature
thereof and the holder of such Indebtedness. To Sellers' and Company's
knowledge, the agreements, contracts and commitments listed in schedule 2.7
are in full force and effect without any material default, waiver or
indulgence thereunder by Company or by any other party thereto. Except as
noted on Schedule 2.7, Company has good and marketable title to all
Properties and other assets of Company, in each case, free and clear of all
Encumbrances of any nature whatsoever.
(b) Except as noted on Schedule 2.7, all Properties of Company are
in a reasonably good state of repair (subject to ordinary wear and tear),
are in operable condition, have been maintained in accordance with
Company's historical practice and are suitable for the uses for which they
are presently being used in the business of Company.
2.8 Contracts and Commitments
(a) Except as set forth in Schedule 2.8, Company has no (i)
collective bargaining agreements, or any agreements that contain any
severance pay liabilities or obligations; (ii) employment, consulting or
similar agreement, contract or commitment which is not terminable without
<PAGE>
penalty or cost by Company on notice of thirty (30) days or less or
contains an obligation of Company to pay and/or accrue more than $50,000
per year; (iii) lease of real or personal property having a term in excess
of one year or remaining payments of $25,000 or more (as lessor or lessee);
(iv) note or other evidence of Indebtedness for borrowed money or the
deferred purchase price of property or services which involves a liability
of more than $25,000; (v) agreement of guaranty or indemnification (other
than rights of indemnification to which officers, directors, employees and
agents of Company may be entitled by reason of the laws of any state, or by
the Bylaws or the Articles of Incorporation of Company); (vi) agreement,
contract or commitment limiting the freedom of Company to engage in any
line of business or compete with any Person; (vii) agreement, contract or
commitment relating to expenditures in excess of $50,000; (viii) agreement,
contract or commitment relating to the acquisition of assets of, or any
interest in, any business enterprise involving individual or aggregate
payments in excess of $50,000; or (ix) other agreement, contract or
commitment (with customers or other Persons) which involves $50,000 or more
and is not cancelable without penalty or cost within sixty (60) days.
(b) Except as set forth in Schedule 2.8: (i) Company is not
materially in violation of, nor has Company received in writing any claim
that it has breached, any of the terms or conditions of any agreement,
contract or commitment set forth or required to be set forth in any of the
schedules to this Agreement (collectively the "Contracts") in such manner
as would permit any other party there to cancel or terminate the same or
impose a fee or charge as a result of such breach, if any such breach or
breaches singly or in the aggregate is reasonably likely to have a Material
Adverse Effect; (ii) to the knowledge of Company and Sellers, each Contract
is in full force and effect in the form delivered to Purchaser and there is
no material breach or default by any party thereto; and (iii) to the
knowledge of Company and Sellers, there are no facts or conditions which
have occurred or are, based on facts presently known to exist, anticipated
which, through the passage of time or the giving of notice, or both, would
constitute a material default under any Contract or would cause the
acceleration of any obligation of any party thereto or the creation of an
Encumbrance which is reasonably likely to materially limit the use,
modification or sale of any asset of Company valued at more than $50,000.
2.9 Permits and Authorizations
(a) Schedule 2.9 lists each consent, license, permit, grant or
other authorization of a Governmental Entity pursuant to which Company
conducts all or a material part of its business or holds any of its
material assets (herein collectively called "Authorizations"). To the
knowledge of Company and Sellers, all Authorizations are in full force and
effect and constitute all Authorizations required to permit Company to
operate its assets and conduct its business following the Closing Date as
such assets and business are presently operated and conducted. schedule 2.9
also discloses all proposed or pending applications for Authorizations, and
all applications for variances from compliance, or postponement of the
dates for compliance with any laws or regulations affecting Company or its
business.
(b) Schedule 2.9 identifies all Authorizations which materially
restrict the present output of Company, which limit the term of possession
or operation of any material assets of the Company, or which pertain to
environmental discharge.
(c) Except as shown on Schedule 2.9, neither Company nor any
Seller has been notified or presently has reason to believe any of the
Authorizations will not in the ordinary course be renewed upon its
expiration. The foregoing statement shall not be deemed inaccurate by
reason of the ordinary expiration of routine Authorizations, the renewal of
which is expected to be obtained in the ordinary course without
interruption of existing operations.
(d) Except as shown on Schedule 2.9, Company has not received in
writing, or to the knowledge of Company or sellers, otherwise, any claim or
assertion that it has breached any of the terms or conditions of any
Authorizations in such manner (i) as would permit any other Person to
cancel, terminate or materially amend any Authorization necessary to permit
the continued operation of the Company as presently conducted or (ii) that
any such breach or breaches singly or in the aggregate is reasonably likely
to have a Material Adverse Effect.
2.10 No Violations
(a) Except as described on schedule 2.10 hereto, to the knowledge
of Company and Sellers, Company is not in violation of any applicable law,
statute, order, rule or regulation promulgated or judgment entered (or,
with respect to rules and regulations of administrative agencies, known by
Sellers to be proposed) by any Governmental Entity in a manner which is
reasonably likely to have a Material Adverse Effect.
(b) Except for those filings listed on schedule 2.10 hereto, no
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Entity is required to be made or
obtained by any Seller or Company in connection with the execution,
delivery and performance by Sellers and Company of this Agreement and the
consummation of the transactions contemplated hereby.
2.11 Proceedings. Schedule 2.11 lists all suits, actions and other
<PAGE>
legal proceedings and all other controversies, and, to Sellers' or
Company's knowledge, governmental investigations, pending against a Seller
or Company or as to which either a seller or the Company has received in
writing any claim or assertion. Except as set forth on schedule 2.11
hereto, there are no facts which Seller or the Company has recognized as
reasonably likely to lead to any additional investigation being conducted
or to any other suit, action or legal proceeding.
2.12 Insurance. Schedule 2.12 lists all insurance policies under
which Company is an insured or a beneficiary or for which it is liable to
pay premiums and further sets forth the name of the insurer, type of
coverage, policy limits and deductibles, if any, and the annual premium for
each such policy. Company has furnished Purchaser copies of all such
policies and a history of all claimed losses in the past five (5) years.
Except as noted on Schedule 2.12, the policies listed thereon will be
outstanding and in full force and effect on the Closing Date.
2.13 Proprietary Information and Rights. Schedule 2.13 hereto
accurately lists all patents, patent applications, patent and know-how
licenses, proprietary formulae, trademarks, service marks, trademark
registrations and applications, trade names, fictitious business names,
computer software and other intellectual property rights (collectively,
"Business Rights") used by Company. schedule 2.13 discloses the identity of
each other person which, to the knowledge of sellers or the Company, owns
any right, title or interest in and to the Business Rights. To the
knowledge of sellers and the Company, no Business Rights conflict with,
infringe on or otherwise violate any rights of others, or require payments
to be made to any Person, or are subject to any pending or overtly
threatened litigation or other adverse claims or infringement by other
Persons, except as set forth in schedule 2.11 or Schedule 2.13. There has
been no written, or to the knowledge of Company or Sellers, other claim of
infringement by Company of any domestic or foreign patents, trademarks,
service marks or copyrights of any other Person.
2.14 Employee Benefits
(a) Schedule 2.14 sets forth a list of all "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, ("ERISA")) and all other profit-sharing,
deferred compensation, bonus, stock option, stock purchase, vacation pay,
holiday pay, pension, retirement plans, medical and other compensation or
benefit arrangements maintained or contributed to or required to be
contributed to by Company for the benefit of its employees (or former
employees) and/or their beneficiaries; including a complete listing of all
plans with respect to which Company has made contributions or payments
within six (6) years prior to Closing or is required to make payments,
transfers or contributions (collectively, "Benefit Plans").
(b) Company has delivered to Purchaser true and complete copies
of:
(i) Each Benefit Plan and any related funding agreements
(e.g., insurance contracts or trusts), including all amendments;
(ii) The current draft of the Summary Plan Description
pertaining to each Benefit Plan for which a Summary Plan Description is
required by ERISA or by the terms of such Benefit Plan;
(iii) The three (3) most recent annual reports for each
Benefit Plan (including all relevant schedules) for which such annual
reports are required;
(iv) The most recently filed PBGC Form l (if applicable); and
(v) The Internal Revenue Service determination letter (if
applicable) for each Benefit Plan and each amendment thereto.
(c) Each Benefit Plan has been established, maintained and
administered in all material respects in accordance with its terms and any
related agreements, and with all applicable laws, and, if intended to
qualify under Code Section 401(a), is so qualified and with respect to each
Benefit Plan that is subject to Title IV of ERISA:
(i) Neither Company nor any Affiliate of Company has ever
contributed or been obligated to contribute to any "multi-employer plan"
(as defined in Section 3(37) of ERISA) on account of any withdrawal from
such Benefit Plan;
(ii) No such Benefit Plan subject to a funding requirement has
been terminated at a time when such Benefit Plan was not sufficiently
funded;
(iii) Except as otherwise provided on Schedule 2.14, the
value, determined on a termination basis, of all accrued benefits
(whether or not vested) under each such Benefit Plan did not exceed, as
of the most recent valuation date, and will not exceed as of the time of
filing, the then current fair market value of the assets of such Benefit
Plan.
(d) All contributions and other payments to be made to each
Benefit Plan under the terms of that Benefit Plan, ERISA, the Internal
Revenue Code ("Code") or any other applicable law have been timely made and
<PAGE>
all contributions made have been fully deductible under the Code. The
books of Company properly reflect all amounts required to be accrued as
liabilities to date under each Benefit Plan.
(e) In the case of each Benefit Plan, there is no accumulated
funding deficiency (within the meaning of Section 4971 of the Code),
whether or not such deficiency has been waived, or any other unfunded
liability.
(f) Each Benefit Plan complies currently, and in all material
respects, in form and operation, with all applicable law including ERISA,
the Code, and the continuation coverage rules of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), Code section 4980B or part 6
of Title I of ERISA.
(g) Except as set forth on Schedule 2.14, to the knowledge of
Company and Sellers, no "prohibited transactions" (as defined in Section
4975(c)(1) of the Code) or breaches of fiduciary duty involving Company, a
Seller, or a director or officer of Company, have occurred with respect to
any of the Benefit Plans.
(h) All trusts maintained in connection with a Benefit Plan,
including trusts that are intended to comply with the provisions of Code
section 501(c)(9) or section 501(c)(17) , are exempt from federal income
taxation under Code section 501(a) and there has been no written or, to
Sellers' and Company's knowledge, other claims, of noncompliance or failure
to properly maintain, operate or administer any Benefit Plan (or a related
trust) which has rendered or is reasonably likely to render such Benefit
Plan or trust, or Company, subject to or liable for any taxes, penalties or
liabilities to any person.
(i) There is no contract, agreement, or benefit arrangement
covering any employee of Company which, individually or collectively, could
give rise to the payment of any amount which would constitute an "excess
parachute payment" (within the meaning of Section 280G of the Code).
(j) Neither Company nor any of its Affiliates maintains any
Benefit Plan that provides severance pay or medical benefits to one or more
former employees (including retirees), or provides for post-retirement
benefits to present or former employees, other than benefits that are
required to be provided pursuant to COBRA or state law conversion rights.
(k) To the knowledge of Company and Sellers, there are no
investigations, proceedings, or lawsuits, either currently in progress, or,
on the basis of facts or circumstances recognized by Company or Sellers,
expected to be instituted in the future, against (i) any Benefit Plan, or
(ii) any Fiduciary of such plan (within the meaning of Section 3(21)(A) of
ERISA) brought on behalf of any participant, beneficiary or Fiduciary
thereunder, or by any Governmental Entity.
2.15 Employment Laws. Except as shown on Schedule 2.15:
(a) Company is in compliance in all material respects with all
federal, state or other applicable laws, respecting employment and
employment practices, terms and conditions of employment, wages and hours,
affirmative action and occupational safety (except for violations or
failures to comply which are not reasonably likely to result in a Material
Adverse Effect), and has not received notice of, and, to the knowledge of
Company and Sellers, is not engaged in, any unfair labor practice.
(b) No unfair labor practice complaint against Company is pending
before the National Labor Relations Board.
(c) There is no labor strike, dispute, slowdown or stoppage
actually pending or, to Sellers' knowledge, threatened against or affecting
Company.
(d) Except to the extent expressly provided herein, there are no
material claims, grievances or arbitration proceedings, workers'
compensation proceedings, labor disputes (including charges of violations
of any federal, state or local laws or regulations relating to current or
former employees (including retirees) or current or former applicants for
employment), governmental investigations, or administrative proceedings of
any kind pending or, to the best knowledge of Company and Sellers,
threatened against or relating to Company, its employees or employment
practices, or operations as they pertain to conditions of employment; nor
is Company or a Seller to their knowledge, subject to any order, judgment,
decree, award, or administrative ruling arising from any such matter.
(e) No collective bargaining agreement is currently in existence
or is being negotiated by Company and as of the date of this Agreement no
labor organization has been certified or recognized as the representative
of any employees of Company or, to the knowledge of Company or Sellers, is
seeking such certification or recognition.
(f) Company's contracts with temporary personnel agencies
represent bona-fide, arms-length agreements and the personnel provided by
such agencies are not, to the knowledge of Company or Sellers, Company's
employees for purposes of any federal, state or local laws, including laws
pertaining to tax withholding, provision of benefits or union
representation.
<PAGE>
2.16 Environmental Laws
(a) Except as disclosed on Schedule 2.16, (i) the assets and the
business of Company have been operated in compliance in all material
respects with all applicable Environmental Laws, (ii) to the knowledge of
Sellers and the Company, there has been no production, storage, Release, or
disposal of any Hazardous Materials in any material quantity at, in, on
under, about or from any of the Properties by or on behalf of Company or by
any previous owner or tenant of the Properties, (iii) to the knowledge of
Sellers and Company, there has been no production, storage, Release or
disposal of any Hazardous Materials in any material quantity by or on
behalf of Company at any other site, (iv) there are no underground storage
tanks or electrical equipment containing PCB's on the Properties, or, to
the knowledge of Sellers and Company any asbestos-containing materials on
the Properties, and (v) no Governmental Entity or any other Person has
issued to Company or, to the knowledge of Company or Sellers, commenced any
notice of violation, notice to comply, compliance schedule, administrative
or judicial complaint, enforcement action or lien with respect to alleged
violations of Environmental Laws by or on behalf of Company or relating to
the Properties, or, to the knowledge of Company and Sellers, any proceeding
or inquiry with respect to any actual or alleged violation of any
Environmental Law or any release or alleged release of a Hazardous Material
by or on behalf of Company or relating to the Properties.
(b) "Environmental Law" shall mean all laws, federal, state or
local, including statutes, regulations, rules, ordinances and orders which
purport to regulate the Release of Hazardous Materials to the environment,
or impose requirements relating to environmental protection or public or
employee health and safety, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq., the
Emergency Planning and Community Right-to-Know Act, as amended, 42 U.S.C.
Section 11001 et seq., the Clean Air Act, as amended, 42 U.S.C. Section
7401 et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act, as amended,
15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, as amended,
42 U.S.C. Section 300f et seq., the Federal Insecticide, Fungicide &
Rodenticide Act, as amended, 7 U.S.C. Section 136 et seq., the Federal
Food, Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq., and
the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651
et seq.
(c) "Hazardous Material(s)" shall mean any substance which is (i)
defined as a hazardous substance, hazardous material, hazardous waste,
pollutant, contaminant or words of similar import under any Environmental
Law, (ii) a petroleum hydrocarbon, including crude oil or any fraction
thereof, (iii) hazardous, toxic, corrosive, flammable, explosive,
infectious, radioactive, carcinogenic or a reproductive toxicant, or (iv)
regulated pursuant to any Environmental Law.
(d) "Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment (including the abandonment or discarding of
barrels, containers, and other receptacles containing any Hazardous
Material).
(e) The Company does not ship to, or distribute its products in,
any country outside the United States except pursuant to arrangements in
which the Company's customers assume responsibility to comply with the
environmental and safety laws of such country.
2.17 Taxes
Except as set forth in Schedule 2.17 hereto, (i) all federal,
state, foreign and local tax returns and tax reports (including information
returns) required to be filed by Company have been filed with the
appropriate Governmental Entities in all jurisdictions in which such
returns and reports are required to be filed, and all such returns and
reports are, in all material respects, complete, accurate and in accordance
with all legal requirements applicable thereto; (ii) all federal, state,
foreign and material local income, profits, franchise, sales, use,
occupation, property, excise, withholding and other taxes, duties, charges
and assessments (including interest and penalties) due from Company, (A)
have been fully paid or adequately provided for on the books and financial
statements of Company in accordance with GAAP or (B) are disclosed on
Schedule 2.17 and are being contested in good faith by appropriate
proceedings; (iii) the Company has not received any written notice or
inquiry from the Internal Revenue Service or any other taxing authority in
connection with any of the returns and reports referred to in the foregoing
clause (i) of any pending or threatened examination or audit which,
individually or in the aggregate, if adversely decided against Company
would reasonably be likely to have a Material Adverse Effect; (iv) no
waivers of statutes of limitation have been given or requested with respect
to Company, (v) the federal and state tax returns of Company have been
examined (or are no longer subject to examination) by the appropriate
agency for all periods prior to and including the dates set forth on
Schedule 2.17 for each category of tax return, and (vi) deficiencies
asserted or assessments made as a result of examination by any taxing
authorities have been fully paid or fully reflected on the books of
Company. Company has not made an election under Section 341(f) of the
Code.
<PAGE>
2.18 No Unlawful Contributions. To the knowledge of Company and
Sellers, neither Company nor any director, officer, agent, employee or
other Person associated with or acting on behalf of Company, has made or
used any corporate funds to make any unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity,
made any direct or indirect unlawful payments to officials or employees of
any Governmental Entity from corporate funds; failed to file any reports
required with respect to lawful contributions; established or maintained
any unlawful or unrecorded fund of corporate monies or other assets; made
any intentionally false or fictitious entries on the books or records of
Company; or made or received any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
2.19 No Insider Transactions. Except as disclosed in Schedule
2.19, no Seller nor any Affiliate (including any member of a Seller's
"immediate family", as such term is defined under Rule l6a-l(e) of the
Securities Exchange Act of 1934) of any such Persons, or any trust,
partnership or corporation in which any of such Persons has an interest,
has, directly or indirectly, (a) any interest (other than as a holder of
not more than 3% of the issued and outstanding securities of a corporation
whose securities are traded on a national securities exchange or the Nasdaq
Stock Market) in any Person which furnishes or sells, services or products
which Company furnishes or sells, (b) any interest (other than as a holder
of not more than 3% of the issued and outstanding securities of a
corporation whose securities are traded on a national securities exchange
or the Nasdaq Stock Market) in any Person which purchases from or sells or
furnishes to Company any goods or services, (c) a beneficial interest in
any contract, commitment, agreement or understanding to which Company is a
party or by which it may be bound or affected (except for written
employment contracts listed on a schedule to this Agreement); or (d) any
interest or claim against Company or any of its assets which could result
in a claim against Company or could materially and adversely affect
Company's assets, Company's title to or its right to use its assets, or
Company's right to conduct its business following the Closing. Except as
disclosed on Schedule 2.19, none of the assets of Company include any
receivables from any officer, director, shareholder or employee of Company.
2.20 Accounts Receivable; Customers. The accounts receivable
reflected on the Financial Statements, or thereafter acquired by Company
through the Closing Date were earned by performance in the ordinary course
of business and, to the knowledge of Company and Sellers except as set
forth on Schedule 2.20, are not subject to any material dispute. Schedule
2.20 discloses, as of October 2, 1994 and October 1, 1995 the identity of
each of Company's ten (10) largest customers for the fiscal year then
ended, and the amounts receivable from each such customer at the respective
dates, and also discloses, as of May 4, 1996, the fiscal year-to-date sales
for each customer identified on Schedule 2.20 and the amount owing from
such customer on May 4, 1996. Except as disclosed on Schedule 2.20,
Company has not received any written or, to the best knowledge of Sellers
and Company, any other notice that any customer identified on Schedule 2.20
expects or intends that its future purchases from Company, as compared to
its purchases in the year ended October 1, 1995, will decrease in any
material respects.
2.21 Inventories. The inventories reflected on the Financial
Statements, and thereafter acquired by Company through the Closing Date,
taken as a whole, are in all material respects of a quality and quantity
usable in the normal course of the business of Company. The values at
which such inventories are carried on the Financial Statements reflect the
normal inventory valuation policy of Company stating inventories at the
lower of cost (on a first-in, first-out basis) or market. Schedule 2.21
lists all inventories of raw materials, finished goods, packaging supplies
or ingredients owned or in the custody of Company ("Inventory") and, with
respect to Inventory owned by or held for the account of a customer,
identifies such customer and Inventory in reasonable detail, and specifies
the location of such Inventory.
2.22 Bank Accounts. Schedule 2.22 lists all bank accounts, safe
deposit boxes, money market funds, certificates of deposit, stocks, bonds,
notes and other securities owned directly or indirectly, beneficially or of
record, by Company.
2.23 Warranties. Schedule 2.23 contains a copy of the Company's
written warranty terms to its customers. Except as set forth on Schedule
2.23, Company has not given or made any other written or, to the knowledge
of Company and Sellers, oral warranties to any Person with respect to any
products sold or services performed. Company and Sellers have no written
or, to their knowledge, other notice of a claim against Company, whether or
not fully covered by insurance, for liability on account of products
liability or on account of any express or implied warranty, except for
warranty obligations and returns in the ordinary course of business
consistent with past practice for which appropriate reserves have been
reflected in the Financial Statements.
2.24 Delivery of Documents. Sellers and Company have delivered to
Purchaser true and correct copies of all documents, and any and all
amendments to any such documents, referred to in this Agreement or in any
Schedule delivered to Purchaser pursuant to this Agreement.
2.25 No Finders or Brokers. Neither any Seller or Company nor any
of their Affiliates has entered into any agreement, arrangement or
<PAGE>
understanding with any Person which could result in the obligation to pay
any finder's fee, brokerage commission, advisory fee or similar payment in
connection with the transactions contemplated hereby.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
3.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and has full corporate power and authority to perform this
Agreement. Purchaser is qualified to do business as a foreign corporation
and in good standing in the State of Georgia to the extent necessary to
perform its obligations under this Agreement.
3.2 Authorization. The execution and delivery of this Agreement
by Purchaser and the performance of its obligations hereunder have been
duly authorized by the directors of Purchaser and no other corporate action
or approval by Purchaser is necessary for the execution, delivery or
performance of this Agreement by Purchaser. This Agreement has been duly
executed and delivered by Purchaser, and is a valid and binding obligation
of Purchaser, enforceable against it in accordance with its terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, relating to or limiting creditors' rights generally, and (b)
general principles of equity (whether considered in an action in equity or
at law).
3.3 No Conflict. Neither the execution and delivery of this
Agreement by Purchaser nor the consummation of the transactions
contemplated hereunder nor the fulfillment by Purchaser of any of its terms
will, except as described in Schedule 3.3:
(a) conflict with or result in a breach by Purchaser of, or
constitute a default by it under, or create an event that, with the giving
of notice or the lapse of time, or both, would be a default under or breach
of, any of the terms, conditions or provisions of (i) any indenture,
mortgage, lease, deed of trust, pledge, loan or credit agreement or any
other material contract, arrangement or agreement to which Purchaser is a
party or to which a material portion of its assets is subject, (ii)
Certificate of Incorporation or Bylaws of Purchaser, or (iii) any judgment,
order, writ, injunction, decree or demand of any Governmental Entity which
materially affects Purchaser or which materially affects the Purchaser's
ability to conduct its business;
(b) result in the creation or imposition of any lien, charge or
Encumbrance of any nature whatsoever upon any material portion of the
assets of Purchaser or which materially affects the Purchaser's ability to
conduct its business as conducted prior to the date of this Agreement; or
(c) cause a loss or adverse modification of any permit, license,
or other authorization granted by any Governmental Entity to or otherwise
necessary or materially useful to Purchaser's business.
3.4 Investment Intent. Purchaser is acquiring Company Common
Stock for investment purposes, and not with a view to the resale or
distribution thereof; Purchaser has the knowledge and sophistication to
purchase the Company Common Stock; Purchaser has had access to all
information regarding Company that it has requested and has had the
opportunity to ask questions regarding Company, its operations and such
other matters that Purchaser has deemed material to its investment
decision; and Purchaser will not dispose of Company Common Stock without
compliance with all applicable federal and state securities laws.
3.5 No Finders or Brokers. Purchaser has not entered into any
agreement, arrangement or understanding with any Person which could result
in the obligation to pay any finder's fee, brokerage commission, advisory
fee or similar payment in connection with this Agreement or the
transactions contemplated hereby, except The Gordon+Morris Group, whose
fees and expenses will be paid by Purchaser or its Affiliates.
ARTICLE IV.
COVENANTS
4.1 Confidentiality
(a) Until the Closing, Purchaser shall treat in confidence all
non-public documents, materials and other information which Purchaser shall
have obtained regarding Company during the course of the negotiations
leading to the transactions contemplated hereby, the investigation of
Company and the preparation of this Agreement, and in the event the sale
and purchase hereunder shall not be consummated, Purchaser shall return all
copies of non-public documents and materials which have been furnished in
connection therewith. However, nothing contained herein shall prohibit
Purchaser hereto from:
(i) using such documents, materials and other information in
<PAGE>
connection with any action or proceeding brought or any claim asserted
by Sellers or Company hereto in respect of any breach of any
representation, warranty or covenant made in or pursuant to this
Agreement, or
(ii) supplying or filing such documents, materials or other
information to or with any Governmental Entity or other Person which
Purchaser and Seller deem reasonably necessary in connection with the
obtaining of any consent, waiver, amendment, modification, approval,
authorization, permit or license which may be necessary to effectuate
this Agreement and to consummate the transactions contemplated hereby.
(b) From and after the date hereof, each Seller shall treat, and
shall cause each of its Affiliates to treat, in confidence all documents,
materials and other information regarding Purchaser or Company or their
respective Affiliates which are in his or its possession or control.
4.2 Delivery of Financial Statements. As soon as practical after
the end of each of Company's fiscal months ending after May 4, 1996, but in
any event at least twenty (20) days following each month end, Sellers and
Company will deliver to Purchaser Company's unaudited balance sheet as of
such month end and the related statements of income and retained earnings
and cash flows for the fiscal month then ended (the "Monthly Financials")
which shall (i) be prepared in accordance with GAAP consistently applied as
at the dates and for the periods covered thereby (except that they are
subject to year-end adjustments and are not accompanied by footnote
disclosures); (ii) present fairly in all material respects the financial
condition and results of operations and cash flows of Company as of the
date and for the periods then ended; (iii) be in agreement with the books
and records of Company in all material respects, and (iv) contain and
reflect adequate reserves, to the extent required by GAAP and Company's
prior practice, for all reasonably anticipated losses, costs and expenses.
4.3 Fulfillment of Conditions
(a) Each Seller will use all reasonable efforts, and each Seller
will cause Company to use all reasonable efforts, to perform, comply with
and fulfill all obligations, covenants and conditions required by this
Agreement to be performed, complied with or fulfilled by Sellers or Company
prior to or as of the Closing Date. Purchaser will use all reasonable
efforts to perform, comply with and fulfill all obligations, covenants and
conditions required by this Agreement to be performed, complied with or
fulfilled by Purchaser prior to or as of the Closing Date.
(b) Each Seller will use all reasonable efforts, and will cause
Company to use all reasonable efforts, to secure all necessary consents,
waivers, permits, approvals, licenses and authorizations and will make, and
will cause Company to make, all necessary filings in order to enable
Sellers or Company to consummate the transactions contemplated hereby.
Purchaser will use all reasonable efforts to secure all necessary consents,
waivers, permits, approvals, licenses and authorizations and will make all
necessary filings in order to enable Purchaser to consummate the
transactions contemplated hereby.
4.4 Purchaser's Access to Records and Inspection Rights. Each
Seller will make reasonable efforts to cause Company to allow Purchaser and
its lenders and other representatives, through its officers, employees,
counsel, accountants and other authorized representatives, to inspect the
properties and records of Company and to discuss the affairs and accounts
of Company with such officers, employees, counsel, accountants and other
agents of Company as shall have been approved (including the procedures in
respect of such inspection and discussions) in advance by Company, which
approval will not be unreasonably withheld. Purchaser shall conduct any
inspection or discussion in a manner that does not unreasonably interfere
with normal business of Company.
4.5 Operation in Ordinary Course. From the execution of this
Agreement until the Closing, Sellers shall cause Company to operate its
business only in a manner consistent with its present and historical
practice, and, in particular, to assure that unless Purchaser otherwise
consents in writing, no action or event within the control of Company or
Sellers occurs which, had it occurred prior to the execution of this
Agreement, would have been required to be disclosed on Schedule 2.6.
4.6 Post-Closing Access by Sellers. After the Closing, Purchaser
shall cause Company to cooperate with Sellers to the extent reasonably
requested by any of the Sellers, and to make available to Sellers all
financial, insurance, tax and other information (including reasonable
access to books and records) of Company with respect to any fiscal period
of Company ending on or prior to the Closing Date to the extent reasonably
required by any of the Sellers in connection with (a) any audit or other
investigation by any taxing authority, or (b) the prosecution or defense of
any tax claims or related litigation that might give rise to
indemnification payments hereunder, or the preparation by any of Sellers of
tax returns or any other reports or submissions to any Governmental Entity
required to be made by any of Sellers with respect to Company; provided
that such cooperation and availability of information do not unreasonably
interfere with normal business of Company and provided, further, that each
of the Sellers reimburses Company for any third-party expenses incurred to
provide such information. Purchaser shall cause Company to preserve all
such information, including without limitation, the books and records of
Company, for at least six (6) years after the Closing Date, provided that
<PAGE>
if any Seller delivers written notice within three months prior to the
sixth anniversary to Purchaser of its desire to remove and retain such
identified information, books and records after the end of such six-year
period, then Purchaser shall give such party the opportunity (at such
party's expense) to remove and retain such information, books and records
prior to their destruction. In the event of conflicting requests or
directions by Sellers, Garretson's decision about which Seller shall
receive original documents shall be followed and other Sellers may have
copies.
4.7 Termination of Affiliate Relationships. Prior to the Closing,
Sellers will cause any and all obligations of Company to or for the benefit
of any Seller or any Affiliate of any Seller to be discharged or terminated
prior to the Closing.
4.8 Bank Accounts. Sellers shall, on or prior to the Closing Date
cause Company to cancel the authority of each Person listed in Schedule
2.22 who is specified by Purchaser in a written notice delivered to Sellers
on or prior to the Closing Date, to draw checks on any of the bank accounts
maintained by Company and Sellers shall submit evidence satisfactory to
Purchaser of such cancellation.
4.9 Indebtedness of Sellers to Company. On the Closing Date, each
Seller will repay in full to Company all principal and accrued interest
outstanding under any Indebtedness of such Seller to Company.
ARTICLE V.
CONDITIONS OF CLOSING
5.1 Conditions of Obligations of Purchaser. The obligation of
Purchaser to consummate the purchase of Company Common Stock pursuant to
this Agreement is subject to the satisfaction of the following conditions,
any of which may be waived by Purchaser:
(a) Representations and Warranties: Performance of Obligations.
The representations and warranties of Sellers and Company set forth in
Article II hereof and in all agreements, documents and instruments executed
and delivered pursuant hereto or in connection with the Closing shall have
been and be true and correct in all material respects as of the date hereof
and as of the Closing Date as though made on and as of the Closing Date.
Each Seller and Company shall have performed in all material respects the
agreements and obligations necessary to be performed by him or it under
this Agreement prior to the Closing Date. This condition shall not be
deemed unsatisfied if Sellers deliver new, revised or updated Schedules to
this Agreement; provided that no information on such Schedules is, in
Purchaser's reasonable judgment, adverse to Company's or Purchaser's
ability to operate its business following the Closing, or Company's
financial condition or prospects, or to Purchaser's financing.
(b) Certificate and Deliveries by Sellers. Purchaser shall have
received a certificate, dated the Closing Date, signed by each of Sellers,
certifying that the conditions specified in Section 5.1(a) have been
fulfilled.
(c) No Injunction. No preliminary or permanent injunction or
order that would prohibit or restrain the consummation of the transactions
contemplated hereunder shall be in effect and no Governmental Entity or
other Person shall have commenced or threatened to commence an action or
proceeding seeking to enjoin the consummation of such transactions or to
impose liability on the parties hereto in connection therewith.
(d) Management Equity Purchase. Purchaser shall have received
subscriptions satisfactory to Purchaser from the employees of Company who
have agreed to purchase shares of Purchaser Common Stock and shall have
received payment of the related purchase amount in cash.
(e) Financing. Purchaser shall have received, within 60 days of
execution of this Agreement, commitments from one or more lenders
acceptable to Purchaser, on terms and conditions acceptable to Purchaser,
to make loans resulting in proceeds in an amount sufficient to pay the
Purchase Price and to provide working capital for Company and, at Closing,
no such lender shall have refused to close for reasons which are reasonably
within Purchaser' s control.
(f) Other Consents. Purchaser shall have received all other
consents required to be obtained from persons who are not Affiliates of
Purchaser in connection with the consummation of the transactions
contemplated hereunder.
(g) Certificates and Instruments of Transfer. Each Seller shall
have delivered to Purchaser certificates representing Company Common Stock,
accompanied by duly executed stock powers, with all required stock transfer
tax stamps affixed. All certificates, instruments and documents delivered
by each Seller in connection with the transactions contemplated hereby and
necessary to evidence such transactions shall be in form and substance
reasonably satisfactory to Purchaser and its counsel.
(h) Stockholders Agreement. Purchaser shall have received an
executed Stockholders Agreement in a form reasonably acceptable to
Purchaser (the "Stockholders Agreement"), duly executed by the existing
<PAGE>
stockholders of Purchaser, each Seller and each employee of Company who
purchases Purchaser Common Stock in connection with the transactions
contemplated by this Agreement.
(i) Employment and Non-Competition Agreement. Purchaser shall
have received an original Employment and Non-Competition Agreement, between
Company and Garretson, substantially in the form of Exhibit 1 hereto (the
"Employment and Non-Competition Agreement") duly executed by Garretson.
(j) Opinion of Counsel to Sellers and Company. Purchaser shall
have received the opinion of Seyfarth, Shaw, Fairweather & Geraldson,
counsel to Sellers and the Company, dated the Closing Date, substantially
in the form of Exhibit 2 hereto.
(k) Due Diligence. Purchaser and its lenders shall have completed
prior to Closing a due diligence investigation of the business, operations,
condition (financial and otherwise) and prospects of Company, and the
results of such investigation shall be satisfactory to Purchaser in its
sole discretion and to its lenders. Unless Purchaser notifies Garretson,
on or before the forty-fifth day after the execution of this Agreement,
that Purchaser is not satisfied, this condition shall be regarded as
satisfied.
(l) No Material Adverse Chance. Purchaser shall be satisfied in
its reasonable discretion, after review of the Monthly Financial
Statements, that there has been no material adverse change after the date
hereof in the business, operations, condition (financial or otherwise) or
prospects of Company since October l, 1995.
(m) Schedules. Any Schedule not attached to this Agreement on the
date hereof shall have been delivered to Purchaser and its lenders on or
before July 17, 1996 and shall be acceptable to Purchaser in its sole
reasonable discretion.
5.2 Conditions of Obligations of Sellers. The obligations of
Sellers to consummate the sale and purchase under this Agreement are
subject to the satisfaction of the following conditions, each of which may
be waived by Sellers:
(a) Representations and Warranties: Performance of Obligations.
The representations and warranties of Purchaser set forth in Article III
hereof and in all agreements, documents and instruments executed and
delivered pursuant hereto or in connection with the Closing shall have been
and be true and correct in all material respects as of the date hereof and
as of the Closing Date as though made on and as of the Closing Date.
Purchaser shall have performed in all material respects the agreements and
obligations necessary to be performed by it under this Agreement prior to
the Closing Date.
(b) Certification by Purchaser. Sellers shall have received a
certificate, dated the Closing Date, signed by an officer of Purchaser,
certifying that the conditions specified in Section 5.2(a) have been
fulfilled.
(c) No Injunction. No preliminary or permanent injunction or
order that would prohibit or restrain the consummation of the transactions
contemplated hereunder shall be in effect and no Governmental Entity or
other Person shall have commenced or threatened to commence an action or
proceeding seeking to enjoin the consummation of such transactions or to
impose liability on the parties hereto in connection therewith.
(d) Employment and Non-Competition Agreement. Garret son shall
have received an original Employment and NonCompetition Agreement, duly
executed by Company.
(e) Opinion of Counsel to Purchaser. Sellers shall have received
the opinion of Paul, Hastings, Janofsky & Walker, counsel to Purchaser,
dated the Closing Date, substantially in the form of Exhibit 3 hereto.
(f) Purchase Price. Sellers shall have received the Purchase
Price payable on the Closing Date pursuant to Section 1.2.
(g) Release of Guaranties. All personal guaranties by Garretson
with respect to any Indebtedness or other obligations of Company shall have
been terminated, cancelled or released.
ARTICLE VI.
CLOSING DATE AND TERMINATION OF AGREEMENT
6.1 Closing Date. The closing for the consummation of the
purchase and sale contemplated by this Agreement (the "Closing") shall,
unless another date or place is agreed to in writing by Sellers and
Purchaser, take place at the offices of Paul, Hastings, Janofsky & Walker,
at 695 Town Center Drive, Seventeenth Floor, Costa Mesa, California 92626,
on the date (the "Closing Date") on which each condition set forth in
Article V is satisfied or waived.
6.2 Termination of Agreement. This Agreement may be terminated
and abandoned at any time prior to the Closing Date:
<PAGE>
(a) By mutual consent of Purchaser, on the one hand, and Sellers,
on the other hand; or
(b) By Purchaser or Sellers if, without fault of such terminating
party, the Closing shall not have been consummated on or before September
30, 1996.
6.3 Effect of Termination. In the event of termination of this
Agreement as provided in Section 6.2, notice thereof shall be promptly
given by the terminating party to the other parties and thereafter this
Agreement shall forthwith become void, and there shall be no liability or
obligation on the part of Purchaser or Sellers or any of their respective
Affiliates (a) except that Section 4.1 shall remain in full force and
effect, and (b) except that nothing herein will relieve any party from
liability for any willful breach of any agreement or covenant herein or any
Seller from liability for breach of its representations in Sections 2.2 and
2.4 herein as they pertain to such Seller and the shares such Seller
purports to own.
ARTICLE VII.
INDEMNIFICATION
7.1 Indemnification by Sellers
(a) Subject to the provisions of Sections 7.1(b) and 7.3 below,
Sellers, shall severally indemnify Purchaser and its Affiliates including,
without limitation, Company, and each of their respective stockholders,
officers, directors, employees and representatives (each a "Purchaser
Indemnitee") against, and hold each Purchaser Indemnitee harmless from, any
and all loss, damage, liability, payment, and obligation, and all expenses,
including without limitation reasonable legal fees (collectively "Losses")
, incurred, suffered, sustained or required to be paid, directly or
indirectly, by, or sought to be imposed upon, such Purchaser Indemnitee
after the Closing Date resulting from, related to or arising out of any
inaccuracy in or breach of any of the representations, warranties or
covenants made by Sellers or Company in or pursuant to this Agreement or in
any agreement, document or instrument executed and delivered pursuant
hereto or in connection with the Closing of the transactions contemplated
hereunder.
(b) No Purchaser Indemnitee shall be entitled to indemnification
pursuant to this Section 7.1 in respect of an inaccuracy in or breach of
any representation or warranty (other than with respect, to the
representations and warranties in Sections 2.2 (Authorization); or 2.4
(Capitalization; No Subsidiaries) and with respect to any breach or
inaccuracy of any representation or warranty known by Sellers, or Company,
prior to Closing), until such time as the Losses of all Purchaser
Indemnitees exceed Three Hundred Twenty-Five Thousand Dollars ($325,000)
("Sellers' Basket") in the aggregate; provided that all claims by Purchaser
Indemnitees for indemnification shall accrue in the aggregate until the
Losses of all Purchaser Indemnitees exceed the Sellers' Basket and
thereupon Sellers shall become obligated to indemnify the Purchaser
Indemnitees only for the amount by which all such claims exceed Sellers'
Basket. In no event shall the Indemnitor's indemnification obligations in
this Section 7.1 exceed an aggregate of One Million Dollars ($1,000,000),
or for any Seller, its proportionate share thereof as determined by the
portion of the Purchase Price received by or for the benefit of such
Indemnitor.
(c) Each Purchaser Indemnitee shall promptly give written notice
to Indemnitors of the assertion by any Person of any claim, action, suit or
proceeding with respect to which Indemnitors are obligated to provide
indemnification hereunder; provided, however, that the rights of a
Purchaser Indemnitee to be indemnified hereunder shall only be affected by
the failure to give such notice if and to the extent such failure
prejudices Indemnitors in the defense of such third party claim. Amounts
due with respect to Losses covered by this Section 7.1 shall be paid
promptly after delivery of reasonably documented written notice of the
amount of Losses incurred. Indemnitors shall have the right, but not the
obligation, to contest, defend or litigate, and to retain counsel of their
choice in connection with, any claim, action, suit or proceeding by any
third party alleged or asserted against a Purchaser Indemnitee that is
subject to indemnification by Indemnitors hereunder, and the cost and
expense thereof shall be subject to the indemnification obligations of
Indemnitors hereunder; provided, that each Purchaser Indemnitee shall have
the right and option to participate in, but not control, the defense of
such action at its own expense; and provided, further, that, (i) if
Indemnitors elect not to defend any such action or (ii) if a Purchaser
Indemnitee shall have defenses not available to Indemnitors and if counsel
to Purchaser shall advise in a written opinion that common representation
is not appropriate, then such Purchaser Indemnitee shall be entitled, at
its option through counsel of its choice, but at Indemnitors' expense, to
assume and control the defense of such action. Neither Indemnitors, on the
one hand, nor any Purchaser Indemnitee, on the other hand, shall be
entitled to settle or compromise any such claim, action, suit or proceeding
without the prior written consent of such Purchaser Indemnitee or
Indemnitor, as the case may be, which consent shall not be unreasonably
withheld. Decisions about counsel and the course of any defense and
consents to settlements shall be made by Garretson if Sellers are unable,
<PAGE>
among themselves, to agree, except that no Seller shall be subject to a
settlement which provides for anything but the payment of money or the
release of claims without such Seller's consent.
7.2 Indemnification by Purchaser
(a) Subject to the provisions of Section 7.2(b) and 7.3 below,
Purchaser shall indemnify Sellers and their Affiliates (other than Company)
and each of their respective stockholders, officers, directors, employees
and representatives (each a "Seller Indemnitee") against, and hold each
Seller Indemnitee harmless from, any and all Losses incurred, suffered,
sustained or required to be paid, directly or indirectly, by or sought to
be imposed upon, such Seller Indemnitee resulting from, related to or
arising out of any inaccuracy in or breach of any of the representations,
warranties or covenants made by Purchaser in or pursuant to this Agreement
or in any agreement, document or instrument executed and delivered pursuant
hereto or in connection with the Closing of the transactions contemplated
hereunder.
(b) No Seller Indemnitee shall be entitled to indemnification
pursuant to this Section 7.2 in respect of an inaccuracy in or breach of
any representation or warranty, until such time as the Losses of all Seller
Indemnitees exceed Three Hundred Twenty-Five Thousand Dollars ($325,000)
("Purchaser's Basket") in the aggregate; provided that all claims by Seller
Indemnitees for indemnification shall accrue in the aggregate until the
Losses of all Seller Indemnitees exceed the Purchaser's Basket and
thereupon Purchaser shall become obligated to indemnify the Seller
Indemnitees only for the amount by which all such claims exceed Purchaser's
Basket. In no event shall Purchaser's indemnification obligations in this
Section 7.2 in the aggregate exceed One Million Dollars ($1,000,000).
(c) Each Seller Indemnitee shall promptly give written notice to
Purchaser of the assertion by any Person of any claim, action, suit or
proceeding with respect to which Purchaser is obligated to provide
indemnification hereunder; provided, however, that the rights of a Seller
Indemnitee to be indemnified hereunder shall only be affected by the
failure to give such notice if and to the extent such failure prejudices
Purchaser in the defense of such third party claim. Amounts due with
respect to Losses covered by this Section 7.2 shall be paid promptly after
delivery of reasonably documented written notice of the amount of Losses
incurred and if the provisions of Section 7.2(b) apply to limit the payment
of all amounts claimed, shall be paid on a pro-rata basis according to the
number of shares sold. Purchaser shall have the right, but not the
obligation, to contest, defend or litigate, and to retain counsel of its
choice in connection with, any claim, action, suit or proceeding by any
third party alleged or asserted against a Seller Indemnitee that is subject
to indemnification by Purchaser hereunder, and the cost and expense thereof
shall be subject to the indemnification obligations of Purchaser hereunder;
provided, that each Seller Indemnitee shall have the right and option to
participate in, but not control, the defense of such action at its own
expense; and provided, further, that (i) if Purchaser elects not to defend
any such action or (ii) if a Seller Indemnitee shall have defenses not
available to Purchaser and if counsel to Sellers shall in a written opinion
advise that common representation is not appropriate, then such Seller
Indemnitee shall be entitled, at its option through counsel of its choice,
but at Purchaser's expense, to assume and control the defense of such
action. Neither any Seller Indemnitee, on one hand, nor Purchaser, on the
other hand, shall be entitled to settle or compromise any such claim,
action, suit or proceeding without the prior written consent of such seller
Indemnitee or Purchaser, as the case may be, which consent shall not be
unreasonably withheld.
7.3 Survival of Representations and Warranties; Reliance
(a) All representations and warranties contained herein or made
pursuant hereto shall survive the Closing hereunder until January 16, 1998,
or, if such date is earlier, the date on which Purchaser receives an audit
report on Company financial statements covering a full twelve-month period
after the Closing, except that the representations and warranties in
Sections 2.4 (Capitalization; No Subsidiaries), 2.14 (Employee Benefits)
and 2.17 (Taxes) shall survive the Closing until the expiration of the
applicable statute of limitations. The expiration of any representation
and warranty shall not affect any claim for indemnification made prior to
the date of such expiration.
(b) The representations and warranties made by any party in this
Agreement or in any agreement, certificate, schedule or exhibit delivered
in connection with this Agreement may be fully and completely relied upon
by each other party unless the party seeking to avoid such representation
or warranty can demonstrate that the investigation made by or on behalf of
such other party actually revealed or disclosed the inaccuracy in question.
7.4 Sole Remedy. Following the Closing, the indemnification
provided in this Article VII shall be the sole remedy of the parties for a
breach of this Agreement except for claims based upon actual fraud inducing
a party to execute and perform obligations under this Agreement.
ARTICLE VIII.
MISCELLANEOUS
<PAGE>
8.1 Further Actions. From time to time, as and when requested by
Purchaser, Sellers shall execute and deliver, or cause to be executed and
delivered, such documents and instruments and shall take, or cause to be
taken, such further or other actions as Purchaser may reasonably deem
necessary or desirable to carry out the intent and purposes of this
Agreement, to transfer, assign and deliver to Purchaser effective as of the
Closing, and its successors and assigns, Company Common Stock (or to
evidence the foregoing) and to consummate and give effect to the other
transactions, covenants and agreements contemplated hereby.
8.2 Expenses. Except as otherwise specifically provided herein,
Sellers and Purchaser shall each bear their own legal fees and other costs
and expenses with respect to the negotiation, execution and delivery of
this Agreement and the consummation of the transactions hereunder, except
that Company may pay up to $50,000 of legal and accounting costs, or other
expenses, directly related to the preparation, execution and consummation
of the transactions contemplated by this Agreement. Purchaser shall pay
all sales, transfer and documentary taxes and other expenses incident to
the transfer of Company Common Stock.
8.3 Entire Agreement. This Agreement, which includes the
Appendix, the Schedules and the Exhibits hereto and the other documents,
agreements and instruments executed and delivered pursuant to this
Agreement, contain the entire agreement between the parties hereto with
respect to the transactions contemplated by this Agreement and supersedes
all prior arrangements or understandings with respect thereto.
8.4 Descriptive Headings. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement.
8.5 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if (a)
delivered personally or (b) sent by registered or certified mail, postage
prepaid, or (c) sent by overnight courier with a nationally recognized
courier, or (d) via facsimile confirmed in writing in any of the foregoing
manners, as follows:
If to Sellers:
Samuel D. Garretson
1665 Chevron Way, N.E.
Atlanta, Georgia 30350
With a Copy to:
David S. Stone, Esq.
Seyfarth, Shaw, Fairweather & Geraldson
Suite 4200
55 East Monroe Street
Chicago, Illinois 60603
FAX: (312) 269-8869
If to Company:
Piedmont Laboratories, Inc.
Attention: Corporate Secretary
2030 Old Candler Road
Gainesville, GA 30507
FAX: (770) 535-8132
If to Purchaser:
Aerosol Companies Holding Corporation
Attention: Secretary
c/o The Gordon+Morris Group
620 Newport Center Drive, Suite 1400
Newport Beach, CA 92660
FAX: (714) 759-7628
With a Copy to:
Peter J. Tennyson, Esq.
Paul, Hastings, Janofsky & Walker
Seventeenth Floor
695 Town Center Drive
Costa Mesa, California 92626
FAX: (714) 979-1921
If sent by mail, notice shall be considered delivered five (5) business
days after the date of mailing, and if sent by any other means set forth
above, notice shall be considered delivered upon receipt thereof. Any
party may by notice to the other parties change the address to which notice
or other communications to it are to be delivered or mailed.
8.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia (other than
the choice of law principles thereof). Any action, suit or other
proceeding initiated by Sellers or Purchaser against any other party under
or in connection with this Agreement may be brought in any Federal or state
court in the State of Georgia, as the party bringing such action, suit or
<PAGE>
proceeding shall elect, having jurisdiction over the subject matter
thereof. Sellers and Purchaser hereby submit themselves to the
jurisdiction of any such court and agree that service of process on them in
any such action, suit or proceeding may be effected by the means by which
notices are to be given to it under this Agreement.
8.7 Assignability. This Agreement shall not be assignable by any
party without the written consent of the other parties and any such
purported assignment by any party without such consent shall be void,
except that:
(a) any or all rights of Purchaser to receive the performance of
the obligations of Sellers hereunder (but not the obligations of Purchaser
to Sellers hereunder) and rights to assert claims against Sellers in
respect of any inaccuracy in or breach of any representations, warranties
or covenants of Sellers hereunder, may be assigned by Purchaser to a direct
or indirect subsidiary of Purchaser, and
(b) Purchaser may assign to any bank, insurance company or other
financial institution providing financing or extending credit to Purchaser
or Company any or all of its rights to assert claims against Sellers in
respect of any inaccuracy in or breach of representations, warranties or
covenants under this Agreement, but any assignee of such rights under
clause (a) or clause (b) shall take such rights subject to any defenses,
counterclaims and rights of set-off to which Sellers might be entitled
under this Agreement. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and
permitted assigns.
8.8 Waivers and Amendments. Any waiver of any term or condition
of this Agreement, or any amendment or supplementation of this Agreement,
shall be effective only if in writing. A waiver of any breach or failure
to enforce any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's rights hereunder at any time to
enforce strict compliance thereafter with every term or condition of this
Agreement.
8.9 Third Party Rights. Notwithstanding any other provision of
this Agreement, and except as expressly provided in Section 7.1 or 7.2
hereof or as permitted pursuant to Section 8.7 hereof, this Agreement shall
not create benefits on behalf of any shareholder or employee of Purchaser
or Company, or any other Person (including without limitation any broker or
finder), and this Agreement shall be effective only as between the parties
hereto, their successors and permitted assigns.
8.10 Public Announcements. Purchaser and Sellers will consult
with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement and neither Purchaser, nor Sellers shall issue any such press
release or make any such public statement without the prior approval of the
other parties both as to the making of such release or statement and as to
the form and content thereof, except to the extent that such party is
advised by counsel, in good faith, that such release or statement is
required as a matter of law.
8.11 Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement. Facsimile signatures shall be treated as if they were
originals.
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Agreement as of the date first above written.
"Purchaser"
AEROSOL COMPANIES HOLDING
CORPORATION
By: John H. Morris
--------------------------------
Name:
Title:
"Sellers"
/s/ Samuel D. Garretson
--------------------------------
SAMUEL D. GARRETSON
/s/ Michael J. Garretson
--------------------------------
<PAGE>
MICHAEL J. GARRETSON
/s/ Gregory G. Garretson
--------------------------------
GREGORY G. GARRETSON
/s/ Ian Gecker
--------------------------------
IAN GECKER
/s/ Carl H. Trieshmann
--------------------------------
CARL H. TRIESHMANN
GARRETSON, O'SULLIVAN CHARITABLE
TRUST
/s/ Robert R. Kiser
--------------------------------
By:
Its: Trustee
"Company"
PIEDMONT LABORATORIES, INC.
/s/ Samuel D. Garretson
--------------------------------
By: Samuel D. Garretson
President
APPENDIX A
Definitions
Capitalized terms in this Agreement shall have the meanings
ascribed to them in this Appendix A unless such terms are defined elsewhere
in this Agreement:
Affiliate: With respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" means the power to direct the management and
policies of another 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.
Encumbrance: Any lien, mortgage, pledge, security interest, charge
or encumbrance of any kind, whether voluntary or involuntary, (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest) and, with
respect to capital stock, any option or other right to purchase or any
restriction on voting or other rights.
GAAP: Generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled "The Meaning of 'Present
Fairly in Conformance with Generally Accepted Accounting Principles in the
Independent Auditors Reports'" issued by the Auditing Standards Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are
applicable to the circumstances as of the date of determination.
Governmental Entity: Any nation or any state, commonwealth,
territory, possession or tribe and any political subdivision, courts,
departments, commissions, boards, bureaus, agencies or other
instrumentalities of any of the foregoing.
Indebtedness: With respect to any Person (a) all indebtedness for
borrowed money; (b) that portion of obligations with respect to capital
leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
<PAGE>
money; (d) any obligation owed for all or any part of the deferred purchase
price of property or services if the purchase price is due more than six
months from the date the obligation is incurred or is evidenced by a note
or similar written instrument; and (e) all indebtedness secured by any
Encumbrance on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.
"Knowledge" of the Company or statements about facts or
circumstances recognized by the Company shall refer to the actual
knowledge, after such inquiry of Company personnel and review of Company
records (but without independent inquiry) as they deem appropriate, of
Samuel Garretson, Michael Garretson, Gregory Garretson, Norman Marcus, Ian
Gecker and Grace Villyard.
Material Adverse Effect: A material adverse effect on the
business, operations, condition (financial or otherwise) or prospects of
Company.
Person: An individual, corporation, partnership, joint venture,
trust or unincorporated organization or association or other form of
business enterprise or a Governmental Entity.
Subsidiary: With respect to any Person, any other Person whose
voting securities or other ownership interests directly or indirectly are
owned by such Person.
Tax: Any and all license and registration fees, taxes (including,
without limitation, income, minimum or alternative minimum tax, gross
receipts, ad valorem, value added, environmental tax, turnover, sales, use,
personal property (tangible and intangible), stamp, leasing, lease, user,
leasing use, excise, payroll, franchise, transfer, fuel, excess profits,
occupational, interest equalization and other taxes), levies, imposts,
duties, charges or withholdings of any nature whatsoever, imposed by any
Governmental Entity, together with any and all penalties, fines, additions
to tax and interest thereon, whether or not such Tax shall be existing or
hereafter adopted.
Other Definitions: The following terms have the meanings ascribed
to them in the Sections noted:
<TABLE>
<CAPTION>
Section
<S> <C>
Agreement Recitals
Stockholders Agreement 5.1(h)
Monthly Financials 4.2
Authorizations 2.9(a)
Benefit Plans 2.14(a)
Business Rights 2.13
Closing 6.1
Closing Date 6.1
COBRA 2.14(f)
Code 2.14(d)
Company Recitals
Company Common Stock Recitals
Contracts 2.8(b)
Employment and Non-Competition
Agreement 5.1(i)
Environmental Law 2.16(b)
ERISA 2. 14 (a)
Financial Statements 2.5(a)
Garretson Recitals
Garretson Trust Recitals
Hazardous Materials 2.16(c)
Inventory 2.21
Losses 7.1(a)
Properties 2.7(a)
Purchase Price 1.2
Purchaser Recitals
Purchaser Indemnitee 7.1(a)
Purchaser's Basket 7.2(b)
Release 2.16(d)
Seller Indemnitee 7.2(a)
Sellers Recitals
Sellers' Basket 7.1(b)
</TABLE>
EXHIBIT l
EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement") is
made this ____ day of _____________, 1996, by and between PIEDMONT
LABORATORIES, INC., a Georgia corporation having its principal place of
business at 2030 Old Candler Road, Gainesville, Georgia 30507 (the
"Company"), and SAMUEL D. GARRETSON, whose address is 1665 Chevron Way,
N.E., Atlanta, Georgia 30350 (the "Employee").
<PAGE>
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing aerosol
and liquid filling and packaging services and has need for management
personnel with experience in said business; and
WHEREAS, the Employee is experienced in the business of providing
aerosol and liquid filling and packaging services and in the management of
such business and is simultaneously selling a majority of Company's stock
pursuant to a Stock Purchase Agreement dated June , 1996; and
WHEREAS, the Company desires to continue to employ the Employee in the
same or similar capacity as that previously existing between the Employee
and the Company upon the terms and conditions hereinafter set forth; and
WHEREAS, the Employee is willing to enter into this Agreement with
respect to the Employee's employment and services upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing recitals and the
promises herein contained, the parties agree as follows:
I. TERM
Section 1.01. Employment. Subject to the provisions of Section 4.01
hereof, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company for a period of two (2) years beginning
on [closing date, 1996 and terminating at the close of business on [closing
date), 1998 (the "Employment Term"). The Employment Term may be extended by
a mutual agreement in writing for two years on the same or mutually
agreeable terms.
II. DUTIES
Section 2.01. General Duties. The Employee shall serve as the
President of the Company during the Employment Term. Further, Employee
shall serve as a member of the Board of Directors of the Company, its
parent company and of Aerosol Services Holding Corporation ("ASHC"). The
Employee shall, during the Employment Term, subject to the policies of the
Board of Directors of the Company, manage and direct the day-to-day
business of the Company, performing those acts and doing those things
customarily done by the president for companies comparable to the Company.
Section 2.02. Devotion of Time to the Company's Business. The Employee
agrees during the Employment Term, to devote his best efforts to his
employment, and perform such duties consistent with his capacity as
President of the Company as shall be determined by the Board of Directors
of the Company. The Employee further agrees to (i) devote such time as is
reasonably necessary to fulfill the duties of his office to the business
and affairs of the Company, (ii) devote his time and resources to the
training and development of individuals capable of managing and directing
the day-to-day business of the Company so that in the future such
individuals may be promoted to senior executive positions within the
Company, and (iii) faithfully observe his duties to preserve as
confidential all trade and other secrets of the Company. The Employee shall
not, during the Employee's employment, unless otherwise agreed to in
advance and in writing by the Company, seek or accept other employment,
become self-employed in any other capacity during the Employment Term, or
engage in any activities which are detrimental to the business of the
Company. Notwithstanding the foregoing, the Employee may engage in personal
investment activities which do not interfere with the Employee's duties
under this Agreement.
III. COMPENSATION
Section 3.01. Base Salary. As compensation for his services hereunder,
during the Employment Term, the Employee shall receive an annual base
salary of Two Hundred Thousand Dollars ($200,000). Such base salary shall
be payable in cash at the times and in the installments consistent with the
Company's payroll practices.
Seciton 3.02. Bonus Plan. The Employee shall be a full participant in
any performance bonus plan made available to senior executives of the
Company except for any such plan established to assist executives to
purchase shares of stock.
Section 3.03. Continuation of Salary. If the Employee dies or becomes
disabled during the Employment Term so that he is unable to perform his
duties hereunder, if Company terminates this Agreement for any reason
except as specified in Section 4.01, or if Employee resigns for "good
reason" as described in Section 4.02 the Company agrees to continue to pay
the Employee or his estate his base salary monthly, but not beyond the end
of the Employment Term, and to continue to provide the benefits described
in Section 3.04.
Section 3.04. Benefits. During the Employment Term, the Employee shall
be entitled to a monthly car allowance of $1,200.00 per month and to
<PAGE>
reimbursement of reasonable operating, repair and maintenance expenses and
company-provided automobile insurance for two automobiles, equivalent to
those now provided Employee by Company. In addition, the Employee shall be
entitled to insurance benefits substantially similar to those now provided
under [Insert Plan Name/Number ]and may continue such benefits after any
termination of this Agreement by paying the applicable premium to the
extent allowed by applicable law. However, the Company may cease providing
such benefits if any law or regulation prohibits making benefits available
except on an equal basis for all employees. The Employer shall continue to
pay the dues, fees and assessments relating to Employee's current club
memberships during the Employment Term. When Employee's employment
terminates, Company agrees to transfer such memberships to the Employee,
and to execute such documents and instruments necessary and appropriate to
effect such transfers.
Section 3.05. Director Compensation. After the Employment Term,
Employee shall receive compensation for any service as a director of the
Company or its affiliates equivalent to the compensation of other "outside"
directors. Employee shall not receive additional compensation for serving
as a director during the Employment Term.
IV. TERMINATION
Section 4.01. Termination by the Company. Any of the following acts or
omissions shall constitute grounds for the Company to terminate this
Agreement:
(a) Conduct on the part of the Employee which constitutes the
breach of any statutory or common law duty of loyalty to the Company which
has a material adverse effect on Company;
(b) Any illegal act by the Employee (as evidenced by a
conviction) which materially and adversely affects the business of the
Company; or
(c) Intentional wrongful engagement in any competitive activity
prohibited by Section 5.01 hereof.
It shall be presumed that the Employee's participation in a business
enterprise other than the Company, except as a member of the Board of
Directors of the Company, Employee's parent company, ASHC and Aerosol
Service Company, constitutes cause for termination under clause (c) of this
section unless the Employee demonstrates otherwise to the reasonable
satisfaction of the Board of Directors of the Company. Termination by the
Company shall be accomplished by written notice to the Employee and, if
pursuant to paragraph (a) or (b) above, shall be preceded by a written
notice providing a reasonable opportunity for the Employee to correct his
conduct, if the conduct in question can be corrected.
Section 4.02. Resignation for Good Reason. Employee may resign for
"good reason" and thereby terminate his employment (but not his other
obligations hereunder) as a result of the following:
(a) Without the Employee's prior written consent, a reduction in
his current salary;
(b) The taking of any action by the Company that would
substantially diminish the aggregate value of the benefits provided to the
Employee under the Employee's medical, health, accident, disability, life
insurance, thrift and retirement plans in which he was participating on the
date of this Agreement, other than any such reduction which is (i) required
by law, (ii) implemented in connection with a general concessionary
arrangement affecting all employees or affecting the group of employees
(senior management) of which the Employee is a member or (iii) generally
applicable to all beneficiaries of such plans;
(c) An involuntary relocation of the Employee's place of
employment outside the general North Georgia area;
(d) Resignation as a result of unlawful discrimination or other
unlawful acts committed against employee, as evidenced by a settlement,
arbitration award or final court order;
(e) A reduction in duties and responsibilities which results in
the Employee no longer having the customary duties of a president; or
(f) The Gordon + Morris Investment Partnership, L.P. or its
successors and Employee, collectively shall cease to Control (as
hereinafter defined) the Company.
Section 4.03. Damages for Breach of Contract. In the event of a
breach of this Agreement by either the Company or the Employee resulting in
damages to the other party, that party may recover from the party breaching
this Agreement any and all damages that may be sustained, excluding
incidental, consequential and punitive damages.
Section 4.04. Arbitration. With the exception of suits for specific
enforcement of the provisions of Sections 5.01 and 5.02, any controversy,
dispute or claim arising out of, relating to, or concerning this Agreement,
the breach of this Agreement, the employment of the Employee, or the
<PAGE>
termination of the Employee's employment will be resolved pursuant to this
Section 4.04. This includes all claims, whether arising in tort or
contract, and whether arising under statute or common law. Any such
controversy, dispute or claim will be submitted to the American Arbitration
Association ("AAA") in Atlanta, Georgia, for final and binding arbitration
in accordance with its Employment Dispute Rules then existing; provided
that, if the rules of the AAA differ from those in this section, the
provisions of this section will control. Any demand for resolution of such
a matter must be sent to the AAA and served on the other party within the
period covered by the applicable statute of limitations. No arbitrator
will have any authority to extend, modify, or suspend any of the terms of
this Agreement. The arbitrator must make his award in writing and must
accompany it with an opinion discussing the evidence and setting forth the
reasons for the award. The decision of the arbitrator within the scope of
the submission will be final and binding on both parties, and any right to
judicial action on any matter subject to resolution by arbitration
hereunder hereby is waived unless otherwise required by applicable law,
except suit to enforce an award by the arbitrator or in the event
resolution by an arbitrator is not available for any reason. This Section
4.04 will be specifically enforceable. Judgment upon any award rendered by
the AAA and/or any other arbitrator may be entered in any court having
jurisdiction.
Section 4.05. Attorneys' Fees and Costs. If any action in law or in
equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees, costs
and necessary disbursements in addition to any other relief to which he may
be entitled.
V. RESTRICTIVE COVENANTS
The following restrictive covenants shall apply to this Agreement:
Section 5.01. Non-Competition. Until five (5) years after the date
Employee is no longer employed by Company, or, if such period would be
shorter, until a date which is seven years after the closing under the
Stock Purchase Agreement, the Employee will not directly or indirectly,
participate in a managerial or supervisory capacity as an executive
officer, member of senior management or consultant in any business or
enterprise competing with the Company or any Affiliate in the Territory
described on Exhibit A. "A business or enterprise competing with the
Company or any Affiliate" means any business or enterprise which does
research with respect to, designs, develops, fills, packages, produces or
manufactures any products or provides any services within the aerosol and
liquid filling contract packaging field. "Affiliate" means any
corporation, company, partnership, joint venture and/or firm which
controls, is controlled by or is under common control with the Company.
"Control" means (a) in the case of corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the stock or participating
shares entitled to vote for the election of directors; and (b) in the case
of non-corporate entities (such as joint venture partnerships or limited
partnerships), either (x) direct or indirect ownership of at least fifty
percent (50%) of the equity interest, or (y) the power to direct the
management and policies of the noncorporate entity. "Territory" means the
states listed on Exhibit A hereto.
The Employee acknowledges that the Company is and has been conducting
business throughout the entire Territory and that Employee's duties as
President and his status prior to the closing under the Stock Purchase
Agreement, have involved him in all aspects of the Company's business. The
Employee agrees and acknowledges the Company has a valid and legitimate
business interest in protecting its business in the Territory from any
activity prohibited by this Section 5.01.
This Section 5.01 shall not apply to the Employee's ownership of three
percent (3%) or less of the outstanding voting securities of any
corporation or other entity which has its securities listed on a national
securities exchange or on the Nasdaq Stock Market.
Section 5.02. No Adverse Acts. During the Employment Term and
continuing for two (2) years after the date of the expiration of the
Employment Term, the Employee will not directly or indirectly, solicit,
take away, or attempt to solicit or take away any employee of the Company
either on the Employee's behalf or on behalf of any other person or entity
in the Territory which competes with Company.
Section 5.03. Equitable Relief. The Employee acknowledges and agrees
that his services are as of a special, unique and extraordinary value to
the Company and its Affiliates and that damages alone may be an inadequate
remedy for any breach of this Agreement. Accordingly, in the event of the
breach by the Employee of any of the provisions of this Agreement, the
Company may, in addition and supplementary to other rights and remedies
existing in its favor, apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive or other relief in
order to enforce, or prevent any violations of, the provisions of this
Agreement.
VI. MISCELLANEOUS
Section 6.01. Notices. Any notices to be given hereunder by either
<PAGE>
party to the other shall be in writing and may be effected by personal
delivery, by courier, or by mail (registered or certified), postage prepaid
with return receipt requested, or by facsimile confirmed by mail. Mailed
notices shall be addressed to the parties at the addresses appearing in the
introductory paragraph. Mailed notices shall be deemed communicated as of
four (4) calendar days after mailing. Notices delivered personally or by
courier shall be deemed delivered when actually received.
Section 6.01. Entire Agreement. This Agreement, together with the
Stock Purchase Agreement, supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the
employment of the Employee by the Company and contains all of the covenants
and agreements between the parties with respect to such employment in any
manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or otherwise,
have been made by any party, which are not embodied herein, and that no
other prior agreement, statement or promise not contained in this Agreement
shall be valid and binding. Any modification of this Agreement, statement
or promise not contained in this Agreement shall not be valid or binding.
Any modification of this Agreement will be effective only if it is in
writing signed by the party to be charged.
Section 6.03. Partial Invalidity. If any provision in this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
Section 6.04. Law Governing Agreement. This Agreement shall be
governed by and construed in accordance with the law of the State of
Georgia.
Section 6.05. Successors and Assigns. The rights and obligations of
the Company and the Employee under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the
Company.
Section 6.06. Waiver. Either party's failure to enforce any
provision or provisions of this Agreement shall not in any way be construed
as a waiver of any such provision or provisions, nor prevent that party
thereafter from enforcing each and every other provision of this Agreement.
The rights granted both parties herein are cumulative and shall not
constitute a waiver of either party's right to assert all other legal
remedies available to it under the circumstances.
[SIGNATURES ON FOLLOWING PAGE)
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
"Company"
PIEDMONT LABORATORIES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
"Employee"
------------------------------------
Samuel D. Garretson
EXHIBIT A
Territory
[insert list of states/countries in which
Company has customers or to which it ships)
EXHIBIT 2 DRAFT
[OPINION OP SEYFARTH, SHAW, FAIRWEATHER & GERALDSON]
___________________, 1996
<PAGE>
Aerosol Companies Holding Corporation
c/o The Gordon+Morris Group
620 Newport Center Drive, Suite 1400
Newport Beach, California 92660
Re: Stock Purchase Agreement, dated June __, 1996 (the "Agreement"),
by and among Aerosol Companies Holding Corporation, the Sellers
named therein and Piedmont Laboratories, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Samuel D. Garretson, an individual
("Garretson"), Michael J. Garretson and Gregory G. Garretson, individua1s
(together with Garretson, the "Garretsons"), Ian Gecker, an individual
("Gecker"), Carl H. Trieshmann, an individual ("Trieshmann"), the
Garretson, O'Sullivan Charitable Trust (the "Garretson Trust" and with
Garretsons, Gecker and Trieshmann, the "Sellers") and Piedmont
Laboratories, Inc., a Georgia corporation (the "Company"), in connection
with that certain Stock Purchase Agreement, dated June , 1996 (the
"Agreement"), by and among Aerosol Companies Holding Corporation, a
Delaware corporation ("Purchaser"), the Sellers and the Company.
This opinion is being delivered pursuant to Section 5.1(j) of the
Agreement. Capitalized terms used herein without definition have the
meaning specified therefor in the Agreement. The Agreement and the
Employment and Non-Competition Agreement which were prepared in connection
with the consummation of the transactions reflected in the Agreement are
sometimes referred to herein collectively as the "Documents."
For purposes of rendering this opinion we have reviewed and examined
originals or copies of the Documents and such other agreements, documents,
instruments, records and matters of law as we have deemed necessary in
order to render the opinions set forth herein. As to all factual matters
relating to the opinions set forth herein, we have without independent
investigation or verification relied upon the representation and warranties
by the various parties in the Documents and upon certificates of the
Company and Sellers. We have also relied upon and assumed the accuracy of
such corporate records, documents, certificates, opinions, memoranda and
other instruments with respect to the facts stated therein as in our
judgments are necessary or appropriate to enable us to render the opinions
expressed below.
In rendering the opinions expressed below, we have assumed without
independent investigation or verification on the following:
(a) the signatures of all persons signing all agreements, documents
or instruments in connection with this opinion is rendered are
genuine, including but not limited to the Documents;
(b) all agreements, documents and instruments submitted to us as
originals or duplicate originals are authentic;
(c) all agreement, documents and instruments submitted to us as
copies, whether certified or not, conform to authentic original
documents;
(d) all parties to the agreements, documents or instruments reviewed
by us (other than the Documents), including without limitation,
the Company, Sellers and Purchaser or any person executing any
such agreement, document or instrument on behalf of the Company,
Sellers or Purchaser, have full power and authority to execute,
deliver and perform their obligations under such agreements,
documents and instruments and under the agreements, documents and
instruments required or permitted to be delivered and performed
thereunder, and that all such agreements, documents and
instruments have been duly authorized by all necessary action,
have been duly executed by such parties and are or will be valid,
binding and enforceable obligations of the parties thereto;
(e) all consents, approvals, waivers, exemptions and authorizations
to be obtained by any party, including, without limitation, the
Company, Sellers or Purchaser, in connection with the
consummation of the transactions reflected in or contemplated by
the Agreement have been obtained and that all other actions
described in Section __ of the Agreement to be taken by any
party, including, without limitation, the Company, Sellers or
Purchaser, have been taken; and
(f) there have been no changes since the respective dates of the
governmental certificates examined by us which would make untrue
or qualify any statement contained therein.
Based on the foregoing and subjects to the limitations and
qualifications expressed herein, we are of the opinion that:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Georgia and has the requisite
corporate power and authority to conduct its business as presently
conducted, to own and lease its properties and assets and to execute and
<PAGE>
deliver the Documents and perform its obligations thereunder.
2. The Company is qualified to do business as a foreign
corporation in the jurisdiction set forth in Exhibit A hereto.
3. The Documents have been duly authorized, executed and
delivered by the Company and are valid and binding obligations of the
Company and the Agreement is enforceable against the Company in accordance
with its terms.
4. The Agreement has been duly executed and delivered by each
Seller and constitutes the valid and binding obligation of each Seller and
is enforceable against each Seller in accordance with its terms.
5. The authorized capital stock of the Company consists of
_________ shares of common stock, par value $___________ per share
("Company Common Stock"), of which 100 shares are issued and outstanding.
Such shares have been duly authorized, validly issued, and are fully paid
and non-assessable.
6. Neither the execution and delivery by the Company of the
Documents nor its performance of its obligations thereunder will (a) result
in the material violation of (i) any Federal or Georgia statute or
regulation applicable to the Company or (ii) any order or decree known to
us of any court or Governmental Authority binding upon the Company or its
property, (b) conflict with the Company's Articles of Incorporation or
Bylaws or (c) result in a material default or in the creation of a lien
under an indenture, loan agreement, or other agreement known to us by which
the Company is a party and bound.
7. Neither the execution and delivery by Sellers of the
Documents to which each is a party, nor the performance of their respective
obligations thereunder will (a) result in the violation of (i) any Federal
or Georgia statute or regulation applicable to a Seller to (ii) any order
or decree known to us of any court or Governmental Authority binding upon
any shares of Company Common Stock owned by a Seller, in either case which
would prevent such Seller from selling the Company Common Stock to
Purchaser or otherwise prevent such Seller from materially performing its
obligations under the Agreement (and with respect to Garretson, the
Employment and Non-Competition Agreement) or (b) result in a material
default or in the creation of a lien on the shares of Company Common Stock
owned by any Seller or any material property or assets of the Company,
under any indenture, loan agreement or other agreement which is known to us
and to which a Seller or any of the shares of Company Common Stock is
bound.
8. The execution and delivery of the Documents by the Company
and Sellers do not, and performance by each of them with the terms thereof
and consummation of the transactions contemplated thereby will not, require
any registration with or approval by any Federal or State of Georgia
Governmental Authority that has not been made or obtained, where the
failure to make or obtain such registration or approval, respectively,
would materially adversely affect the ability of the Company or Sellers to
perform any of their respective material obligations under the Documents to
which each is a party.
9. Assuming full payment by or on behalf of Purchaser of the
consideration for the Company Comon Stock set forth in the Agreement in the
manner and to the persons contemplated in the Agreement, the performance by
Purchaser of its obligations under the Agreement, the delivery by or on
behalf of each Seller to Purchaser of the certificates for the Company
Common Stock owned by such Seller and the executed stock powers for each
Seller therefor at the closing of the purchase and sale of the Company
Common Stock, and the acquisition of the Company Common Stock by Purchaser
in good faith without notice of any adverse claim, Purchaser will acquire
the interests of the Sellers in the Company Common Stock, free of any
adverse claim as a "bona fide purchaser" under Section of the
Georgia Uniform Commercial Code.
We are not acting as counsel for the Company or Garretson in any
pending litigation in which the Company or Garretson is a party, and
neither the Company nor Garretson has referred to us for legal advice or
legal representation any litigation matter that has been overtly
threatened, in writing, in which the Company or Garretson may reasonably be
expected to become a party.
The statement set forth in the preceding sentence is limited to those
matters that the Company or Garretson has referred to us for legal
representation or about which the Company or such Seller has consulted us
as counsel and with respect to which we have given substantive attention,
as reflected in our billing statements, subsequent to January 1, 199[5].
We have identified those matters by making inquiry of the lawyers presently
in the Chicago Office of our firm who, according to our billing statements,
have been engaged in legal services on behalf of the Company or Garretson
during that period. In that process we have not undertaken any independent
review of documents or records concerning the Company or Garretson that are
in our possession.
We are also able to advise you that, based only upon an inquiry of
those attorneys presently in the Chicago Office of our firm who have,
according to our billing statements, devoted time to the transactions
contemplated by the Documents, we do not have any knowledge of any action,
<PAGE>
suit or proceeding pending against the Company or any Seller relating to
the shares of the Company Common Stock, in law or equity before any court,
arbitrator or administrative or governmental body, in which an injunction
or order has been entered (or a hearing to cause on injunction to be
entered is pending or with respect to which the Company or any Seller has
received written notice thereof) preventing the transactions contemplated
by the Documents.
The opinions set forth herein are subject to the following further
qualifications, assumptions, limitations and exceptions:
(a) Our opinions are subject in all cases to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or affecting
creditors' rights and remedies generally;
(b) the legality, validity, enforceability and binding effect of the
Documents are subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding at law or in
equity), including without limitation, good faith, fair dealing,
unconscionability, materiality, reasonableness and the possible
unavailability of specific performance and injunctive relief;
(c) any provision contained in the Documents which purports to sever
from any such Document any provision therein which is prohibited
or unenforceable under applicable law without affecting the
enforceability or validity of the remainder of such Document is
subject to the qualification that such a provision may be
enforced only to the extent that a court of competent
jurisdiction determined that such prohibited or unenforceable
provision could be severed without impairing the interpretation
and application of the remainder of such Document;
(d) we express no opinion as to the enforceability of cumulative
remedies to the extent that such cumulative remedies purport to
compensate or would have the effect of compensating the party
entitled to the benefits thereof in amounts in excess of the
actual loss suffered by such party;
(e) requirements in the Documents specifying that provisions thereof
may only be waived in writing may not be valid, binding or
enforceable to the extent that an oral agreement or an implied
agreement by trade practice or course of conduct has been created
modifying any provision of such Document;
(f) we express no opinion as the enforceability of the
indemnification provisions to the Documents insofar as such
provisions contravene public policy or limit the remedies
available to any party otherwise entitled to indemnification,
contribution or other remedies under the laws, statutes,
regulations or rules of any jurisdiction;
(g) our opinions rendered in Paragraphs 6, 7 and 8 above are based
upon a review of those Federal and State of Georgia statutes and
regulations which, in our experience, are normally applicable to
transactions of the type contemplated in the Documents.
(h) a statement in our opinion or in this letter that a matter which
involves a question of fact is "to our knowledge" or "known to
us" refers exclusively to the current actual knowledge of facts
or other information of the attorneys of our firm who have given
substantive attention to matters concerning the Company or
Sellers in connection with the transactions which are the subject
of this opinion, and our knowledge of the Company and/or the
Sellers is limited to the representations made by the Company and
Sellers in the Documents, but beyond that we have made no
independent factual investigation for the purpose of rendering
the opinions contained herein and no inference as to our
knowledge concerning any facts should be drawn as a result of our
limited representation; and
(i) the opinions set forth herein are limited to the matters stated
herein as of the date hereof and we disavow any obligation to
update this opinion or advise you of any change in our opinions
in the event of changes in applicable law or facts becoming
effective after the date hereof or if additional or newly
discovered information is brought to our attention.
We call your attention to the fact that we are attorneys admitted to
practice law in the State of Illinois. We express no opinion as to any
laws, or matters governed by any laws, other than the laws of the State of
Illinois and the Federal laws of the United States. Insofar as the
opinions expressed herein relate to matters governed by the laws of the
State of Georgia, we have relied solely, with your consent and without
independent investigation, on the opinion of counsel attached as Exhibit B
hereto, as to the matters described therein, a copy of which is being
delivered to you herewith.
This opinion is rendered solely for the benefit of the addressees, and
may not be relied upon by any other person. It may not be disclosed or
referred to by you or anyone acting on your behalf to any person except for
purposes of review by your counsel in connection with the purchase and sale
<PAGE>
of the Company Stock without the prior written consent of the undersigned.
Very truly yours,
[SEYFARTH, SHAW, FAIRWEATHER & GERALDSON]
EXHIBIT 3
Form of Opinion (Purchaser's Counsel)
____________, 1996
Samuel D. Garretson and the Other Sellers
1665 Chevron Way, N.E.
Atlanta, Georgia 30350
Piedmont Laboratories, Inc.
2030 Old Candler Road
Gainesville, Georgia 30507
Re: Stock Purchase Agreement, dated as of June __ 1996,
among Aerosol Companies Holding Corporation, Samuel D. Garretson
and the other Sellers named therein and Piedmont Laboratories,
Inc.
Ladies and Gentlemen:
We have acted as special counsel to Aerosol Companies Holding
Corporation, a Delaware corporation ("Purchaser") in connection with the
Stock Purchase Agreement (the "Agreement"), dated as of June 27, 1996,
among Purchaser, Samuel D. Garretson, an individual ("Garretson"), and the
other Sellers named therein (together with Garretson, "Sellers") and
Piedmont Laboratories, Inc., a Georgia corporation ("Company")
This opinion is rendered in compliance with Section 5.2(e) of the
Agreement. Capitalized terms used herein shall have the meanings ascribed
them in the Agreement, unless otherwise defined herein.
We have examined originals or copies of the Agreement.
We have also examined such other documents, records and matters
of law and fact as we have deemed necessary for the purposes of this
opinion. As to factual matters, we have relied upon the representations
and warranties by the various parties in the Agreement and the Employment
and Non-Competition Agreement and upon certificates of Purchaser. We have
also relied upon originals or copies of such records, documents,
certificates, opinions, memoranda and other instruments as in our judgment
are necessary or appropriate to enable us to render the opinion expressed
below.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions set forth below, we are of the opinion that:
1. Purchaser is incorporated, validly existing and in good
standing under the laws of the State of Delaware with corporate power and
authority to execute and deliver the Agreement and perform its obligations
thereunder.
2. Purchaser is qualified to do business as a foreign
corporation and is in good standing in the State of Georgia to the extent
necessary to perform its obligations under the Agreement.
3. The Agreement has been authorized, executed and delivered by
Purchaser and is a valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms.
4. Neither the execution and delivery by Purchaser of the
Agreement nor its performance of its obligations thereunder will (a) result
in the violation of (i) any federal or Georgia statute or regulation
applicable to Purchaser or (ii) any order or decree known to us of any
court or governmental authority binding upon Purchaser or its property, (b)
conflict with Purchaser's Certificate of Incorporation or Bylaws or (c)
result in a default or in creation of a lien under any indenture, loan
agreement, or other agreement known to us by which Purchaser is bound.
We are able to advise you that, based only upon an inquiry of
those attorneys presently in our firm who have, according to our records,
devoted time to the transactions contemplated by the Agreement, we are
aware of no action, suit, or proceeding pending against Purchaser, in law
or equity before any court, arbitrator or administrative or governmental
body, in which an injunction or order has been entered (or a hearing to
cause an injunction or order to be entered is pending or noticed)
preventing the transactions contemplated by the Agreement.
<PAGE>
The foregoing opinions are subject to the following assumptions,
limitations, qualifications and exceptions:
A. We have assumed (i) the genuineness of all signatures and
the authenticity of all documents submitted to us as originals, (ii) the
conformity with the originals of all documents submitted to us as copies
thereof, (iii) the accuracy of all certificates from public officials and
authorized representatives of Purchaser submitted to us, (iv) the continued
accuracy of all certificates from public officials dated earlier than the
date of this letter, and (v) that the Agreement and the Employment and Non-
Competition Agreement have been duly authorized, executed and delivered by,
and constitute the valid and binding obligations of Company and each Seller
that is a party thereto, enforceable against Company and such Seller or
Sellers in accordance with their respective terms.
B. Our opinion rendered in Paragraph 3 above relating to the
enforceability of the Agreement is subject to and limited by the following:
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter affecting the remedies of creditors and (ii)
general equitable principles, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing (regardless of
whether the issue of enforceability is considered in a proceeding in equity
or at law), public policy and the discretion of the court before which any
proceeding therefor may be brought.
C. Our opinion rendered in Paragraph 4 above regarding no
violation of federal or Georgia statutes or regulations applicable to
Purchaser is based upon a review of those statutes and regulations which,
in our experience, are normally applicable to transactions of the type
contemplated by the Agreement.
D. In rendering our opinion in Paragraph 4 above, we have
identified orders, decrees and agreements "known" to us by making inquiry
of Purchaser and the attorneys presently in our firm who, according to our
records, have been actively involved in the transaction covered by this
opinion.
E. In rendering the foregoing opinions, our examination of
matters of law has been limited to the laws of the State of Delaware (with
respect to the opinion set forth in Paragraph l above), the State of
Georgia, the State of California and the laws of the United States of
America.
This opinion is provided to you by us as special counsel to
Purchaser in connection with the execution and delivery of the Agreement
and is intended solely for your benefit and may not be relied upon by any
other person or in connection with any other transactions without our prior
written consent.
Very truly yours,
<PAGE>
AMENDMENT TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT, dated as of the 30th day of
September 1996, by and among AEROSOL COMPANIES HOLDING CORPORATION, a
Delaware corporation ("Purchaser"), SAMUEL D. GARRETSON, an individual
("Garretson"), MICHAEL J. GARRETSON and GREGORY G. GARRETSON (together with
GARRETSON, the "Garretsons"), IAN GECKER ("Gecker"), CARL H. TRIESHMANN
("Trieshmann"), GARRETSON, O'SULLIVAN CHARITABLE TRUST (the "Garretson
Trust") (and, with Garretsons, Trieshmann and Gecker, the "Sellers") and
PIEDMONT LABORATORIES, INC., a Georgia corporation (the "Company")
W I T N E S S E T H:
WHEREAS, Purchaser, Sellers and the Company have entered into a Stock
Purchase Agreement dated as of June 27, 1996 providing for the sale by
Sellers of all of the outstanding Company Common Stock to Purchaser upon
the terms and conditions set forth therein (the "Agreement"); and
WHEREAS, Purchaser, Sellers and the Company desire to amend certain
provisions of the Agreement as hereinafter provided;
NOW, THEREFORE, in consideration of these premises, the covenants and
agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser, Sellers and the Company agree that all capitalized
terms used herein shall have the meanings ascribed thereto in the
Agreement, and further agree as follows:
1. AMENDMENT TO SECTION 1.2 (PURCHASE PRICE). Section 1.2 is hereby
amended by deleting in its entirety the second sentence thereof.
2. AMENDMENT TO ARTICLE IV (COVENANTS OF SAMUEL D. GARRETSON).
Article IVis hereby amended by adding Section 4.10 as follows:
"4.10 Covenants of Garretson. At or prior to the
Closing, Purchaser shall subtract the $5,000.00 down
payment from that portion of the Purchase Price payable
to Garretson relating to the 1995 Mercedes Benz S5O0V.
Garretson covenants and agrees that no later than thirty
(30) days from the Closing, Garretson will either assume
the leases of or purchase the following three (3)
vehicles: (i) a 1988 Mercedes Benz 56OSL currently
leased by the Company from Mercedes-Benz Credit
Corporation; (ii) 1993 Acura Legend currently leased by
the Company from American Honda Finance Corporation; and
(iii) 1994 Ford Explorer currently leased by the Company
from Enterprise Leasing Company of Georgia."
3. AMENDMENT TO SECTION 5.1(A) (REPRESENTATIONS AND WARRANTIES;
PERFORMANCE OF OBLIGATIONS). Section 5.1 (a) is hereby amended by
adding the following language after the word "financing" in the
fifteenth line thereof:
"; provided, further, that notwithstanding the delivery of
new, revised or updated Schedules 2.11 and 2.16 to this
Agreement by Sellers to Purchaser or anything in this
Agreement to the contrary, Sellers shall indemnify any
Purchaser Indemnitee in the manner and subject to Article
VII hereof for any and all Losses or items which would have
been Losses, absent the delivery of amendments to Schedules
2.11 and 2.16."
4. AMENDMENT TO SECTION 5.2 (CONDITIONS OF OBLIGATIONS OF SELLERS).
Section 5.2 is hereby amended by deleting Section 5.2(g) (Release
of Guaranties) in its entirety.
5. NO OTHER AMENDMENT. Except for the amendments set forth above,
the Agreement shall remain unchanged and in full force and effect.
6. COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original, and all
of which, taken together, shall constitute one and the same
agreement.
7. GOVERNING LAW. This Amendment shall be deemed to be made under,
and for all purposes shall be construed in accordance with, the
laws of the State of Georgia (other than the choice of law
principles thereof).
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal as of the day and year first above written.
PURCHASER:
AEROSOL COMPANIES HOLDING
CORPORATION
<PAGE>
By: /s/ Drew H. Adams
---------------------------------
Name: Drew H. Adams
Title: Vice President
SELLERS:
/s/ Samuel D. Garretson
---------------------------------
SAMUEL D. GARRETSON
/s/ Michael J. Garretson
---------------------------------
MICHAEL J. GARRETSON
/s/ Gregory G. Garretson
---------------------------------
GREGORY G. GARRETSON
/s/ Ian Gecker
---------------------------------
IAN GECKER
/s/ Carl H. Trieshmann
---------------------------------
CARL H. TRIESHMANN
GARRETSON, O'SULLIVAN
CHARITABLE TRUST
By: /s/ Robert. R. Kiser
---------------------------------
Name: Robert R. Kiser
trustee
COMPANY:
PIEDMONT LABORATORIES, INC.
By: /s/ Samuel D. Garretson
---------------------------------
Samuel D. Garretson
President
<PAGE>
----------------------------------------------------------------------------
PURCHASE AND MERGER AGREEMENT
----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Merger and Effect of Merger . . . . . . . . . . . . . . . . . . . . . . .
1.01 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.02 Excluded Assets Transfer . . . . . . . . . . . . . . . . . . .
Consideration and Covenants . . . . . . . . . . . . . . . . . . . . . . .
2.01 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.02 Adjustment to Purchase Price . . . . . . . . . . . . . . . . .
2.03 Excluded and Retained Liabilities . . . . . . . . . . . . . . .
2.04 Sale and Transfer Taxes . . . . . . . . . . . . . . . . . . . .
2.05 Operation of ASC Business Prior to Closing . . . . . . . . . .
2.06 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . .
2.07 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . .
2.08 Proprietary Information . . . . . . . . . . . . . . . . . . . .
2.09 Damages for Breach . . . . . . . . . . . . . . . . . . . . . .
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.01 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . .
3.02 Deliveries at Closing . . . . . . . . . . . . . . . . . . . . .
Representations and Warranties of Sellers . . . . . . . . . . . . . . . .
4.01 Organization . . . . . . . . . . . . . . . . . . . . . . . . .
4.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .
4.03 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
4.04 Financial Statements . . . . . . . . . . . . . . . . . . . . .
4.05 Absence of Certain Facts or Events . . . . . . . . . . . . . .
4.06 Property, Leases and Liens . . . . . . . . . . . . . . . . . .
4.07 Transfer of Good Title . . . . . . . . . . . . . . . . . . . .
4.08 Contracts and Commitments . . . . . . . . . . . . . . . . . . .
4.09 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . .
4.10 Permits and Authorizations . . . . . . . . . . . . . . . . . .
4.11 No Violations . . . . . . . . . . . . . . . . . . . . . . . . .
4.12 No Finders or Brokers . . . . . . . . . . . . . . . . . . . . .
4.13 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . .
4.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.15 No Other Sale . . . . . . . . . . . . . . . . . . . . . . . . .
4.16 Proprietary Information and Rights . . . . . . . . . . . . . .
4.17 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . .
4.18 Employment Laws . . . . . . . . . . . . . . . . . . . . . . . .
4.19 Environmental Laws . . . . . . . . . . . . . . . . . . . . . .
4.20 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.21 No Unlawful Contributions . . . . . . . . . . . . . . . . . . .
4.22 No Insider Transactions . . . . . . . . . . . . . . . . . . . .
4.23 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . .
4.24 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . .
4.25 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . .
4.26 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . .
4.27 No Misstatement . . . . . . . . . . . . . . . . . . . . . . . .
4.28 Copying and Inspection . . . . . . . . . . . . . . . . . . . .
4.29 Accuracy Records . . . . . . . . . . . . . . . . . . . . . . .
Representations and Warranties of Newco and Parent . . . . . . . . . . .
5.01 Organization . . . . . . . . . . . . . . . . . . . . . . . . .
5.02 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . .
5.03 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .
5.04 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . .
Limitations on Representations, Warranties and Agreements . . . . . . . .
6.01 Certain Limitations on Representations and Warranties . . . . .
6.02 Reliance on and Survival of Representations, Warranties
Covenants and Agreements; Limits on Suits Relating to the
<PAGE>
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .
6.03 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.01 By Seller . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.02 By Newco . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.03 Procedure for Indemnification . . . . . . . . . . . . . . . . .
7.04 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.05 Specific Environmental Indemnity . . . . . . . . . . . . . . .
7.06 Special Procedures for Environmental Indemnity . . . . . . . .
Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . .
8.01 Conditions to Obligations of Newco and Parent . . . . . . . . .
8.02 Conditions to Obligations of Seller and ASC . . . . . . . . . .
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . .
9.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . .
Miscellaneous
10.01 Expenses . . . . . . . . . . . . . . . . . . . . . . . . .
10.02 Entire Agreement . . . . . . . . . . . . . . . . . . . . .
10.03 Successors Bound . . . . . . . . . . . . . . . . . . . . .
10.04 Governing Law . . . . . . . . . . . . . . . . . . . . . .
10.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . .
10.06 Counterparts . . . . . . . . . . . . . . . . . . . . . . .
10.07 Severability . . . . . . . . . . . . . . . . . . . . . . .
10.08 Certain Interpretative Matters . . . . . . . . . . . . . .
</TABLE>
EXHIBITS
A Agreement of Merger
B Machinery and Equipment (Section 1.01(a) (i))
C Leasehold Interests (Section 1.01(a) (ii))
D Facilities Where Inventory Located (Section 1.01(a) (iii))
E Contracts (Section 1.01(a) (v))
F Excluded Assets (Section 1.02)
G Terms of Preferred Stock (Section 2.01(b))
H Taxes Newco Will Assume (Section 2.03(a)
I Litigation for which Sellers Remain Responsible (Section 2.03(a))
J Exceptions to Representations and Warranties (Section 4) (includes
attached Schedules)
K Principal Terms of Opinion of Kindel & Anderson (Section 8.01(c))
L Employment Agreement (Sections 8.01(h) and 8.02(f))
M Confidential and Proprietary Information Agreement (Section 8.01(i))
N Form of Subscription Agreement (Section 8.01(j))
O Projections (Section 8.01(k))
P Principal Terms of Opinion of Jones, Day, Reavis & Pogue (Section
8.02(c))
PURCHASE AND MERGER AGREEMENT
This Purchase and Merger Agreement (this "Agreement") is made and
entered into as of the 14th day of February, 1994 by and among Aerosol
Services Company, Inc., a California corporation ("ASC"), Walter K. Lim and
Howard C. Lim (hereinafter collectively referred to as "Sellers" and
individually as a Seller"); Aerosol Services Holding Corporation, a
Delaware corporation ("Parent"); and ASC Merger Corp., a California
corporation ("Newco")
W I T N E S S E T H
WHEREAS, Sellers desire to transfer to Newco, substantially all the
business and assets of ASC, subject to the liabilities of ASC except for
certain liabilities the Sellers will retain; and
WHEREAS, Newco desires to acquire substantially all the business and
assets of ASC, subject to liabilities of ASC.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties
hereto agree as follows:
Merger and Effect of Merger
1.01 Merger. Upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined in Section 3.01):
(a) Pursuant to the Agreement of Merger attached as Exhibit A,
ASC shall merge with and into Newco, with Newco being the surviving
corporation, and Newco shall change its name to "Aerosol Services Company,
Inc."
(b) As a result of the merger described in subparagraph (a)
above, Newco shall acquire all of the right, title and interest of ASC
after giving effect to the Excluded Assets Transfer described in Section
<PAGE>
3.01 below, in and to all of the assets, interests and properties of ASC
(the "ASC Assets"), as the same shall exist on the Closing Date (as defined
in Section 3.01 hereof), including the following:
(i) All machinery, equipment (including computer, office,
manufacturing and laboratory equipment), furniture, fixtures, leasehold
improvements, tools, vehicles and other tangible assets or property used or
held for use primarily in connection with the business of ASC, the
principal items of which are listed in Exhibit B hereto;
(ii) The leasehold interests in the real property described
in Exhibit C hereto, together with ASC's interest, if any in the
improvements thereon;
(iii) All of ASC's inventories of supplies, raw
materials, work-in-process and finished goods, wherever located, including
all such inventories located at the facilities identified in Exhibit D
hereto;
(iv) All of ASC's cash and all its accounts, claims and
notes receivable including claims under insurance policies;
(v) Each lease, license, joint venture agreement, contract
or commitment, whether written or oral, pertaining to the conduct of the
business of ASC, including without limitation those which are set forth in
Exhibit E hereto (the "Contracts");
(vi) All patents, trademarks, service marks and trade names
(and all applications thereof), know-how, processes, trade secrets, product
formulae, computer programs and software, and all manufacturing, research
and similar technical information used in the business of ASC;
(vii) ASC's prepaid expenses for its business and
miscellaneous other assets;
(viii) All books of account, records, files, invoices,
supplier lists, customer lists and other data associated with, necessary to
or used or employed in connection with the business of ASC; and
(ix) All ASC's permits, Authorizations (as defined in
Section 4.10) and government licenses, to the extent transferable.
The ASC Assets shall be free and clear of all liens, liabilities,
obligations, claims, security interests and rights of third parties which
are Excluded Liabilities, as defined in Section 2.03 below.
1.02 Excluded Assets Transfer. The parties to this Agreement
recognize that Parent and Newco do not intend to acquire any interest in
the portion of ASC's business sometimes referred to as its "Heartland
Division" or in ASC's note receivable from Image Laboratories, Inc., or in
certain other assets (collectively, the "Excluded Assets") described on
Exhibit F to this Agreement. Sellers shall cause ASC to transfer ownership
of the Excluded Assets prior to Closing and shall deliver evidence this has
been done at the Closing. To the extent that Sellers have not caused ASC
to deliver custody (as opposed to title) of the Excluded Assets prior to
the Closing, Newco and Parent agree to cause or permit such transfers and
deliveries after the Closing.
Consideration and Covenants
2.01 Price. Upon the terms and subject to the conditions of this
Agreement, in consideration of the merger Sellers shall receive the
consideration described below (collectively the "Purchase Price") and at
the Closing Newco shall:
(a) Deliver to Sellers the sum of $32,000,000, as adjusted
pursuant to Section 2.03(a) (the "Cash at Closing");
(b) Deliver to Sellers $3 million in face amount of the 10%
Cumulative Redeemable Preferred Stock of Parent, having the terms set forth
on Exhibit G attached hereto (the "Preferred Stock");
(c) Pay the reasonable legal fees and expenses of Kindel &
Anderson and Latham & Watkins incurred by Sellers in connection with this
Agreement and the fees and expenses of Coopers & Lybrand incurred by ASC or
Sellers in connection with this Agreement, provided that any legal fees of
Latham & Watkins which would be amounts recoverable by Newco or Parent
pursuant to Section 7.05 shall not be paid by Parent or Newco, and
(d) Assume, pay, perform and discharge all of ASC's obligations
and liabilities which are not retained by Sellers pursuant to Section
2.03(a) hereof.
2.02 Adjustment to Purchase Price.
(a) The Cash at Closing shall be adjusted by deducting from
$32,000,000 the amount required to pay or discharge the following
indebtedness:
(i) all amounts due under ASC's shareholder note
($1,505,833)
<PAGE>
(ii) all amounts due Union Bank by ASC under Obligation Nos.
0003-00-0-001 and 0005-00-0-001 ($2,737,284).
The Cash at Closing shall be further reduced by the amount of any expenses
relating to this Agreement which are the responsibility of Sellers but
which ASC has paid prior to the Closing and by the amount (if any) by which
bonus and profit-sharing amounts awarded by ASC for 1993 are less than
$250,000, in the aggregate.
(b) Prior to Closing, ASC and Newco will agree upon the
allocation of the Purchase Price and record such allocation on a
certificate delivered at the Closing.
2.03 Excluded and Retained Liabilities. As a result of the merger,
Newco shall assume the debts, obligations and liabilities of ASC as they
exist on the Closing Date. Notwithstanding this, as among the parties,
except as specifically listed on Exhibit H, Newco shall not assume or pay
any debt, obligation or liability of ASC or Sellers for federal, state or
local taxes, including excise taxes, owed by ASC or Sellers attributable to
periods on or prior to the Closing Date or attributable to prohibited
transactions (within the meaning of Section 4975 of the Code and Section
406 of ERISA) that occurred on or before the Closing Date or, except as
described in Section 2.04, arising from this purchase. Sellers shall
retain liability for and defend, at their own expense, all such claims
regardless of when they are asserted and shall be responsible for all
obligations of any kind or nature, including but not limited to attorneys'
fees, interest expenses, fines, damages, settlements, judgments, debts,
obligations or any similar liabilities resulting therefrom. In addition,
Sellers shall be and continue to be, from and after the Closing Date,
responsible for all debts, obligations, interest liabilities, attorneys'
fees, costs, expenses, fines, damages, settlements, judgments or similar
liabilities resulting from the claims and lawsuits described in Exhibit I
hereto and for all liabilities associated with the Excluded Assets. Newco
shall cooperate with Sellers in defending such claims and lawsuits and
shall make available to Sellers such personnel and records as Sellers may
reasonably request in connection therewith, provided that Sellers shall pay
all out-of-pocket expenses incurred by Newco. Such liabilities for taxes,
claims and lawsuits are the "Excluded Liabilities."
2.04 Sale and Transfer Taxes. Notwithstanding anything herein to the
contrary, all state or local transfer, stamp, vehicle, sales or use taxes
imposed or incurred in connection with the consummation of the transactions
contemplated by this Agreement shall be borne by Newco.
2.05 Operation of ASC Business Prior to Closing. Prior to the Closing
Date, Sellers shall cause ASC to operate its business only in the ordinary
course and consistent with past practice, and shall not cause or permit ASC
to (i) pay any dividend or distribution except for transfer of the Excluded
Assets, (ii) redeem or otherwise acquire any shares of its stock, (iii)
terminate any employee whose 1992 compensation exceeded $35,000 or (iv)
cause any representation or warranty contained herein to become incorrect
as of the Closing Date, except in each case as Newco shall have consented
in writing.
2.06 Inspection. ASC shall prior to Closing make the plants,
properties, books and records of ASC available for examination and
inspection by Newco and its lenders and its and their advisors and give
Newco and its advisors access to employees of ASC. Such inspections shall
be at reasonable times deigned not to interfere unreasonably with ASC's
operations, and Newco shall indemnify ASC and hold it harmless for any loss
or damage to ASC's property or premises, including consequential damages
and liabilities for discharge or release of Hazardous Materials (as
hereafter defined) arising from such inspections. Sellers and Newco shall,
on request, on or after the Closing Date, cooperate with one another by
furnishing any additional documents and/or instruments and doing any and
all such other things as may be reasonably required by the parties or their
counsel to consummate or otherwise implement the transactions contemplated
by this Agreement.
2.07 Non Competition. Sellers hereby severally agree that neither
Seller will, directly or indirectly, whether as an employee, consultant,
director, shareholder, investor or otherwise, engage in, or have any
interest in or provide any services to any services to any corporation,
partnership, proprietorship, firm, association or business which engages in
any activities competitive with the business of ASC as presently conducted,
except that (a) either Seller may own less than 3% of the shares of any
corporation whose shares are listed on a national securities exchange or
the National Association of Securities Dealers Automated Quotation System;
(b) Sellers may retain an interest in Omni Leasing Co. (provided Omni
Leasing Co. does not accept new customers without Newco's consent) and in
any entity formed to operate or hold the Excluded Assets and (c) Walter K.
Lim may continue to have an ownership interest in, and devote time to,
Walbert, Inc. and Head First, Inc. This covenant shall continue until the
fifth anniversary of the date such Seller's employment by Newco terminates
except that if a Seller's employment by Newco is terminated after the
Closing without cause (as defined in each Seller's employment agreement)
such covenant shall continue only until the third anniversary of the
termination of employment. This covenant shall apply in the State of
California to San Diego County, Los Angeles County, Ventura County,
Riverside County, San Bernardino County and Orange County, and to all other
counties in the State of California listed on Schedule 2.07, and shall also
<PAGE>
apply to all other portions of the United States of America, the United
States of Mexico and the Dominion of Canada. Sellers expressly acknowledge
that ASC's business is not restricted by geography, and that ASC ships
products throughout the United States and to other countries. Sellers and
Newco agree that if any court should hold the terms of this Section 2.07 to
be broader than necessary, this Section shall be given the broadest
possible application, to the end that Sellers shall be precluded from
competing with Newco in any area in which ASC-produced products cave been
sold.
2.08 Proprietary Information. ASC and each of the Sellers further
jointly and severally agree not to divulge, use to the detriment of Newco
or use for the benefit of any other person or persons, or misuse in any
way, any confidential information or trade secrets of or relating to the
Purchased Assets or the business of ASC, including personnel information,
inventions, trade secrets, designs, computer programs, formulas, secret
processes know-how, list of customers or other business data. The sellers
acknowledge and agree that any information or data they have acquired on
any of these matters or items was revealed in confidence and as a fiduciary
of ASC.
2.09 Damages for Breach. Each of the Sellers hereby agrees that the
remedy at law for any breach of Sections 2.07 and 2.08 may be inadequate
and in addition to any other relief to which Newco may be entitled, Newco
shall be entitled to injunctive relief for any breach or threatened breach
hereof and further agree that any breach of Section 2.07 or 2.08 shall be
presumed (but subject to rebuttal) to be the cause of any decrease in
revenues or failure to achieve the operating results projected in the
incentive plan established pursuant to the employment agreements described
in Section 8.02 following such breach.
Closing
3.01 Closing Date. The term "Closing" as used herein shall refer to
delivery of the Agreement of Merger for filing in the offices of the
Secretary of State of the State of California and the delivery of the
documents described in Sections 3.02 and 3.03, which shall take place at
the offices of Jones, Day, Reavis & Pogue, 555 West Fifth Street, Los
Angeles, California 90013 on February 14, 1994 or at such other date, time
or place as may be mutually agreed upon in writing by ASC and Newco. The
date of the Closing shall be the actual date the Agreement of Merger is
filed, and is sometimes referred to herein as the "Closing Date.
3.02 Deliveries at Closing.
(a) At the Closing, Sellers and ASC shall deliver to Newco the
following:
(i) the Agreement of Merger, duly executed, and such
assignments, stock certificates, consents and other documents and
instruments of sale, assignment, conveyance and transfer as are appropriate
or necessary to transfer the ASC Assets to Newco in accordance with the
terms of this Agreement;
(ii) Amendments to the leases described on Schedule 4.06,
and related documents, satisfactory in form and substance to ASC and its
counsel and ASC's lenders;
(iii) the documents required of ASC or Sellers Pursuant
to Section 8.01 hereof; and
(iv) such other documents as Newco or its counsel may
reasonably request to carry out the purposes of this Agreement
(b) At the Closing, Newco and Parent shall deliver to ASC and
Sellers the following:
(i) The Cash at Closing and the Preferred Stock, together
with a statement showing the calculation of the Cash at Closing;
(ii) The Agreement of Merger, duly executed, and the escrow
instructions contemplated by Section 2.02;
(iii) The documents required of Newco pursuant to
Section 8.02 hereof; and
(iv) Such other documents as ASC or its counsel my
reasonably request to carry out the purposes of this Agreement.
Representations and Warranties
of
Sellers
Except as otherwise set forth in Exhibit J (Schedules) hereto, ASC and
each Seller hereby represents and warrants to Newco and Parent as follows:
4.01 Organization. ASC is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and
has full corporate power and authority to conduct its business as it is
presently being conducted and to own and lease its properties and assets.
ASC is duly qualified to do business as a foreign corporation and is in
<PAGE>
good standing in each jurisdiction in which (i) such qualification is
necessary under the applicable law as a result of its conduct of its
business, and (ii) where the failure to be so qualified would have a
material adverse effect on the business or financial condition of ASC.
4.02 Authorization. ASC has all necessary corporate authority to
enter into this Agreement and the Agreement of Merger. At Closing, ASC and
the Sellers will have taken all necessary corporate action to consummate
the transactions contemplated by this Agreement and the Agreement of Merger
and to perform its and their obligations hereunder. This Agreement and the
Agreement of Merger have been approved by the directors and the
stockholders of ASC and no other action or approval is needed for the
execution, delivery or performance of this Agreement or the Agreement of
Merger by ASC. This Agreement has been duly executed and delivered by ASC
and Sellers and is a valid and binding obligation of ASC and each Seller
enforceable against each of them in accordance with its terms, except as
such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, relating to or limiting creditors' rights generally and (ii)
general principles of equity (whether considered in an action in equity or
at law).
4.03 No Subsidiaries. For all purposes of this Agreement, the term
"subsidiary" shall mean any corporation, partnership, joint venture or
other entity any of whose outstanding voting securities or other ownership
interests are directly or indirectly owned by ASC. ASC has no
subsidiaries.
4.04 Financial Statements.
(a) ASC has delivered to Newco its audited financial statements
as of December 31, 1992, accompanied by the unqualified opinion of Coopers
& Lybrand, and the September 30, 1993 and December 31, 1993 balance sheet
of ASC and the related statements of operations and statements of cash
flows for the 9-month period ended September 30, 1993 and the 12-month
period ended December 31, 1993 (collectively the "Financial Statements").
The Financial Statements (i) are prepared in accordance with generally
accepted accounting principles consistently applied as at the dates and for
the periods covered thereby (except that the September 30, 1993 and
December 31, 1993 statements are subject to year-end adjustments and are
not accompanied by footnote disclosures), and, except as otherwise noted
therein, (ii) fairly present the financial condition and results of
operations of ASC as of the dates and for the periods then ended, (iii) are
in agreement with the books and records of ASC, (iv) contain and reflect
adequate provisions for all liabilities and all taxes, federal, state,
local or foreign, with respect to the periods then ended and in all prior
periods and, (v) with respect to contracts and commitments, contain and
reflect adequate reserves for all reasonably anticipated losses and costs
and expenses.
(b) Except as set forth in Schedule 4.04 hereto, ASC has no
liabilities or obligations, either accrued, contingent or otherwise, which,
individually or in the aggregate, are material to ASC or which individually
or in the aggregate could cause any material adverse change in the
financial condition or results of operations of ASC, and which have not
been reflected in the Financial Statements. ASC is not in default in
respect of any material term or condition of any indebtedness or liability.
Except as set forth in the Financial Statements or Schedule 4.04 hereto,
there are no claims against or liabilities or obligations of, or any facts
in existence known to ASC or to any Seller or any other reasonable legal
basis known to ASC or any Seller for any claims against or liabilities or
obligations of ASC or any of its subsidiaries, including but not limited to
any pension liabilities of any type.
4.05 Absence of Certain Facts or Events. Except as listed on Schedule
4.05, since December 31, 1992, there has not been:
(a) any material adverse change in (i) the financial condition
of ASC from that shown on the December 31, 1992 balance sheet or in (ii)
the results of operations of ASC from that shown in the statement of income
and retained earnings of ASC for the period ended December 31, 1992;
(b) any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the purchased Assets
or the business of ASC;
(c) any increase in the compensation payable or to become
payable by ASC to any employee, officer or director whose 1992 annual
remuneration exceeded $35,000, or in the coverage or benefits under any
bonus, insurance, pension or other benefit plan made for or with any of
such officers or employees;
(d) any redemption or repurchase of outstanding shares, any
declaration, setting aside or payment of any dividend or distribution
thereon, or any agreement to take any such actions;
(e) any sale, assignment or transfer of any of the assets of ASC
or any of ASC's contractual rights on other claims, other than in the
ordinary course of business;
(f) any mortgage, pledge, or other lien, encumbrance or charge
of or on any ASC Asset;
<PAGE>
(g) the occurrence of any obligation or liability of ASC as a
result of borrowed money or any commitment to borrow money entered into by
ASC, or any increase in any loans made or agreed to be made by ASC or any
capital expenditure in excess of $20,000;
(h) any failure to repay any obligation of ASC as, when and to
the extent due;
(i) any waiver of any rights of substantial value to ASC or any
amendment or termination of any interest or agreement to which ASC is a
party;
(j) any transaction not in the ordinary course of business or
any failure to operate the business of ASC consistent with past practice;
(k) Any material addition to or modification of the employee
benefit plans, arrangements or practices affecting Personnel of ASC other
than (i) contributions made for fiscal year 1992 in accordance with ASC's
normal practices or (ii) the extension of coverage to other personnel who
became eligible after December 31, 1992 in accordance with the terms of
such employee benefit plan, which contributions and payments are listed in
Schedule 4.05(1); or
(l) Any notification (formal or informal) from any significant
customer of ASC identified on Schedule 4.23 that such customer expects its
annual purchases from ASC to decrease significantly; or
(m) To the knowledge of ASC or a Seller, any other event,
condition or state of facts of any character, whether in the ordinary
course of business or otherwise, which materially and adversely affects, or
threatens to materially and adversely affect, the ASC Assets or the results
of operations or business or financial condition or prospects of ASC,
except for events, conditions or states of fact generally applicable to
businesses In Southern California or general economic conditions in the
United States of America.
4.06 Property. Leases and Liens.
(a) Schedule 4.06 hereto accurately sets forth as of December
31, 1993 all ASC's owned or leased real properties and all items of
personal property or equipment which are significant in the conduct of
ASC's business (which, together with the equipment, buildings and
appurtenances necessary to the operation of such properties are termed
herein the "Properties") and contains with respect to each of the
Properties a list of (i) all leases, franchises and similar agreements
creating, modifying or altering rights to such Property, including zoning
or use restrictions, and (ii) all indebtedness secured by a mortgage, lien,
pledge, restriction, charge or encumbrance on any such Property, specifying
the nature thereof, including, where appropriate, the original principal
amount thereof, the person to whom owed and the unpaid balance and rate of
interest (if any). ASC owns all leasehold estates, charter rights and other
rights purported to be granted by the agreements, contracts and commitments
listed in Schedule 4.06, each of which is in full force and effect without
any material default, waiver or indulgence thereunder by ASC or to Sellers'
knowledge by any other party thereto. Except as noted on Schedule 4.06,
ASC has good and marketable title to all the Properties, in each case free
and clear of all mortgages, liens, pledges, restrictions, charges or
encumbrances of any nature whatsoever.
(b) All Properties of ASC are in a good state of repair (subject
to ordinary wear and tear), are in operable condition, have been maintained
in accordance with ASC's historical practice and are suitable for the uses
for which they are intended in the business of ASC.
(c) Except as disclosed on Schedule 4.06, the Properties
comprise all assets presently used in or needed for conduct of the business
of ASC in accordance with past practice.
4.07 Transfer of Good Title. Except as disclosed on Schedule 4.07,
consummation of the merger will convey and transfer to Newco, good,
complete and marketable title to all of ASC Assets, free and clear of
restrictions or conditions to transfer or assignment and free and clear of
all defects of mortgages, liens, encumbrances, pledges, leases, equities,
claim charges, easements, rights of way, covenants, conditions, conditional
sale of contracts, security interest and restrictions.
4.08 Contracts and Commitments.
(a) Except as set forth in Schedule 4.08, ASC has no (i)
collective bargaining agreements, or any agreements that contain any
severance pay liabilities or obligations; (ii) bonus, deferred
compensation, pension, profit-sharing, stock option, employee stock
purchase or retirement plans, or other employee benefit or incentive plans
or arrangements; (iii) employment, consulting or similar agreement,
contract or commitment not terminable on notice of thirty (30) days or less
or containing an obligation to pay and/or accrue more than $10,000 per
year; (iv) lease of real or personal property having a term in excess of
one year or remaining payments of $10,000 or more (as lessor or lessee);
(v) note or other evidence of indebtedness for borrowed money or the
deferred purchase price of property or services which involves a liability
of more than $25,000; (vi) agreement of guarantee or indemnification (other
than rights of indemnification to which officers, directors, employees and
<PAGE>
agents may be entitled by reason of the laws of any state, or by the By-
laws or the Articles of Incorporation of ASC); (vii) agreement, contract or
commitment which is presently expected to have a material adverse impact on
the financial condition or results of operations of ASC; (viii) agreement,
contract or commitment containing any covenant limiting the freedom of ASC
to engage in any line of business or compete with any person; (ix)
agreement, contract or commitment relating to expenditures which, together
with future payments under any such agreement, contract or commitment,
exceed $10,000; (x) agreement, contract or commitment relating to the
acquisition of assets of, or any interest in, any business enterprise; or
(xi) other agreement, contract or commitment (with customers or other third
parties) which involves $10,000 or more and is not cancellable without
penalty within sixty (60) days.
(b) Except as set forth in Schedule 4.08: (i) ASC has not
breached, nor has ASC received in writing any claim that it has breached,
any of the terms or conditions of any agreement, contract or commitment set
forth in any of the Schedules to this Agreement (collectively the
"Contracts") in such manner as would permit any other party to cancel or
terminate the same or impose a fee or charge as a result of such breach, if
any such breach or breaches singly or in the aggregate could materially and
adversely affect the ASC Assets or the financial condition or results of
operations of ASC. (ii) To Sellers' knowledge each Contract is except as
otherwise noted on such Schedule, in full force and effect in the form
provided to Newco and there is no breach or default by any party thereto,
nor will there be a breach or default thereunder due to the assignment and
sale of any such Contract to Newco as contemplated by this Agreement.
(iii) To the knowledge of Sellers and ASC there are no facts or conditions
which have occurred or are anticipated to occur which, through the passage
of time or the giving of notice, or both, would constitute a default under
any Contract or would cause the acceleration of any obligation of any party
thereto or the creation of a lien or encumbrance upon any of the ASC
Assets.
4.09 No Conflict. Neither the execution and delivery of this
Agreement by ASC or any Seller nor the consummation of the transactions
contemplated hereunder nor the fulfillment by ASC or any seller of any of
its terms will, except as described on schedule 4.09:
(a) conflict with or result in a breach by ASC or any Seller of, or
constitute default by it under, or create an event that, with the giving of
notice or the elapse of time, or both, would be a default or breach of or
under any of the terms, conditions or provisions of (i) any indenture,
mortgage, lease, deed of trust, pledge, loan or credit agreement, employee
benefit plan or any other Contract to which ASC is a party or to which any
ASC Asset is subject, (ii) the Articles of Incorporation or By-Laws of ASC,
or (iii) any judgment, order, writ, injunction, decree or demand of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which affects ASC or
its business or the ASC Assets;
(b) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the ASC Assets; or
(c) cause a loss or adverse modification of any permit, license, or
other authorization granted to or otherwise held by ASC which is necessary
or useful to ASC's business.
4.10 Permits and Authorizations.
(a) Except as set forth on Schedule 4.10, ASC is the holder of each
federal, state, local or foreign governmental consent, license, permit,
grant or other authorization pursuant to which ASC conducts all or a
material part of its business or holds any of its properties (herein
collectively called "Authorizations") which Authorizations are in full
force and effect and constitute all Authorizations required-to permit Newco
to operate the ASC Assets and conduct ASC's business following the Closing
Date as such ASC Assets and business are presently operated and conducted.
Schedule 4.10 also discloses all Proposed or pending applications for
Authorizations, and all applications for variances from compliance, or
postponement of the dates for compliance with any laws or regulations
affecting ASC or its business.
(b) Schedule 4.10 lists all Authorizations which may materially
restrict the present output of ASC or are required for the presently
contemplated expansion of business of ASC to add two new filling lines
including any limitations on the term of possession or operation of any
assets or the business of ASC, or which pertain to environmental discharge.
(c) ASC and Sellers have no reasonable ground to believe that any of
the Authorizations will not in the ordinary course be renewed (except as
described in Schedule 4.10) upon its expiration. The foregoing statement
shall not be deemed inaccurate by reason of the ordinary expiration of
routine. Authorizations, the renewal of which is expected to be obtained
in the ordinary course without interruption of existing operations.
(d) Except as noted on Schedule 4.10, to the best knowledge of
Sellers and ASC all Authorizations are transferable to Newco upon
effectiveness of the Merger.
(e) ASC has not breached, nor received in writing any claim or
assertion that it has breached, any of the terms or conditions of any
<PAGE>
Authorizations in such manner (x) as would permit any other party to
cancel, terminate or materially amend any Authorization or (y) that any
such breach or breaches singly or in the aggregate could materially and
adversely affect the ASC Assets or the financial condition or results of
operations of ASC.
4.11 No Violations.
(a) Except as described on Schedule 4.11 hereto, ASC is not in
violation of any applicable law, statute, order, rule or regulation
promulgated or judgment entered (or, with respect to rules and regulations
of administrative agencies, known by Sellers to be proposed) by any
federal, state, local or foreign court or governmental authority which
violations might have an adverse effect, individually or in the aggregate,
on the financial condition or results of operations of ASC or its
operations or on the ASC Assets.
(b) Except for those filings listed on Schedule 4.11 hereto, no
consent, approval or authorization of, or declaration, filing or
registration with, any federal or state governmental or regulatory
authority is required to be made or obtained by any Sellers in connection
with the execution, delivery and performance by Sellers of this Agreement
and the consummation by ASC of the transactions contemplated hereby.
4.12 No Finders or Brokers. Neither any Seller nor any affiliate of
Sellers has entered into or will enter into any agreement, arrangement or
understanding with any person or firm which will result in the obligation
of Newco or ASC, or any affiliate of Newco or ASC, to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby, except for the arrangement with respect to this
transaction between ASC and Greif & Co., with respect to which all amounts
due to Greif & Co. will be paid by Sellers.
4.13 Proceedings. Schedule 4.13 accurately lists all suits, actions
and legal, administrative, arbitration or other proceedings and
governmental investigations and all other controversies, pending or as to
which ASC has received in writing any claim or assertion. To the best
knowledge of ASC and Sellers, there are no facts which could lead to any
additional investigation being conducted or to any other suit, action or
legal proceeding.
4.14 Insurance. Schedule 4.14 lists all insurance policies under
which ASC is an insured or a beneficiary or for which it is liable to pay
premiums and further sets forth the name of the insurer, policy limits and
deductibles, if any, and the annual premium for each such policy. ASC has
furnished Newco copies of all such policies and a history of all losses
since ___________. Except as noted on Schedule 4.14, the policies listed
on schedule 4.14 will be outstanding, transferred to Newco, and in full
force and effect on and after the Closing Date.
4.15 No Other Sale. Except for this Agreement, neither any seller nor
ASC has any legal obligation, absolute or contingent, to any other person
or firm to sell the business of ASC, to sell substantially all of the
assets of ASC or any of its Shares or to effect any merger, consolidation
or other reorganization of ASC or to enter into any agreement with respect
thereto.
4.16 Proprietary Information and Rights. Schedule 4.16 hereto
accurately lists all patents, patent applications, patent and know-how
licenses, proprietary formulae, trademarks, service marks, trademark
registrations and applications, trade names, or fictitious business names,
computer software and other intellectual property rights (hereinafter
collectively termed "Business Rights") used or proposed to be used by ASC.
Unless otherwise indicated in Schedule 4.16, ASC owns the entire right,
title and interest in and to the Business Rights. Schedule 4.16 also
accurately sets forth all Business Rights which relate to the business of
ASC and which are owned or controlled by any director, officer or employee
of ASC, or by the estate of any such director, officer or employee or any
beneficiary of such estate. Sellers will cause any such Business Rights to
be Contributed to ASC or otherwise included among the ASC Assets. No
Business Rights conflict with, infringe on or otherwise violate any rights
of others, nor require payments to be made to any person, or are subject to
any pending or threatened litigation or other adverse claims or
infringement by others except as set forth in Schedule 4.13. There has
been no infringement by ASC of any domestic or foreign letters patent, or
engaged trademarks of another, or any claim or assertion that ASC has in
any such infringement.
4.17 Employee Benefits. Schedule 4.17 sets forth a list of all
"employee benefit plans" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA")) and all
other profit-sharing, deferred compensation, bonus, stock option, stock
purchase, vacation pay, holiday pay, pension, retirement plans, medical and
compensation arrangements ("Benefit Plans") maintained or contributed to or
required to be contributed to by ASC for the benefit of its employees (or
former employees) and/or their beneficiaries; including a complete listing
or description of all pension, retirement, profit sharing, savings, thrift,
stock bonus, stock option, stock purchase, restricted stock purchase, stock
ownership, stock appreciation right, phantom stock, deferred compensation,
supplemental retirement, deferred bonus, severance, change of control,
parachute, medical, health, dental, fitness, vision, dependent care,
educational assistance, group legal services, life insurance, disability,
<PAGE>
accidental death, accidental dismemberment, disability income, group
insurance, supplemental employment income, training, apprenticeship,
scholarship, tuition reimbursement, employee discount, subsidized
cafeteria, fringe benefit, employer sponsored recreational facility, or
other employee pension benefit or welfare plan, policy, contract, or
arrangement, or other similar fringe or employee benefit plan, program,
policy, contract, or arrangement, written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, for the benefit of,
or relating to, any current or former director, officer, shareholder,
consultant, employee or independent contractor of ASC, or to which ASC
contributes or has an obligation to contribute, including any such plan,
program or arrangement that has been frozen or terminated in the past six
years and any trust, escrow, or similar agreement related thereto, whether
or not funded, in respect of any of the present or former directors,
officers, shareholders, consultants, independent contractors, or employees
of ASC or with respect to which ASC has made within six years prior to
Closing or is required to make payments, transfers or contributions (the
above hereinafter individually or collectively referred to as "Benefit
Plan" or "Benefit Plans," respectively).
(a) ASC has delivered to Newco true and complete
(i) Each Benefit Plan and any related funding agreements
(e.g., insurance contracts or trusts), including all amendments (and
Schedule 4.17 includes a description of any such item that is not in
writing), all of which are legally valid and binding and in full force and
effect (except for terminated Benefit Plans), and there are no defaults
thereunder;
(ii) The current draft of the Summary Plan Description
pertaining to each Benefit Plan for which a Summary Plan Description is
required;
(iii) The three most recent annual reports for each
Benefit Plan (including all relevant schedules) for which such annual
reports are required;
(iv) The most recently filed PBGC Form l (if applicable);
and
(v) The Internal Revenue Service determination letter (if
applicable) for each Benefit Plan and each amendment thereto.
(b) Each Benefit Plan has been maintained and administered in
all material respects in accordance with its terms and any related
agreements, and with all applicable laws, and, if intended to qualify under
Code Section 401(a), is so qualified and with respect to each Benefit Plan
that is subject to Title IV of ERISA:
(i) Neither ASC nor any affiliate of ABC has ever
contributed or been obligated to contribute to any "multi-employer plan"
(as defined in Section 3(37) of ERISA) on account of any withdrawal from
such plan;
(ii) No such plan has been terminated at a time when the
plan was not sufficiently funded;
(iii) Except as otherwise provided on Schedule 4.17, the
value, determined on a termination basis, of all accrued benefits (whether
or not vested) under each such plan did not exceed, as of the most recent
valuation date, and will not exceed as of the time of filing, the then
current fair market value of the assets of the plan.
(c) All contributions and other payments to be made to each
Benefit Plan under the terms of that Benefit Plan, ERISA, the Internal
Revenue Code ("Code") or any other applicable law have been timely made and
all contributions made have been fully deductible under the Code. The
books of ABC properly reflect all amounts required to be accrued as
liabilities to date under each Benefit Plan.
(d) In the case of each Benefit Plan, there is no accumulated
funding deficiency (within the meaning of Section 4971 of the Code),
whether or not such deficiency has been waived, or any other unfunded
liability.
(e) Each Benefit Plan complies currently, and has complied in
the past, in all material respects, in form and operation, with all
applicable law including ERISA, the Code, and the continuation coverage
rules of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), Code section 4980B or part 6 of Title I of ERISA.
(f) No "prohibited transactions" (as defined in Section 4975(c)
(l) of the Code) or breaches of fiduciary duty involving ASC, a Seller, a
director or officer of ASC or, to ASC's knowledge, any third party, have
occurred with respect to any of the Benefit Plans.
(g) All trusts maintained in connection with a Benefit Plan,
including trusts, including trusts that are intended to comply with the
provisions of Code section 501(c) (9) or section 501(c) (17), are exempt
from federal income taxation under Code section 501(a) and there has been
no noncompliance or failure to properly maintain, operate or administer any
<PAGE>
Benefit Plan (or a related trust) which has rendered or will render such
Benefit Plan or trust, or ASC, subject to or liable for any taxes,
penalties or liabilities to any person.
(h) There is no contract, agreement, or benefit arrangement
covering any employee of ASC which, individually or collectively, could
give rise to the payment of any amount which would constitute an "excess
parachute payment" (within the meaning of Section 280G of the Code).
(i) Neither ASC nor any ASC affiliate maintains any Benefit Plan
that provides severance pay or medical benefits to one or more former
employees (including retirees), or provides for post-retirement benefits to
present or former employees, other than benefits that are required to be
provided pursuant to COBRA or state law conversion rights.
(j) To the best knowledge of ASC and the Sellers, there are no
investigations, proceedings, or lawsuits, either currently in progress or
expected to be instituted in the future, against any Benefit Plan, by any
administrative agency, whether local, state, or federal.
(k) There are no lawsuits or other claims, pending or threatened
(other than routine claims for benefits under the plan) against (i) any
Benefit Plan, or (ii) any Fiduciary of such plan (within the meaning of
Section 3(21) (A) of ERISA) brought on behalf of any participant,
beneficiary, or Fiduciary thereunder, nor is there any reasonable basis for
any such claim.
4.18 Employment Laws. Except as shown on Schedule 4.18:
(a) ASC is in compliance with all Federal, state or other
applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment, wages and hours, affirmative
action and occupational safety (except for minor violations or failures to
comply which would not result in any significant liability), and has not
and is not engaged in any unfair labor practice.
(b) No unfair labor practice complaint against ASC is pending
before the National Labor Relations Board.
(c) There is not any labor strike, dispute, slowdown or stoppage
actually pending or threatened against or involving
(d) There is no currently pending claim by any labor union or
similar organization concerning representation of the of ASC.
(e) Except to the extent expressly provided herein, there are no
claims, grievances or arbitration proceedings, workers' compensation
proceedings, labor disputes (including charges of violations of any
federal, state, or local laws or regulations relating to current and/or
former employees (including retirees), and/or current and/or former
applicants for employment) litigation, governmental investigations, or
administrative proceedings of any kind pending or, to the best knowledge of
ASC or Sellers, threatened against or relating to ASC, its employees,
employment practices, or operations as they pertain to conditions of
employment; nor has there come to Sellers' attention any such matter
pending or threatened against any other person, firm, or corporation which
might adversely affect ASC, its employees, assets, properties or
operations; nor are Sellers subject to any known order, judgment, decree,
award, or administrative ruling arising from any such matter.
(f) No collective bargaining agreement is currently in existence
or is being negotiated by ASC and as of the date of this Agreement no labor
organization has been certified or recognized as the representative of any
employees of ASC.
(g) ASC has not experienced any material labor difficulty during
the last three years. There has not been, and to the best knowledge,
information and belief of ASC, there will not be, any change in relations
with employees of ASC as a result of any announcement or completion of the
transactions contemplated by this Agreement.
(h) ASC's contracts with Interim Personnel Pool and )1 Arlin
Personnel Services represent bona-fide, arms-length agreements and the
personnel provided by such companies are not ASC's employees for purposes
of any federal or California laws, including laws pertaining to tax
withholding, provision of benefits or union representation.
4.19 Environmental Laws. (a) Except as disclosed on Schedule 4.19,
(i) the ASC Assets and the business of ASC have been operated in compliance
with all applicable Environmental Laws (except for violations that
individually or in the aggregate would not have a material adverse effect
on ASC or its operations), (ii) there has been no production, storage,
Release, or disposal of any Hazardous Materials at, in, on under, about or
from any of the Properties (as defined in Section 4.06) by or on behalf of
ASC, or to the best knowledge of ASC or Sellers, by any previous owner or
tenant of the Properties in violation of any applicable Environmental Law,
(iii) there has been no production, storage, Release or disposal of any
Hazardous Materials by or on behalf of ASC at any other site in violation
of any applicable Environmental Law, and (iv) there are no underground
storage tanks, asbestos-containing materials or electrical equipment
containing PCB's on the Properties, and (v) no federal, state or local
governmental entity, or any other person or group, has issued or commenced
<PAGE>
any notice of violation, notice to comply, compliance schedule,
administrative or judicial complaint, enforcement action or lien with
respect to alleged violations of Environmental Laws or, to the best
knowledge of ASC or Sellers, any proceeding or inquiry with respect to any
actual or alleged violation of any Environmental Law or any release or
alleged release of a Hazardous Material by or on behalf of ASC or relating
to the Properties.
(b) "Environmental Law" shall mean all laws, federal, state or
local, including statutes, regulations, rules, ordinances and orders which
purport to regulate the Release of Hazardous Materials to the environment,
or impose requirements relating to environmental protection or public or
employee health and safety, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. section 6901 et seq., the
Emergency Planning and Community Right-to-Know Act, as amended, 42 U.S.C.
Section 11001 et seq., the Clean Air Act, as amended, 42 U.S.C. Section
7401 et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act, as amended,
15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, as amended, 42
U.S.C. Section 300f et seq., the Federal insecticide, Fungicide &
Rodentcide Act, as amended, 7 U.S.C. Section 136 et seq., the Federal Food,
Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq., and the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et
seq. Environmental Law shall also mean any law, regulation or requirement
of any foreign country in which ASC's products are distributed which
governs the distribution, import or export of any Hazardous Material.
(c) "Hazardous Material(s)" shall mean any substance which is
(i) defined as a hazardous substance, hazardous material, hazardous waste,
pollutant, contaminant or words of similar import under any Environmental
Law, (ii) a petroleum hydrocarbon, including crude oil or any fraction
thereof, (iii) hazardous, toxic, corrosive, flammable, explosive,
infectious, radioactive, carcinogenic or a reproductive toxicant, or (iv)
regulated pursuant to any Environmental Law.
(d) "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment including the abandonment or
discarding of barrels, containers, and other receptacles containing any
Hazardous Material)
4.20 Taxes.
(a) Except as set forth in Schedule 4.20 hereto, (i) all federal,
state, foreign and local tax returns and tax reports (including information
returns) required to be filed by ASC have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns and
reports are required to be filed, and all such returns and reports are, in
all material respects, complete, accurate and in all respects in accordance
with all legal requirements applicable thereto; (ii) all federal, state,
foreign and material local income, profits, franchise, sales, use,
occupation, property, severance, production, excise, withholding and other
taxes, duties, charges and assessments (including interest and penalties)
due from ASC, without limitation including all amounts due and payable to
the California Department of Benefit Payments and the California State
Board of Equalization, (x) have been fully paid or adequately provided for
on the books and financial statements of ASC in accordance with generally
accepted accounting principles or, (y) are disclosed on Schedule 4.20 and
are being contested in good faith by appropriate proceedings and are not
material to ASC; (iii) no issues have been raised (and are currently
pending) by the Internal Revenue Service or any other taxing authority in
connection with any of the returns and reports referred to in the foregoing
clause (i) which, individually or in the aggregate, might have a material
adverse effect on ASC; (iv) no waivers of statutes of limitation have been
given or requested with respect to ASC, (v) the United States and
California tax returns of ASC have been examined (or are no longer subject
to examination) by the appropriate agency for all periods prior to and
including the dates set forth on Schedule 4.20 for each category of tax
return, (vi) and except as and to the extent shown on such Schedule, all
deficiencies asserted or assessments made as a result of examination by any
taxing authorities have been fully paid or fully reflected on the books of
ASC.
(b) ASC is not subject to any penalty by reason of violation of any
order, rule or regulation of, or a default with respect to any return or
report (other than a tax return or report set forth on Schedule 4.20)
required to be filed with, any federal, state, foreign, local or other
governmental agency, department, commission, board, bureau or
instrumentality to which it is subject, which violations or defaults,
individually or in the aggregate, might have a material adverse effect on
the financial condition or results of operations of ASC.
4.21 No Unlawful Contributions. Neither ASC, nor, to the best of
Sellers' knowledge, information and belief, any director, officer, agent,
employee or other person associated with or acting on behalf of ASC, has
made or used any corporate funds to make any unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity,
made any direct or indirect unlawful payments to officials or employees of
any federal, state, local or foreign governmental agency from corporate
funds; failed to file any reports required with respect to lawful
<PAGE>
contributions; established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; made any false or fictitious entries on
the books or records of ASC; or made or received any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment; and there have been
no claims that any such actions have occurred.
4.22 No Insider Transactions.
Except as disclosed in schedule 4.22, no Seller nor any ancestor,
sibling, descendant, spouse or affiliate of any such persons, or any trust,
partnership or corporation in which any of such persons has or had an
interest, has or has had, directly or indirectly, (i) an interest in any
entity which furnished or sold, or furnishes or sells, services or products
which ASC furnishes or sells, or proposes to furnish or sell, or (ii) any
interests in any entity which purchases from or sells or furnishes to ASC
any goods or services; (iii) a beneficial interest in any contract,
commitment, agreement or understanding to which ASC is a party or by which
it may be bound or affected; (iv) any interest or claim against any of the
Purchased Assets or ASC which could result in a claim against Newco or
could adversely affect the Purchased Assets, Newco's title to or its right
to use the Purchased Assets, or Newco's right to conduct ASC's business
following the Closing. Except as disclosed on Schedule 4.22, none of the
purchased Assets include any receivables from any officer, director,
shareholder or employee of ASC.
4.23 Accounts Receivable. The accounts receivable reflected on the
Financial Statements, or thereafter acquired by ASC from September 30, 1993
through the Closing Date were fully earned by performance in the ordinary
course of business, have been collected or to ASC's and Sellers' knowledge
are collectible at the aggregate gross recorded amounts thereof less, in
the case of accounts receivable reflected on the Financial Statements, the
allowance for uncollectible accounts set forth therein, and for accounts
receivable collected from September 30, 1993 through the Closing Date,
consistent with past practices of ASC. Schedule 4.23 discloses, as of
December 31, 1991 and December 31, 1992 the identity of each of ASC's ten
(10) largest customers for the year then ended, and the amounts receivable
from each such customer at the respective dates, and also discloses, as of
September 30, 1993, the year-to-date sales for each customer identified on
Schedule 4.23 and the amount owing from such customer on September 30,
1993. Except as disclosed on Schedule 4.23, ASC does not expect the
purchases of any customer identified on Schedule 4.23 to decrease
materially after the Closing.
4.24 Inventories. The inventories reflected on the Financial
Statements, and thereafter acquired by ASC through the date hereof, taken
as a whole, are in all material respects of a quality and quantity usable
in the normal course of the business of ASC or saleable at values (taken as
a whole) at least equal to values at which such are carried on the books of
ASC statements reflect the normal inventory valuation policy of ASC stating
inventories at the lower of cost or market on a first-in, first-out basis.
Schedule 4.24 lists all inventories of raw materials, finished goods,
packaging supplies or ingredients owned or in the custody of ASC
("Inventory") and, with respect to Inventory owned by or held for the
account of a customer, identifies such customer and Inventory in reasonable
detail, and specifies the location of such Inventory.
4.25 Bank Accounts. Schedule 4.25 lists all bank accounts, safe
deposit boxes, money market funds, certificates of deposit, stocks, bonds,
notes and other securities owned directly or indirectly, beneficially or of
record, by ASC.
4.26 Warranties. Except as set forth on Schedule 4.26, ASC has not
given or made any express warranties to third parties with respect to any
products sold or services performed. Sellers do not have any knowledge of
any fact or of the occurrence of any event forming the basis of any present
or future claim against ASC, whether or not fully covered by insurance, for
liability on account of products liability or on account of any expressed
or implied product warranty, except for warranty obligations and product
returns in the ordinary course of business and as set forth on Schedule
4.26.
4.27 No Misstatement. This Agreement, and the Schedules, Exhibits or
other written material supplied under this Agreement by ASC or Sellers do
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein in
light of the circumstances in which made, not misleading.
4.28 Copying and Inspection. Sellers and ASC have made available for
inspection and copying by Newco true and correct copies of all documents,
and any and all amendments to any such documents, referred to in this
Agreement or in any Schedule delivered to Newco pursuant to this Agreement.
4.29 Accurate Records. ASC has maintained complete and accurate books
and records in accordance with good business practices, including financial
records which fairly present its financial condition and complete and
accurate records of all its corporate proceedings.
Representations and Warranties
of
Newco and Parent
<PAGE>
Newco and Parent hereby represent and warrant to ASC as lows:
5.01 Organization. Newco and Parent each is a corporation duly
organized, validly existing and in good standing under the laws of the
State of its incorporation, has full corporate power and authority to
perform this Agreement and in Newco's case to conduct the business of ASC
following the Closing. Parent is qualified and in good standing as a
foreign corporation in the State of California.
5.02 No Conflict. Neither the execution and delivery of this
Agreement by Newco or Parent nor the consummation of the transaction
contemplated hereunder nor the fulfillment by Newco or Parent of any of its
terms will conflict with or result in a breach of, or constitute a default
by it under, any of the terms, conditions or provisions of (i) any
indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement
or any other contract, arrangement or agreement to which Newco is a party,
(ii) Newco's or Parent's Certificate of Incorporation or By-Laws, and (iii)
any judgment, order, writ, injunction, decree or demand against Newco or
its Parent of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality.
5.03 Authorization. The execution and delivery of this Agreement by
Newco and Parent and the performance of all acts contemplated to be
performed by it hereunder have been duly authorized by all necessary
corporate actions. Newco and Parent have duly executed and delivered this
Agreement, and this Agreement constitutes a legal, valid and binding
obligation of Newco and Parent, enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, relating to or limiting creditors' rights
generally, and (ii) general principles of equity (whether considered in an
action in equity or at law).
5.04 No Brokers or Finders. Newco and Parent have not retained any
broker, finder, investment banker or financial advisor in connection with
this Agreement or the transaction contemplated herein, except The Gordon &
Morris Group, whose fees and expenses will be paid by Newco and Parent.
Limitations on Representations, Warranties and Agreements
6.01 Certain Limitations on Representations and Warranties.
(a) Each party to this Agreement is a sophisticated person or
legal entity that was advised by knowledgeable counsel and, to the extent
it deemed necessary, other advisors in connection with this Agreement.
Accordingly, each party hereby acknowledges that there are no
representations or warranties by or on behalf of any party hereto or any of
its respective affiliates or representatives other than those expressly set
forth in this Agreement.
(b) The representations and warranties made in this Agreement by
Sellers and ASC will be deemed for all purposes to be qualified by the
disclosure made in the Schedules, whether or not in the case of any
particular representation or warranty such representation or warranty
refers to the Schedule in which the disclosure is made or to any other
Schedule. All references in this Agreement to the knowledge of ASC will be
deemed to be references solely to the actual knowledge of the managers of
ASC listed on Schedule 6.01.
6.02 Reliance on and Survival of Representations, Warranties,
Covenants and Agreements: Limits on Suits Relating to the Agreement.
(a) The representations and warranties made by any party in this
Agreement or in any agreement, certificate, schedule or exhibit delivered
pursuant to this Agreement may be fully and completely relied upon by ASC,
Sellers, Newco and Parent, as the case may be, notwithstanding any
investigation heretofore or hereafter made by such party or on behalf of
any of them.
(b) All representations, warranties, covenants and agreements
made by a party to another party in this Agreement or in any agreement,
certificate, schedule or exhibit pursuant to this Agreement shall remain in
full force and effect regardless of any investigation, verification or
approval by any party or its representative and shall survive the Closing
for a period of two years from the Closing Date, except (i) that the
covenants and agreements in Section 2.07 shall survive for the periods set
forth therein; (ii) that the representations and warranties made in
Sections 4.17, 4.18 and 4.20 shall survive the Closing until the expiration
of any applicable statute of limitations; (iii) that any agreement made by
a party to another party in this Agreement or in any agreement,
certificate, schedule or exhibit delivered pursuant to this Agreement and
relating to any liability or obligation in respect of claims, actions,
suits, proceedings or investigations instituted under Environmental Laws or
based upon the presence or release of Hazardous Substances shall survive
the Closing until the expiration of any applicable statute of limitations;
(iv) that the provisions of Section 2.08 shall survive the Closing until
the expiration of any applicable statute of limitations, and (v) that the
provisions of Sections 6.03 and 7.05 shall survive the Closing until the
expiration of any applicable statute of limitations. Upon the expiration
of any such survival period, any suit, claim or action relating to any
representation, warranty, covenant or agreement hereunder shall be forever
barred.
<PAGE>
6.03 Confidentiality. Whether or not the Closing occurs, each party
to this agreement will treat in confidence all documents materials and
other information disclosed by any other party that is not its affiliate,
whether during the course of the negotiations leading to the execution of
this Agreement or thereafter, in its investigation of the other and in the
preparation of agreements, schedules and other documents relating to the
consummation of the transactions contemplated hereby. In the event that
this Agreement is terminated, none of the parties hereto will use any
information furnished by any other party hereto in its or any of its
affiliate's businesses. If this Agreement is terminated, each party will
use its reasonable efforts to return to the other all originals and copies
of nonpublic documents and materials of the type provided for in this
Section 6.03 that have been furnished in connection with this agreement.
Indemnification
7.01 By Sellers. Sellers shall jointly and severally indemnify and
hold harmless Newco and Parent against any loss, damage or expense
(including reasonable attorneys' fees) suffered by Newco or Parent
resulting from (i) any breach by ASC or any Seller of this Agreement or any
of its terms or conditions, or (ii) any inaccuracy in or breach of any of
the representations, warranties or covenants made by ASC or any Seller
herein or in any document delivered pursuant hereto, except that no Seller
shall have any liability for a breach by another Seller of Section 2.07,
Section 2.08 or of such other Seller's employment agreement.
7.02 By Newco. Newco shall indemnify and hold harmless sellers
against any loss, damage or expense (including reasonable attorneys' fees)
suffered by Sellers resulting from (i) any breach by Newco or Parent of
this Agreement or any of its terms or conditions or (ii) any inaccuracy in
or breach of any of the representations, warranties or covenants made by
Newco or Parent herein or in any document delivered pursuant hereto.
7.03 Procedure for Indemnification. Upon obtaining knowledge
thereof, the indemnified party shall promptly notify the indemnifying party
of any claim or demand which it has determined has given or could give rise
to a right of indemnification under this Agreement. If such claim or
demand relates to a claim asserted by a third party, the indemnifying party
shall notify the indemnified party within 45 days (or, in the event that a
temporary restraining order is being sought by such third party, within 48
hours) if it intends to contest any such claim or demand and shall have the
right to employ counsel reasonably acceptable to the indemnified party, and
the indemnified party shall cooperate in the defense of any such claim or
demand, provided that the indemnifying party shall pay all out-of-pocket
expenses incurred by the indemnified party. Whether or not the
indemnifying party so elects to defend any such claim or demand, the
indemnified party shall not have any obligation to do so and the
indemnified party shall not waive any rights it may have against the
indemnifying party hereunder with respect to any such claim or demand by
not defending same.
7.04 Payment. Subject to the indemnifying party's right to defend
third party claims as set forth above, the indemnifying party shall
reimburse the indemnified party promptly upon demand for any payment made
or loss suffered by the indemnified party in respect of any liability,
loss, damage or expense to which this Section 7 relates. However, (except
with respect to payments arising under or with respect to Sections 2.03,
4.07, 4.18, 4.19 and 4.20) no payment shall be due except to the extent
that the aggregate amount of all payments due pursuant to Section 7.01 or
7.02, as applicable, exceeds $400,000 and the aggregate amount of all
payments pursuant to Section 7.01 or 7.02, as applicable, shall not exceed
$3,000,000 (excluding in calculating both the $400,000 and $3,000,000
amounts, payments arising under or with respect to Sections 2.03, 4.07,
4.17, 4.18, 4.19 and 4.20)
7.05 Specific Environmental Indemnity. Sellers, jointly and
severally, shall release, indemnify, defend and hold harmless Newco and
Parent and their directors, officers, partners, employees, affiliates,
agents, consultants, representatives, and their respective successors and
assigns (collectively "Environmental Indemnitees" and individually
"Environmental Indemnitee") from and against any and all claims (including,
without limitation, third party claims for personal injury or real or
personal property damage), actions, judicial proceedings, administrative
proceedings (including informal proceedings), judgements, damages, punitive
damages, penalties, fines, liabilities (whether absolute or contingent, and
including sums paid in settlement of claims), interest, taxes, fees
(including attorneys', consultants', and expert witness fees), liens,
claims of lien, expenses or costs sought from, asserted against, imposed
upon or incurred by any Environmental Indemnitee, which arise out of, are
related to or are based upon any of the following:
(a) Any matter disclosed on Schedule 4.19 or any breach of any
representation or warranty under Section 4.19 of this Agreement, provided
that if a matter disclosed on Schedule 4.19 is also subject to specific
indemnification under paragraph (f) or (h), or the proviso following
paragraph (h), of this Section 7.05 the language in such paragraph or
proviso shall control such indemnification;
(b) The presence, Release, treatment, storage or disposal of any
Hazardous Material in, on, under, about or from the Properties, or ASC's
<PAGE>
former location at 1440 Chico Street, South El Monte, California, which was
present, occurred or existed on or before the Closing Date;
(c) Any investigation, characterization and/or remediating of
any Hazardous Material that was present in, on, under or about, or Released
from the Properties on or before the closing Date, or in, on, under or
about ASC's former location at 1440 Chico Street, South El Monte,
California which is performed or rehired by any third party, including
without limitation, the U.S. Environmental Protection Agency and/or the
Regional Water Quality Control Board Los Angeles Region;
(d) The Release, treatment, storage, transportation or disposal of
any Hazardous Material at any site other than the Properties by ASC or any
of the Sellers or their respective agents or contractors, which occurred on
or before the Closing Date, whether or not such other site was or has ever
been owned or operated by ASC;
(e) Any failure by ASC or Sellers, or pertaining to the
Properties or ASC's business, to comply with any Environmental Law,
including any failure to have, maintain in effect or operate in compliance
with any permit or approval required by any Environmental Law, which
failure occurred or existed on or before the Closing Date;
(f) Any failure by ASC or Sellers, or pertaining to the
Properties or ASC's business, to comply with any Environmental Law after
the Closing Date, where such failure commenced on or before the Closing
Date and continued thereafter, provided that the right to indemnification
under this subparagraph 7.05(f) for any continuing failure described on
Schedule 7.05(f) or a similar failure shall cease as of the date, if any
(which shall not be earlier than one year following the Closing), which
Sellers establish as the date on which Newco, through the exercise of
reasonable efforts after discovery of such failure, without extraordinary
expense, could have corrected such failure;
(g) The implementation of any measure, program, construction or
other work or action necessary to correct any failure by ASC or the
Sellers, or pertaining to the Properties or ASC's business, to comply with
any Environmental Law, which failure occurred, existed or commenced on or
before the Closing Date; or
(h) The removal of any (i) underground storage tank not in use
as of the Closing Date, or (ii) asbestos-containing materials if removal is
required to comply with laws or reasonable safety policies, or (iii) PCBs,
any of which is present on the Properties as of the Closing Date.
Provided, that up to $115,000 of costs associated with bringing
underground storage tanks into compliance with applicable laws or with
responding to requirements of the California Regional Water Quality Control
Board shall be excluded from the amounts Sellers are required to pay
pursuant to this Section 7.05, and provided further, that-wages and
salaries of ASC employees who write plans, prepare and install labels or
governing signs, administer training and perform similar functions bring
Newco into compliance with Environmental Laws, shall not be reimbursed by
Sellers, but costs incurred by ASC or Newco to have such functions
performed by consultants or other outside personnel shall be costs against
which Sellers shall indemnify.
7.06 Special Procedures for Environmental Indemnity. In additional
and as a supplement to the procedures in Section 7.03 above, (i) Sellers
shall on Newco's request pay directly any count for which Newco or any
other indemnified party would have the right to be reimbursed pursuant to
Section 7.05, (ii) Sellers shall have the right (to be exercised in a
manner which shall minimize disruption to the ongoing business activities
of Newco and Parent) to enter onto the Property and to take reasonable
steps to correct or otherwise deal with any matter or condition giving rise
or potentially giving rise to a right of indemnification under Section
7.05, and (iii) Newco and Parent shall, upon discovery of any matter or
condition giving rise to a right of indemnification under Section 7.05,
take reasonable steps to mitigate the resultant damages therefrom
(provided, however, that such duty to mitigate shall not limit Newco's
rights under subparagraph 7.05 (g) above or require Newco or Parent to
expend amounts in excess of $10,000 with respect to an individual or
related series of matters or conditions if Newco or Parent shall have made
demand upon Sellers to advance or pay such amounts in excess of $10,000 and
Sellers shall have failed to do so, or if Sellers are otherwise in default
with respect to Section 7.05 this Section 7.06).
Conditions to Closing
8.01 Conditions to Obligations of Newco and Parent. The obligations
of Newco and Parent hereunder (including the obligation of Newco to
consummate the transactions contemplated hereby) are subject to the
following conditions precedent:
(a) ASC shall have delivered a certified copy of a resolution or
resolutions duly adopted by its Board of Directors and shareholders
authorizing the transaction contemplated hereby;
(b) On the Closing Date, (i) each of the representations and
warranties of ASC contained herein shall be true in all material respects
on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on the Closing Date; (ii) ASC
<PAGE>
shall have performed and complied with all agreements, obligations,
covenants and conditions required to be performed or complied with by it
pursuant hereto on or prior to the Closing Date; and (iii) the business of
ASC shall have been operated in the ordinary course and in accordance with
Section 2.06 hereof between the date of this Agreement and the Closing
Date, and Newco shall have received a certificate from ASC, signed by an
officer of ASC, satisfactory in form and substance to Newco, to such
effect.
(c) ASC shall have provided an opinion of Kindel & Anderson,
counsel for ASC, dated the Closing Date, in form and substance satisfactory
to Newco and its counsel, in substantially the form of Exhibit K attached
hereto;
(d) At the Closing there shall be delivered to Newco, signed by
ASC, the documents required by Sections 1.02, 2.07 and 3.02(a) hereof;
(e) Newco shall have received all necessary consents to the
transfer of ASC's Authorizations, and in the case of authorizations not
transferable shall have received new licenses, permits or other
entitlements as needed to permit Newco to operate ASC's business after the
Closing.
(f) No proceeding or litigation, at law or in equity, shall be
pending or threatened by or before any court, governmental or regulatory
commission or agency or any other body or authority which challenges the
consummation of the transaction contemplated hereby or which claims
substantial damages against Newco as a result of such consummation;
(g) Newco shall have received from one or more lenders
acceptable to Newco, on terms and conditions reasonably acceptable to
Newco, proceeds in an amount sufficient to permit it to pay the Purchase
Price;
(h) Howard C. Lim and Walter K. Lim shall have entered into
employment agreements with Newco in substantially the form of Exhibit L to
this Agreement;
(i) Each ASC employee with access to confidential or proprietary
information shall have executed a confidentiality and proprietary
information agreement with Newco in substantially the form of Exhibit M to
this Agreement;
(j) Newco and Parent shall have received from Howard C. and
Walter K. Lim executed subscription agreements in the form of Exhibit N for
not less than 210,000 shares of the common stock of Parent and payment of
the purchase price for such shares, and shall have received from them and
other persons an aggregate of not less than $6,100,000 in payment for
common stock in Parent;
(k) Newco shall have confirmed to its reasonable Satisfaction
that ASC has performed, through the Closing Date, substantially in
accordance with the projections included in Exhibit O; and
(l) Newco shall have received an appraisal satisfactory to Newco
and its lender(s) showing the value of ASC's fixed assets as in excess of
$6.5 million.
8.02 Conditions to Obligations of Sellers and ASC. The obligations of
ASC and Sellers hereunder (including the obligation to consummate the
transactions contemplated hereby) are subject to the following conditions
precedent:
(a) Newco shall have furnished ASC with a certified copy of
resolutions duly adopted by Newco's and Parent's Board of Directors
authorizing the transactions contemplated hereby;
(b) ASC shall have received a certificate from Newco signed by
an officer of Newco and Parent, satisfactory in and substance to ASC,
certifying that each of the representations and warranties of Newco
and Parent contained Date with the same force and effect as if such
representations and warranties had been made on the Closing Date and
that Newco and Parent has performed and complied with all agreements,
obligations, covenants and conditions required to be performed or
complied with by it pursuant hereto on or prior to the Closing Date;
(c) Newco shall have provided the opinion of Jones, Day, Reavis
& Pogue, counsel for Newco, dated the Closing Date, in form and
substance satisfactory to ASC and its counsel, in substantially the
form of Exhibit P attached hereto;
(d) At the Closing there shall be delivered to sellers the Cash
at Closing, the Certificates representing the preferred Stock and the other
documents required by Section 3.02, and the payments required by Section
2.01(c) shall have occurred;
(e) No proceeding or litigation, at law or in equity, shall be
pending or threatened by or before any court, governmental or regulatory
commission or agency or any other body or authority which challenges the
consummation of the transaction contemplated hereby or which claims
substantial damages against ASC or Sellers as a result of such
<PAGE>
consummation;
(f) Walter K. and Howard C. Lim shall have entered into
employment agreements with Newco in substantially the form of Exhibit L to
this Agreement; and
(g) The allocation referred to in Section 2.02(b) shall have
been completed.
Termination
9.01 Termination. This Agreement and the transaction contemplated
hereby may be terminated at any time prior to the closing Date:
(a) by mutual consent of ASC, Sellers, Newco and Parent;
(b) by any party if the conditions to the terminating party's
obligation to consummate the transaction contemplated hereby have not been
satisfied at the time of Closing; or
(c) by any party if the Closing Date shall not have occurred
prior to February 28, 1994 provided that the party seeking so to terminate
shall not then be in default hereunder and shall have used its best efforts
to consummate the transactions contemplated hereby.
9.02 Effect of Termination. If this Agreement is terminated for any
reason set forth in Section 9.01 hereof, it shall become void and have no
effect, and there shall be no liability on the part of any party hereto or
its stockholders, directors or officers in respect thereof, except for the
provisions of Sections 2.06, 2.08 and 6.03.
Miscellaneous
10.01 Expenses. Except as provided in Section 2.01(c), each party
will each pay its own costs and expenses (including attorneys' fees,
accountants' fees, investment bankers' fees and other professional fees and
expenses) in connection with the negotiation, preparation, execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
10.02 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the transaction
contemplated hereby, and supersedes all negotiations, representations,
warranties, commitments, offers, contracts and writings prior to the date
hereof. No waiver and no modification or amendment of any provision of
this Agreement shall be effective unless specifically made in writing and
duly signed by the party to be bound thereby.
10.03 Successors Bound. This Agreement shall be binding Upon and
inure to the benefit of the respective successors and assigns of the
parties hereto. Notwithstanding the above, this Agreement, and all rights
and obligations provided for herein shall not be assigned by any party
hereto without the written consent of the other parties hereto, except that
the indemnities in Sections 7.01, 7.02 and 7.05 shall be assignable to and
run to the benefit of the successors and assignees of the parties hereto.
10.04 Governing Law. The validity, interpretation and effect of
this Agreement shall be exclusively governed by, and construed in
accordance with, the laws of the State of California
10.05 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and delivered in
person (including by courier) or by telecopy, or sent by certified mail,
postage prepaid, and properly addressed as follows:
To ASC or Sellers:
Aerosol Services Company, Inc.
425 So. Ninth Avenue
City of Industry, CA 91746
Attn: Walter K. Lim and Howard C. Lim
With a Copy to:
Kindel & Anderson
555 South Flower Street
Los Angeles, California 90071
Attn: Hugh Boss, Esq.
To Parent or Newco:
c/o The Gordon + Morris Group
620 Newport Center Drive
Suite 1400
Newport Beach, California 92660
Attn: John H. Morris
With Copies to:
<PAGE>
Jones, Day, Reavis & Pogue
2600 Main Street
Suite 900
Irvine, California 92714-6232
Attn: Peter J. Tennyson
All notices and other communications required or permitted under this
Agreement which are addressed as provided in this Section 10.05 shall, if
delivered personally (including delivery by courier) or by telecopy, be
effective upon delivery and shall, if delivered by mail, be effective four
(4) business days following deposit in the United States Mail, postage
prepaid. Any party may from time to time change its address for the
Purpose of notices to that party by a similar notice specifying a new
address, but no such notice shall be deemed to have been given until it is
actually received by the party sought to be charged with the contents.
10.06 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all
affixed together shall be deemed to be one and the same instrument.
10.07 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and full provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon any binding
determination that is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable and legally enforceable manner, to the end that the transactions
contemplated hereby may be completed to the extent possible.
10.08 Certain Interpretative Matters.
(a) Titles and headings to Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
(b) No provision of this Agreement will be interpreted in favor
of, or against, any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any
prior draft hereof or thereof.
(c) All references in this Agreement to Sections or portions of
Sections are to Sections of this Agreement unless otherwise indicated
specifically.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date and year first above written.
ASC MERGER CORPORATION AEROSOL SERVICES COMPANY, INC.
By: /s/ John H. Morris By: /s/ Walter K. Lim
--------------------- -------------------------
Title: President Title: President
---------- ---------
By: /s/ Walter K. Lim
-------------------------
By: /s/ Howard C. Lim
-------------------------
AEROSOL SERVICES
HOLDING CORPORATION
By: /s/ John H. Morris
-------------------
Title: President
---------
<PAGE>
AMENDMENT AND TERMINATION OF EMPLOYMENT CONTRACT
THIS AMENDMENT AND TERMINATION OF EMPLOYMENT CONTRACT (hereafter, the
"Amendment") is made this 31 day of December, 1997, between AEROSOL
SERVICES COMPANY, INC. (hereafter, the "Company") and HOWARD C. LIM
(hereafter, "Employee").
WHEREAS, the Company and Employee have previously entered into an
Employment Agreement (hereafter, the "Agreement") dated February 14, 1994,
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein, acknowledged by both parties to be sufficient, the parties agree as
follows:
1. Employee's employment with the Company will terminate (the
"Termination Date") as of the close of business on the later of (i)
December 31, 1997 and (ii) the closing of OSG's acquisition of Kolmar
Laboratories, Inc., at which time Employee agrees to an early
termination and will no longer serve in the capacity of Executive
Vice President of the Company. Company will provide Employee his
current office until forty-five (45) days after the Termination Date.
2. Notwithstanding the provisions of paragraph 1, Employee will continue
to serve as a member of the Board of Directors of Company and its
Parent, Outsourcing Services Group, Inc. ("OSG"), and for periods
after February 14, 1999 will receive payment for serving as a
director in the amount of $35,000 per year or such other amount as
OSG pays "outside" directors for as long as Employee continues to
hold at least 33% of the shares of OSG Common Stock held on the date
of this Agreement.
3. Employee shall be entitled to a lump-sum payment equal to the balance
of the salary payments due to him under Section 3.01 of the
Agreement, namely salary in the amount of $358,864 per annum through
February 14, 1999, for a total payment of $403,722 plus accrued but
unused vacation. Portions of this amount at Employee's salary rate
shall be paid on normal payroll dates until the balance is paid upon
the Closing of the Company's proposed high-yield Senior Subordinated
Note offering, but in any event on or before March 31, 1998. In
addition, Employee will continue to receive the automobile and the
health insurance (which includes a life insurance benefit) benefits
described at Section 3.04 of the Agreement for the remainder of the
original employment term provided in the Agreement, i.e., until
February 14, 1999 and will receive his pro-rata share of the
Company's profit-sharing plan payment for the year ended December 31,
1997, when such amount is computed and paid in a manner consistent
with prior years. At the termination of the original employment term
under the Agreement, Employee's medical benefits may be continued
after such date at Employee's expense so long as Employee serves as
director of OSG.
4. Any and all amounts paid to Employee pursuant to Paragraph 3 above
are contingent upon Employee's compliance with the restrictive
covenants in Sections 5.01 and 5.02 of the Agreement. Upon a breach
by Employee of the covenants in either of these Sections, the
Company's obligation to pay to Employee any of the amounts in
Paragraph 3 will be extinguished.
5. The amounts paid to Employee by the Company pursuant to Paragraph 3,
above, represent the entire obligation of the Company to Employee
under the Agreement, and any amendments or supplements thereto, and
Employee has no entitlement under the Agreement, or any amendments or
supplements thereto, to seek additional compensation from the
Company.
6. Except as expressly amended herein, the Agreement is expressly
ratified and confirmed and all the covenants, agreements, terms, and
conditions thereof shall remain in full force and effect.
(Signature Page Follows)
[SIGNATURE PAGE - AMENDMENT (LIM)]
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment on
the day and year first above written.
"Employee"
/s/ Howard C. Lim
------------------------------
HOWARD C. LIM
"Company"
AEROSOL SERVICES COMPANY, INC.
By: /s/ Joseph Sortais
-----------------------------
Name: Joseph Sortais
--------------------------
Its: Chief Financial Officer
----------------------------
<PAGE>
AMENDMENT AND TERMINATION OF EMPLOYMENT CONTRACT
THIS AMENDMENT AND TERMINATION OF EMPLOYMENT CONTRACT (hereafter, the
"Amendment") is made this 31 day of December, 1997, between PIEDMONT
LABORATORIES, INC. (hereafter the "Company") and SAMUEL D. GARRETSON
(hereafter "Employee").
WHEREAS, the Company and Employee have previously entered into an
Employment Agreement (hereafter, the "Agreement") dated September 30, 1996,
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein, acknowledged by both parties to be sufficient, the parties agree as
follows:
1. Employee's employment with the Company will terminate as of the close
of business on the later of (i) December 31, 1997 and (ii) the
closing of OSG's acquisition of Kolmar Laboratories, Inc., at which
time Employee agrees to resign as an employee and will no longer
serve in the capacity of President of the Company or as Vice Chairman
of the Board of Directors of Outsourcing Services Group, Inc. ("OSG",
also the "Parent"). Company agrees not to exercise its call rights
with respect to Employee's shares under Company's Stockholder's
Agreement dated June 30, 1997, as amended, as a result of such
resignation.
2. Notwithstanding the provisions of paragraph 1, Employee will continue
to serve as a member of the Board of Directors of the Company and the
Parent, and will receive payment for serving as a director in the
amount of $35,000 per year or such other amount as OSG pays outside
directors, for periods after September 30, 1998, for as long as
Employee continues to hold at least thirty-three percent (33%) of the
101,187 shares of Company Stock he now owns.
3. Employee shall be entitled to a lump-sum payment equal to the balance
of the salary payments due to him under Section 3.01 of the
Agreement, namely salary at the rate of $200,000 per annum through
September 30, 1998, for a total payment of $150,000. Portions of
this amount at Employee's salary rate shall be paid on normal payroll
dates until the balance is paid upon the Closing of the Company's
proposed high-yield senior subordinated note offering, but in any
event on or before March 31, 1998. In addition, Employee will
continue to receive the medical, life insurance, and automobile
benefits described at Section 3.04 of the Agreement for the remainder
of the original employment term provided in the Agreement. At the
termination of the original employment term under the Agreement,
Employee's medical benefits may be continued at Employee's expense so
long as Employee serves as a director of the Parent.
4. Any and all amounts paid to Employee pursuant to Paragraph 3 above
are contingent upon Employee's compliance with the restrictive
covenants in Sections 5.01 and 5.02 of the Agreement. Upon a
material breach by Employee of the covenants in either of these
Sections, the Company's obligation to pay to Employee any of the
amounts in Paragraph 3 will be extinguished.
5. The amounts paid to Employee by the Company pursuant to paragraph 3
above represent the entire obligation of the Company to Employee
under the Agreement, and any amendments or supplements thereto, and
Employee has no entitlement under the Agreement, or any amendments or
supplements thereto, to additional compensation from the Company.
6. Upon the effectiveness of this Amendment, Company shall transfer to
employee the membership rights in the Golf Club of Georgia.
7. Except as expressly amended herein, the Agreement is expressly
ratified and confirmed and all the covenants, agreements, terms, and
conditions thereof shall remain in full force and effect.
(Signature Page Follows)
[SIGNATURE PAGE - AMENDMENT (GARRETSON)]
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment on
the day and year first above written.
"Company"
PIEDMONT LABORATORIES, INC.
By: /s/ Joseph Sortais
-------------------------------------
Name: Joseph Sortais
-----------------------------------
Its: Chief Financial Officer
-----------------------------------
"Employee"
/s/ Samuel D. Garretson
----------------------------------------
SAMUEL D. GARRETSON
<PAGE>
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIOS OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Predecessor OSG
----------------------------------------------------------------------------------
Fiscal Year Ended December 31, Three Months Ended
-------------------------------------------------------- ----------------------
March 30, March 28,
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Income (loss) before taxes $ 12 $ 638 $ 92 $1,443 $ 112 $ (105) $ 199
Fixed charges reflected in
income (loss) before taxes
Interest expense 208 3,116 3,689 3,646 4,221 1,341 2,829
One-third of rental expenses 330 337 342 378 461 115 199
------ ------ ------ ------ ------ ------ ------
Total Fixed Charges 538 3,453 4,031 4,024 4,682 1,456 3,028
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Income (loss) before taxes
plus fixed charges above 550 4,091 4,123 5,467 4,794 1,351 3,227
Fixed charge ratio 1.02 x 1.18 x 1.02 x 1.36 x 1.02 x 0.93 x 1.07 x
Deficiency - - - - - $ 105 -
</TABLE>
<PAGE>
EXHIBIT 16.1
OUTSOURCING SERVICES GROUP, INC.
CHANGE IN INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Outsourcing Services Group, Inc.
(the "Company") as of December 31, 1995 and for the year then ended, included
in this Prospectus, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as stated in their report herein. Coopers & Lybrand L.L.P. was
replaced on October 25, 1996 by Deloitte & Touche LLP. The decision to change
accountants was approved by the Company's Board of Directors. Coopers &
Lynbrand L.L.P's report on the December 31, 1995 financial statements does not
contain an adverse opinion or a disclaimer of opinion, nor is it qualified or
modified as to uncertainty, audit scope or accounting principles. There were
no disagreements between the Company and Coopers & Lybrand L.L.P. on any matter
or practices, financial statement disclosure, or auditing scope or procedure.
<PAGE>
SUBSIDIARIES OF OUTSOURCING SERVICES GROUP, INC.
Name Jurisdiction of Organization
- ---- ----------------------------
Aerosol Services Company, Inc. California
Kolmar Laboratories, Inc. Delaware
Piedmont Laboratories, Inc. Georgia
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use int his Registration Statement of Outsourcing Services
Group, Inc. on Form of our report dated March 3, 1998, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Proospectus.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
June 17, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333- ) of our report dated February 23, 1996, on our audit of the
consolidated statements of operations, stockholders' deficit and cash flows for
the year ended December 31, 1995 of Outsourcing Services Group, Inc. and
subsidiary. We also consent to the reference to our firm under the caption
"Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
June 15, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITOR'S CONSENT
Board of Directors of
Outsourcing Services Group, Inc.
We consent to the use of our report with respect to the combined financial
statements of Kolmar Group included herein and to the reference to our firm
under the heading "Experts" in the registration statement on Form S-4 by
Outsourcing Services Group, Inc.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Stamford, CT
June 17, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITOR
We consent to the inclusion in this registration statement of Outsourcing
Services Group, Inc. on Form S-4 of our report dated November 12, 1996, on our
audit of the financial statements of Piedmont Laboratories, Inc. for the year
ended September 29, 1996. We also consent to the reference to our firm under the
caption "Experts".
/s/ MOORE, COLSON & COMPANY, P.C.
Moore, Colson & Company, P.C.
Marietta, Georgia
June 16, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
FORMERLY KNOWN AS
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
OUTSOURCING SERVICES GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-0597491
(State of Incorporation) (I.R.S. Employer
Identification No.)
425 South Ninth Avenue
City of Industry, California 91746
(Address of Principal Executive Offices) (Zip Code)
10 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION Furnish the following information as to the
Trustee.
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the
act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority is incorporated by reference to Registration
Number 333-42147.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within
three years prior to the date of filing this statement, or what persons are
owners of 10% or more of the voting securities of the obligors, or
affiliates, are based upon information furnished to the Trustee by the
obligors. While the Trustee has no reason to doubt the accuracy of any such
information, it cannot accept any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association f/k/a First Trust National
Association, an Association organized and existing under the laws of the
United States, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City
of Saint Paul and State of Minnesota on the 9th day of June, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
f/k/a FIRST TRUST NATIONAL ASSOCIATION
/s/ RICHARD H. PROKOSCH
--------------------------------------
Richard H. Prokosch
Assistant Vice President
/s/ JUDITH M. ZUZEK
- -------------------------
Judith M. Zuzek
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK TRUST NATIONAL ASSOCITION f/k/a FIRST TRUST NATIONAL
ASSOCIATION hereby consents that reports of examination of the undersigned by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
Dated: June 9, 1998
U.S. BANK TRUST NATIONAL ASSOCIATION
f/k/a FIRST TRUST NATIONAL ASSOCIATION
/s/ RICHARD H. PROKOSCH
________________________________
Richard H. Prokosch
Assistant Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 558
<SECURITIES> 0
<RECEIVABLES> 17,858
<ALLOWANCES> (209)
<INVENTORY> 12,125
<CURRENT-ASSETS> 30,912
<PP&E> 14,042
<DEPRECIATION> (3,854)
<TOTAL-ASSETS> 51,841
<CURRENT-LIABILITIES> 18,317
<BONDS> 0
0
4,259
<COMMON> 12,663
<OTHER-SE> (17,989)
<TOTAL-LIABILITY-AND-EQUITY> 51,841
<SALES> 110,328
<TOTAL-REVENUES> 110,328
<CGS> 95,211
<TOTAL-COSTS> 95,211
<OTHER-EXPENSES> 10,784
<LOSS-PROVISION> (43)
<INTEREST-EXPENSE> 4,221
<INCOME-PRETAX> 112
<INCOME-TAX> 568
<INCOME-CONTINUING> (456)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,060)
<CHANGES> 0
<NET-INCOME> (1,516)
<EPS-PRIMARY> (1.11)
<EPS-DILUTED> (1.11)
</TABLE>
