<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1998
REGISTRATION NO. 333-46607
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
WERNER HOLDING CO. (DE), INC.
AND OTHER REGISTRANTS*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 6719 25-1581345
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I R S EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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1105 NORTH MARKET STREET
SUITE 1300
WILMINGTON, DELAWARE 19899
(302) 478-5732
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ERIC J. WERNER, ESQ.
93 WERNER ROAD
GREENVILLE, PENNSYLVANIA 16125
(724) 588-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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With copies to:
E. MICHAEL GREANEY, Esq. RICHARD M. RUSSO, ESQ.
Gibson, Dunn & Crutcher LLP Gibson, Dunn & Crutcher LLP
200 Park Avenue 1801 California Street, Suite 4100
New York, New York 10166 Denver, Colorado 80202
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
---------------------------
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*OTHER REGISTRANTS
I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL IDENTIFICATION
AS SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBERS NUMBER
--------------------------- ------------------------------ --------------------------- ---------------
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Werner Holding Co. (PA), Inc......... Pennsylvania 6719 25-0906895
Werner Co............................ Pennsylvania 3449 25-1754435
Gold Medal Ladder Company............ Pennsylvania 6719 25-1112588
Kentucky Ladder Company.............. Pennsylvania 2499 25-1595338
Florida Ladder Company............... Florida 6719 59-0605366
Werner Management Co................. Pennsylvania 8741 25-1754434
Werner Financial Inc................. Delaware 6719 51-0372598
R.D. Arizona Ladder Corp............. Arizona 5084 25-1619259
WIP Technologies, Inc................ Delaware 6794 51-0372599
Ardee Investment Co., Inc............ Delaware 6719 51-0310986
Olympus Properties, Inc.............. Illinois 6519 52-1584865
Phoenix Management Services, Inc..... Pennsylvania 7322 25-1619261
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 15, 1998
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
10% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 OF
WERNER HOLDING CO. (DE), INC. WERNER LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1998, UNLESS EXTENDED
------------------------
Werner Holding Co. (DE), Inc. (the "Issuer"), hereby offers to exchange an
aggregate principal amount of up to $135,000,000 of its 10% Series A Senior
Subordinated Notes due 2007 (the "New Notes") for a like principal amount of its
10% Senior Subordinated Notes due 2007 (the "Old Notes") outstanding on the date
hereof upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"). The New Notes and the Old Notes are collectively hereinafter
referred to as the "Notes." The terms of the New Notes are identical in all
material respects to those of the Old Notes, except for certain transfer
restrictions and registration rights relating to the Old Notes. The New Notes
will be issued pursuant to, and entitled to the benefits of, the Indenture (as
defined) governing the Old Notes.
The New Notes will be unsecured and will be subordinated to all existing and
future Senior Indebtedness (as defined) of the Issuer. The New Notes will also
be guaranteed (the "Guarantees") fully, unconditionally and jointly and
severally by the Issuer's parent, Werner Holding Co. (PA) Inc. ("Holding"), and
substantially all of the Issuer's subsidiaries (collectively, the "Guarantors").
The Guarantees will be unsecured and will be subordinated to all existing and
future Senior Indebtedness of the Guarantors. The New Notes and the Guarantees
will rank pari passu with all future Pari Passu Indebtedness (as defined) of the
Issuer and the Guarantors, respectively, and will rank senior to all other
subordinated indebtedness of the Issuer and the Guarantors, respectively. The
Indenture permits the Issuer and the Guarantors, respectively, to incur
additional indebtedness, including Senior Indebtedness under the Issuer's $320.0
million Senior Credit Facility (as defined), subject to certain limitations. See
"Description of the New Notes." As of December 31, 1997, the aggregate amount of
the Issuer's Indebtedness was $317.5 million of which $186.5 million (exclusive
of unused commitments and comprised entirely of borrowings under the Senior
Credit facility) was the outstanding amount of the Issuer's aggregate Senior
Indebtedness, and the Issuer had no Pari Passu Indebtedness outstanding other
than the Notes of $131.0 million ($135.0 million, net of the unamortized
discount). As of December 31, 1997, the aggregate amount of the Guarantors'
Senior Indebtedness was $191.5 million (exclusive of unused commitments and
comprised of borrowings under the Senior Credit Facility of $186.5 million and
indebtedness under the Variable Rate Demand Industrial Building Revenue Bonds of
$5.0 million), and the Guarantors had no Pari Passu Indebtedness outstanding
other than the Guarantees. The total outstanding indebtedness of the Issuer and
the Guarantors as of December 31, 1997 was $322.5 consisting of $186.5 million
of indebtedness outstanding under the Senior Credit Facility, $131.0 million
outstanding under the Notes and $5.0 million outstanding under the Variable Rate
Demand Indebtedness Building Revenue Bonds.
The New Notes will bear interest from and including the date of consummation of
the Exchange Offer. Interest on the New Notes will be payable semi-annually on
May 15 and November 15 of each year, commencing May 15, 1998. Additionally,
interest on the New Notes will accrue from the last interest payment date on
which interest was paid on the Old Notes surrendered in exchange therefor or, if
no interest has been paid on the Old Notes, from the date of original issue of
the Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Issuer contained in the Registration Rights Agreement dated
November 14, 1997 (the "Registration Rights Agreement"), among the Issuer, the
Guarantors and the Initial Purchasers (as defined), with respect to the initial
sale of the Old Notes. Neither the Issuer nor the Guarantors will receive any
proceeds from the Exchange Offer. The Issuer will pay all the expenses incident
to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration Date (as defined) for the
Exchange Offer. In the event the Issuer terminates the Exchange Offer and does
not accept for exchange any Old Notes with respect to the Exchange Offer, the
Issuer will promptly return such Old Notes to the holders thereof. See "The
Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivery of a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"). This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuer has agreed that, for a period
of 90 days after the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
Prior to the Exchange Offer, there has been no public market for the Old Notes.
If a market for the New Notes should develop, such New Notes could trade at a
discount from their principal amount. The Issuer currently does not intend to
list the New Notes on any securities exchange or to seek approval for quotation
through any automated quotation system and no active public market for the New
Notes is currently anticipated. There can be no assurance that an active public
market for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE> 3
AVAILABLE INFORMATION AND INCORPORATION BY REFERENCE
The Issuer and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a registration statement relating to the New Notes
offered hereby (herein, together with all amendments and exhibits, referred to
as the "Registration Statement") under the Securities Act. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description thereof, and each such statement shall be deemed qualified in its
entirety by such reference.
Upon effectiveness of the Registration Statement, the Issuer and the
Guarantors will be subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith must file periodic reports and other information with the Commission.
All documents filed by the Issuer or any of the Guarantors pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Exchange Offer shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Registration Statement and the exhibits and schedules thereto and any
periodic reports or other information filed pursuant to the Exchange Act may be
inspected without charge and copies at prescribed rates at the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at 7 World Trade Center, Suite
1300, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains a website
that contains reports, proxy and information statements and other information
filed electronically with the Commission at http://www.sec.gov.
Pursuant to the Indenture, the Issuer and the Guarantors have agreed to
file with the Securities and Exchange Commission (the "Commission") and provide
to the holders of the Notes annual reports and the information, documents and
other reports (including quarterly reports) that are specified in Sections 13
and 15(d) of the Exchange Act. Such annual reports shall be certified if
required by the rules and regulations of the Commission by independent public
accountants.
FORWARD LOOKING INFORMATION
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. THOSE
STATEMENTS INCLUDE, AMONG OTHER THINGS, THE DISCUSSIONS OF THE COMPANY'S (AS
DEFINED) BUSINESS STRATEGY AND EXPECTATIONS CONCERNING THE COMPANY'S POSITION IN
THE INDUSTRY AND MARKET SHARE, FUTURE OPERATIONS, MARGINS, PROFITABILITY,
LIQUIDITY AND CAPITAL RESOURCES, AS WELL AS STATEMENTS CONCERNING THE
DEVELOPMENT OF NEW PRODUCTS AND THE ACHIEVEMENT OF COST SAVINGS. ALL OF THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY
MANAGEMENT OF THE COMPANY THAT, ALTHOUGH BELIEVED TO BE REASONABLE, ARE
INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH
STATEMENTS AND ESTIMATES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH STATEMENTS
OR ESTIMATES WILL BE REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS
THAT MAY CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
IDENTIFIED IN THE RISK FACTORS DISCUSSED BELOW. IN LIGHT OF THESE AND OTHER
UNCERTAINTIES, THE INCLUSION OF A FORWARD-LOOKING STATEMENT HEREIN SHOULD NOT BE
REGARDED AS A REPRESENTATION BY THE COMPANY THAT THE COMPANY'S PLANS AND
OBJECTIVES WILL BE ACHIEVED.
2
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION AND INCORPORATION BY REFERENCE........ 2
FORWARD LOOKING INFORMATION................................. 2
SUMMARY..................................................... 4
RISK FACTORS................................................ 17
THE TRANSACTIONS............................................ 24
USE OF PROCEEDS............................................. 26
CAPITALIZATION.............................................. 27
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS................................................ 28
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA............. 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 36
THE EXCHANGE OFFER.......................................... 43
BUSINESS.................................................... 51
MANAGEMENT.................................................. 62
PRINCIPAL SHAREHOLDERS...................................... 70
CERTAIN TRANSACTIONS........................................ 72
THE SENIOR CREDIT FACILITY.................................. 73
DESCRIPTION OF THE NEW NOTES................................ 75
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 111
PLAN OF DISTRIBUTION........................................ 112
BOOK-ENTRY; DELIVERY AND FORM............................... 112
LEGAL MATTERS............................................... 114
EXPERTS..................................................... 114
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
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NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
3
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SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Consolidated Financial
Statements (including the notes thereto) appearing elsewhere in this Prospectus.
The consummation of the Old Notes Offering (as defined) occurred simultaneously
with, and was conditioned upon, the consummation of the Recapitalization (as
defined). As used herein and except as the context otherwise may require, the
"Issuer" means Werner Holding Co. (DE), Inc., "Holding" means Werner Holding Co.
(PA), Inc. and the "Company" or "Werner" means, collectively, Holding, the
Issuer and all of their consolidated subsidiaries. Holding has no substantial
operations or assets other than its investment in the Issuer. Unless otherwise
noted, all market share and industry data presented in this Prospectus is based
on Company research, estimates or studies commissioned by the Company and
conducted by third parties every three years, and as such, the most recent
market share and industry data relates to the year ended 1996.
THE COMPANY
OVERVIEW
Werner is the nation's largest manufacturer and marketer of ladders and
other climbing products. Management estimates that in 1996 the Company had
approximately 36% of the estimated $820 million domestic market for climbing
products. Werner's climbing products include aluminum, fiberglass and wood
ladders, scaffolding, stages and planks. The Company markets its broad line of
innovative products across all major price points under the Werner name, which
management believes to be the most widely-recognized climbing products brand
name by both professional and consumer end-users of climbing products. The
Company sells its products through a variety of distribution channels, such as
home improvement retailers, hardware dealers, professional supply houses and
specialty wholesale distributors. Werner is committed to providing the highest
level of customer service and is a primary supplier of ladders to most of the
largest United States home improvement retailers, including power retailers
(e.g. The Home Depot and Lowe's), and to most of the major hardware
co-operatives, including ACE Hardware, Hardware Wholesalers, Inc. ("HWI") and
TruServ. In addition to climbing products, the Company manufactures and sells
aluminum extruded products and more complex fabricated components to a number of
industries, including the automotive, electronics, and architectural and
construction industries. The Company's net sales have increased at a five-year
compound annual growth rate ("CAGR") of 11.9%, from 237.1 million in fiscal 1992
to $416.3 million in fiscal 1997.
COMPETITIVE STRENGTHS
Recognized Industry Leader. Management estimates that in 1996, Werner
generated approximately three times the revenue of its largest competitor in the
domestic climbing products market and increased its market share from
approximately 32% in 1993 to approximately 36% in 1996. Management believes that
the Company's combination of (i) market leadership, (ii) breadth of product
line, (iii) nationwide production and distribution, (iv) reputation for high
quality and (v) superior customer service have enabled the Company to attract
and retain many of the largest distributors across the United States as its
customers. Management believes that these factors also enable the Company to
serve its customer base on a broad geographic basis and benefit from economies
of scale in manufacturing, purchasing and distribution. Werner serves all
segments of the climbing products market.
Strong Brand Name. The Werner brand name has nearly a 50-year history, and
management believes Werner is the most recognized name by both professional and
consumer end-users of climbing products. The Company has established its leading
brand name primarily by providing high-quality products and strong customer
service. Werner has successfully leveraged the strength of its brand name to
expand its product offerings, particularly in the fiberglass ladder category,
and to expand its market coverage by partnering with the leading home
improvement retailers, hardware dealers and professional supply houses to
distribute Werner products.
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High-Quality, Innovative Product Line. Management believes that the
Company's products are regarded as the most innovative and highest quality in
the industry. The Company has consistently introduced improvements to the ladder
market, from the early development of the ALFLO(R) Twist-Proof(R) rung-to-side
rail technology, which significantly increased the structural integrity of
lightweight aluminum ladders, to the more recent introduction of premium quality
and visually-appealing fiberglass ladders. Management believes that Werner has
successfully generated incremental new sales and encouraged end-users to
purchase ladders at higher price points by continually introducing innovative,
new products. Management estimates that new or substantially improved products
introduced since 1990 accounted for approximately 48% of the Company's climbing
products sales in 1997.
Superior Customer Service. The Company's strategically located
manufacturing and distribution facilities, coupled with a broad offering of
high-quality products, allow the Company to provide its customers throughout the
United States with one-stop shopping on a cost-effective and timely basis.
Werner's strong relationships with its customers are supported by innovative
sales and marketing programs tailored to serve specific channels of
distribution. The Company has found that by educating and working closely with
its customers it has been able to increase their effectiveness in selling the
Company's products. To this end, the Company has developed innovative marketing
and category management services for its climbing products customers, which
include (i) product mix optimization, (ii) effective point-of-purchase
merchandising and signage, (iii) training programs, (iv) aggressive application
of electronic commerce and (v) customer inventory management programs.
Management believes that these services allow the Company to assist its
customers in maximizing sales. The Company's superior customer service has been
consistently recognized in awards granted to Werner by its customers and
industry organizations.
Loyal and Diverse Customer Relationships. The Company has a broad and well
established customer base of more than 17,000 customers across all major
climbing products distribution channels. Its customer network encompasses
relationships with the major home improvement retailers, hardware dealers,
professional supply houses and wholesale distributors. Werner is a primary
supplier of ladders to most of the largest United States home improvement
retailers, including power retailers, (e.g. The Home Depot and Lowe's), and to
most of the largest hardware co-operatives, including ACE Hardware, HWI and
TruServ. Werner is also a primary supplier to most of the major paint retailers,
such as Sherwin Williams and ICI. Werner attributes its ability to establish
such relationships with its customers primarily to the Company's broad offering
of high-quality products and high level of customer service. These factors have
resulted in a loyal customer base, characterized by low turnover. The Company
has had relationships with many of its major customers for over 20 years.
Vertically Integrated, Cost-Efficient Manufacturing. Werner operates
vertically integrated manufacturing facilities, which allow the Company to
cost-efficiently manufacture consistent, premium quality products as well as to
respond quickly to customer requirements. The Company believes it is the most
vertically integrated company in the climbing products industry. In the last
five years, Werner has invested more than $45 million in its facilities to
increase quality and capacity and to reduce total product and distribution
costs.
Experienced and Committed Management Team. Werner has assembled a strong
and experienced management team at both the corporate and operating levels. The
top fifteen members of Werner's senior management team have an average of over
20 years of experience with the Company. The Management Shareholders (as
defined) own approximately 13% of the outstanding shares of Holding with an
opportunity to own up to approximately 22% of the shares of Holding through
participation in employee incentive plans.
5
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BUSINESS STRATEGY
The Company intends to enhance its market leadership position and maximize
profitability and cash flow by implementing the following business strategies:
Increase Penetration of the Domestic Climbing Products Market. The Company
believes it is well positioned to continue to increase its share of the domestic
climbing products market and intends to leverage its strong brand name, broad
product line and established distribution network to increase sales through
existing customers and to develop new customer relationships. The Company also
believes that its strong strategic relationships with leading climbing products
distributors in each channel will facilitate continued market share gains as
such customers further consolidate and expand their channels. Furthermore,
management believes that as distributors continue to consolidate their vendor
bases, the Company's broad product line and ability to supply distributors
throughout the United States provide significant opportunities for domestic
growth. The Company plans to further extend its domestic market coverage by
entering new product categories within the climbing products industry in which
it does not significantly participate at this time, such as domestic platform
ladders and step stools.
Achieve Cost Reductions. Management has identified a number of cost
reduction opportunities from which the Company expects to realize up to
approximately $20 million in annual savings over the next five years, at an
estimated cost of up to approximately $49 million. These include: (i) adding
aluminum remelting capability to certain of the Company's manufacturing sites,
(ii) modernizing a number of extrusion presses, (iii) consolidating warehouses,
and (iv) constructing a new extension ladder production line. Management
believes that these capital investments will significantly enhance the Company's
vertically integrated manufacturing capabilities, thus allowing Werner to reduce
costs, improve productivity and achieve greater economies of scale.
Continue New Product Development. Werner has invested significant resources
in research and development. The Company has expended approximately 0.6% of net
sales in 1995 and 1996 and 0.5% of net sales in 1997 on product development. The
Company continues to introduce new products while focusing on higher margin
products. For example, in the third quarter of 1997, the Company introduced the
Penguin(TM), an attractive, lightweight, consumer-oriented platform ladder for
household chores. Werner's commitment to product development includes the
application of further advancements in fiberglass pultrusion technology to
climbing products as well as the introduction of new products for the stage and
scaffold markets. Management believes that Werner's cost-efficient production
capability, well recognized brand name and loyal, diverse customer relationships
will enable the Company to continue to successfully introduce new products and
to increase per capita ladder ownership.
Pursue Complementary Acquisitions and International Expansion. Werner
intends to pursue acquisitions which complement its existing manufacturing and
distribution capabilities, provide opportunities to add capacity, expand product
offerings and achieve further economies of scale. Management believes that the
international climbing products market offers significant growth opportunities
for the Company. Compared to the United States market, the international
climbing products market is highly fragmented and regionally-focused, with
smaller companies offering narrower product lines and limited marketing and
customer service support. Furthermore, management believes that as the major
United States hardware and home improvement chains expand internationally, there
will be a growing need for high-quality, dependable suppliers such as Werner to
establish a direct presence overseas. The Company has licenses in the following
countries: United Kingdom, the Netherlands, South Africa, New Zealand, Brazil,
Australia, Japan, Chile, Canada and Italy. The Company sells its products to
customers in over 60 countries around the world.
THE TRANSACTIONS
On October 8, 1997, Holding entered into a Recapitalization Agreement,
which was amended and restated on October 27, 1997 (the "Recapitalization
Agreement"), with certain affiliates of INVESTCORP S.A. ("Investcorp") and
certain other international investors organized by Investcorp
6
<PAGE> 8
(such affiliates and investors, the "Investors"). On November 24, 1997 (the
"Recapitalization Closing Date"), pursuant to the Recapitalization Agreement,
Holding reclassified all of the outstanding shares of its Class A Common Stock,
par value $1.00 per share ("Pre-Recapitalization Class A Stock"), and its Class
B Common Stock, par value $1.00 per share ("Pre-Recapitalization Class B
Stock"). The Pre-Recapitalization Class A Stock was reclassified into shares of
Class A Common Stock, par value $0.01 per share ("Class A Stock"), and Class A-I
Common Stock, par value $0.01 per share ("Class A-I Stock"), and the
Pre-Recapitalization Class B Stock was reclassified into shares of Class B
Common Stock, par value $0.01 per share ("Class B Stock"), and Class B-I Common
Stock, par value $0.01 per share ("Class B-I Stock"). On the Recapitalization
Closing Date, Holding redeemed all outstanding shares of Class A-I Stock and
Class B-I Stock, representing approximately 85% of the then outstanding shares
of Holding, in exchange for (i) $2,421.29 per share (the "Cash Redemption
Price"), with an aggregate Cash Redemption Price of approximately $330.7 million
and (ii) the right to receive, upon certain conditions, an additional, one-time,
lump sum payment (the "Market Participation Right"). Simultaneously therewith,
the Investors purchased from Holding for approximately $122.7 million (the "Cash
Equity Investment") shares representing approximately 67% of the shares of
Holding outstanding immediately after the Recapitalization. The foregoing
transactions are collectively referred to herein as the "Recapitalization." The
Class A Stock and the Class B Stock were retained by two categories of pre-
Recapitalization shareholders: (1) Donald M. Werner, Howard L. Solot, Michael E.
Werner, Eric J. Werner, Michael J. Solot, Craig R. Werner and Bruce D. Werner,
who were active in the management of the Company at the time of the Transactions
(collectively, the "Management Shareholders") and (2) shareholders who were not
active in the management of the Company at the time of the Transactions,
including Werner family members and certain other individuals (collectively, the
"Non-Management Shareholders"). Following the Recapitalization, the
pre-Recapitalization shareholders continue to own approximately 33% of the
outstanding equity of Holding, with a value of $59.3 million based on the price
paid by the Investors. Included in this group are the Management Shareholders,
who continue to manage and operate the business, and who continue to own
approximately 13% of Holding's capital stock. See "The Transactions -- The
Recapitalization."
Financing for the Recapitalization, together with the repayment of certain
existing indebtedness of the Company, was funded by (i) the Cash Equity
Investment, (ii) the offering of $135.0 million principal amount of privately
placed Notes (the "Old Notes") and (iii) 186.5 million of borrowings under a
$320.0 million senior credit facility (the "Senior Credit Facility"). See "The
Transactions -- The Recapitalization" and "The Senior Credit Facility." The
offering of the Old Notes (the "Old Notes Offering") and the Senior Credit
Facility are collectively referred to herein as the "Recapitalization Financing"
and, together with the Recapitalization, the "Transactions."
RECENT DEVELOPMENT
Prior to March 31, 1998, the Company operated Manufacturers Indemnity and
Insurance Company of America ("MIICA") as a Colorado captive insurance company,
to provide product liability, workers compensation and environmental insurance
to Holding and its subsidiaries. MIICA maintained an insurance fund consisting
of investments in debt and equity securities, real estate and other investments
to pay claims associated with these insurance policies. In the first quarter of
1998, the Company undertook an extensive evaluation of the cost and efficiency
of providing such insurance through MIICA. As a result of this evaluation, the
Company decided to obtain such insurance coverage from an external commercial
insurance company and to discontinue the operations of MIICA.
As a result of its decision, on March 31, 1998, the Company effectively
completed the transfer of MIICA's outstanding product and workers compensation
liabilities for losses incurred on or prior to March 31, 1998 to a commercial
insurance company in exchange for the payment by MIICA of premiums of
approximately $41.5 million (the "Insurance Transfer"). MIICA liquidated a
substantial portion of its investment portfolio to pay this premium. Immediately
prior to the Insurance Transfer, the Company had a reserve for such liabilities
of approximately $48.5 million as of March 31, 1998. This reserve was
established in conjunction with external independent actuaries. As a result of
the Insurance Transfer,
7
<PAGE> 9
MIICA ceded and the commercial insurance company assumed MIICA's product and
workers' compensation liabilities for losses incurred prior to March 31, 1998.
Under the terms of the agreements governing the Insurance Transfer, the
aggregate limit of all such liabilities assumed by the commercial insurance
company for losses incurred on or prior to March 31, 1998 is $75 million. The
Company has agreed to indemnify the commercial insurance company for any losses
in excess of this limit.
Because MIICA is a captive insurance company licensed in Colorado, the
cessation of MIICA's operations and dissolution requires pre-approval of the
Colorado Division of Insurance ("CDI"). The Company believes it will obtain such
approval in the second quarter of 1998. Upon receipt of this approval, it is
expected that the remaining assets of MIICA will be distributed to the Issuer
and will be sold or liquidated as soon as practicable. As required by the Senior
Credit Facility, the net cash proceeds from the disposition of these remaining
assets of MIICA will be used to pay indebtedness under the Senior Credit
Facility.
In conjunction with the Insurance Transfer, the Company has now obtained
product liability and workers' compensation insurance coverage for such losses
which occur on or after April 1, 1998. This insurance coverage is at guaranteed
rates over a rolling five year period and is subject to certain deductible
provisions. The Company believes that this insurance coverage is adequate for
its current and future anticipated business needs.
RISK FACTORS
Holders of Old Notes should consider carefully all of the information set
forth in this Prospectus and, in particular, the information set forth under
"Risk Factors", beginning on page 14, including, among others risks relating to:
substantial existing and potential future leverage, debt service obligations and
liquidity; the subordination of New Notes and asset encumbrance; restrictive
loan covenants; the conduct of substantially all of the Issuer's operations
through its subsidiaries; the control of Werner by a small group of
shareholders; dependence on key customers; the uncertainty of anticipated cost
savings; competition; legal proceedings; the Company's sensitivity to economic
cycles and weather conditions; availability and pricing of raw materials;
environmental regulation; MIICA's investment portfolio; the potential inability
of the Company to fund a change of control offer; the Company's dependence on
key personnel; fraudulent conveyances and preferential transfers; the absence of
a public market for the New Notes and the impact of the year 2000.
------------------------
The Issuer is a Delaware corporation. Its principal offices are located at
1105 North Market Street, Suite 1300, Wilmington, Delaware 19899, and its
telephone number is (302) 478-5732. Holding's principal offices are located at
93 Werner Road, Greenville, Pennsylvania 16125 and its telephone number is (724)
588-2550.
THE EXCHANGE OFFER
Issuer........................ Werner Holding Co. (DE), Inc.
Securities Offered............ Up to $135,000,000 in aggregate principal
amount of 10% Series A Senior Subordinated
Notes due 2007 of the Issuer (the "New Notes").
The terms of the New Notes and Old Notes are
identical in all material respects, except for
certain transfer restrictions and registration
rights relating to the Old Notes.
The Exchange Offer............ The New Notes are being offered in exchange for
a like principal amount of Old Notes. Old Notes
may be exchanged only in integral multiples of
$1,000. The issuance of the New Notes is
intended to satisfy obligations of the Company
contained in the Registration Rights Agreement
(as defined).
8
<PAGE> 10
Expiration Date; Withdrawal of
Tender...................... 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 by the Company but in no event later
than 30 business days after the date on which
the Commission declares the Registration
Statement to be effective. The tender of Old
Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration
Date. Any Old Notes not accepted for exchange
for any reason will be returned without expense
to the tendering holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Certain Conditions to the
Exchange Offer.............. The Issuer's obligation to accept for exchange,
or to issue New Notes in exchange for, any Old
Notes is subject to certain customary
conditions relating to compliance with any
applicable law, order of any governmental
agency or any applicable interpretation by any
staff of the Commission, which may be waived by
the Issuer in its reasonable discretion. The
Issuer currently expects that each of the
conditions will be satisfied and that no
waivers will be necessary. See "The Exchange
Offer -- Certain Conditions to the Exchange
Offer.
Procedures to Tendering
Old Notes................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with such Old Notes and any
other required documentation, to the Exchange
Agent (as defined) at the address set forth
herein. See "The Exchange Offer -- Procedures
for Tendering Old Notes."
Use of Proceeds............... There will be no use of proceeds to the Company
from the exchange of Notes pursuant to the
Exchange Offer.
Exchange Agent................ IBJ Schroder Bank & Trust Company is serving as
the Exchange Agent in connection with the
Exchange Offer.
Federal Income Tax
Consequences................ The exchange of Notes pursuant to the Exchange
Offer will not be a taxable event for federal
income tax purposes. See "Certain Federal
Income Tax Consequences."
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, holders of Old Notes (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) who exchange their Old Notes for New Notes pursuant to the
Exchange Offer generally may offer such New Notes for resale, resell such New
Notes, and otherwise transfer such New Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
such New Notes are acquired in the ordinary course of the holder's business and
such holders have no arrangement or understanding with any person to participate
in a distribution of such New Notes. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, 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
9
<PAGE> 11
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied with.
The Issuer has agreed, pursuant to the Registration Rights Agreement and subject
to certain specified limitations therein, to register or qualify the New Notes
for offer or sale under the securities or blue sky laws of such jurisdictions as
any holder of the Notes reasonably requests in writing. If a holder of Old Notes
does not exchange such Old Notes for New Notes pursuant to the Exchange Offer,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes may not be offered 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. See "The Exchange Offer -- Consequences of
Failure to Exchange; Resales of New Notes."
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading.
THE NEW NOTES
The terms of the New Notes are identical in all material respect to the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes. For purposes of this Prospectus, the term "Notes" shall refer
collectively to the New Notes and the Old Notes.
Issuer........................ Werner Holding Co. (DE), Inc.
Securities Offered............ $135,000,000 in aggregate principal amount of
10% Series A Senior Subordinated Notes due 2007
of the Issuer.
Maturity Date................. November 15, 2007.
Interest Payment Dates........ May 15 and November 15 of each year, commencing
on May 15, 1998.
Note Guarantees............... The Issuer's payment obligations under the
Notes are jointly and severally guaranteed on a
senior subordinated basis by Holding and each
of the Issuer's Restricted Subsidiaries other
than any Foreign Subsidiary (as defined) or
Insurance Subsidiary (as defined) (the
"Subsidiary Guarantors" and, together with
Holding, the "Guarantors"). The Note Guarantees
are subordinated in right of payment to all
existing and future Senior Debt of the
Guarantors, including the guarantees of Senior
Debt issued by the Guarantors under the Senior
Credit Facility. See "Description of the New
Notes -- Note Guarantees."
Optional Redemption........... Except as described below, the Notes are not
redeemable at the Issuer's option prior to
November 15, 2002. Thereafter, the Notes will
be subject to redemption at any time at the
option of the Issuer, in whole or in part, upon
not less than 30 nor more than 60 days' notice,
at the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages thereon, if any, to the applicable
redemption date. In addition, at any time and
from time to time, prior to November 15, 2000,
the Issuer may redeem up to 35% of the original
aggregate principal amount of Notes at a
redemption price of 110% of the principal
amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash
proceeds of a public offering of common stock
of the Issuer or Holding; provided that at
least 65% of the
10
<PAGE> 12
original aggregate principal amount of Notes
remains outstanding immediately after the
occurrence of such redemption; and provided
further that such redemption shall occur within
60 days of the date of the closing of such
public offering. See "Description of the New
Notes -- Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control, (i)
the Issuer will have the option, at any time on
or prior to November 15, 2002, to redeem the
Notes in whole, but not in part, at a
redemption price equal to 100% of the principal
amount of the Notes plus the Applicable Premium
as of, and accrued but unpaid interest and
Liquidated Damages thereon, if any, to, the
date of redemption, and (ii) if the Issuer does
not so redeem the Notes, or if a Change of
Control occurs after November 15, 2002, each
holder of Notes will have the right to require
the Issuer to repurchase all or any part of
such holder's Notes at a price equal to 101% of
the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of
purchase. There can be no assurance that the
Issuer will have sufficient funds available or
will be permitted by its other debt agreements
to repurchase the Notes upon the occurrence of
a Change of Control. See "Description of the
New Notes -- Optional Redemption" and
"Description of the New Notes -- Repurchase at
the Option of Holders -- Change of Control."
Ranking....................... The Notes are general unsecured obligations of
the Issuer that are subordinated to all Senior
Debt (as defined) of the Issuer. The Note
Guarantees are general unsecured obligations of
the Guarantors that are subordinated to all
Senior Debt of the Guarantors. At December 31,
1997, (i) the outstanding Senior Debt of the
Issuer was $186.5 million, all of which was
Secured Debt (as defined), (ii) the Issuer had
no Pari Passu Indebtedness outstanding and no
indebtedness that would be subordinate or
junior in right of payment to the Notes, (iii)
the outstanding Senior Debt of the Guarantors
was $191.5 million, all of which was Secured
Debt, and (iv) the Guarantors had no Pari Passu
Indebtedness and no indebtedness that would be
subordinate or junior in right of payment to
the Note Guarantees. Of the $322.5 million of
consolidated indebtedness of the Company, the
Notes (representing $131 million ($135 million,
net of the unamortized discount) of such
indebtedness) rank junior in the right of
payment to all other indebtedness. See
"Description of the New Notes --
Subordination."
Restrictive Covenants......... The Indenture contains certain covenants that,
among other things, limit the ability of the
Issuer and/or its Restricted Subsidiaries to
(i) incur additional indebtedness, (ii) pay
dividends or make certain other restricted
payments, (iii) make investments, (iv) enter
into transactions with affiliates, (v) make
certain asset dispositions and (vi) merge or
consolidate with, or transfer substantially all
of its assets to, another person. The Indenture
also limits the ability of the Issuer to create
restrictions on the ability of Restricted
Subsidiaries to pay dividends or make any other
distributions. In addition, the Issuer is
obligated, under certain circumstances, to
offer to repurchase the Notes with the net cash
proceeds of certain sales or other
11
<PAGE> 13
dispositions of assets. However, all of these
limitations and prohibitions are subject to a
number of important qualifications. See
"Description of the New Notes."
Absence of a Public Market for
the New Notes................. The New Notes are new securities and there is
currently no established market for the New
Notes. Accordingly, there can be no assurance
as to the development or liquidity of any
market for the New Notes. The Company does not
intend to apply for listing of the New Notes on
a securities exchange.
12
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following summary historical and pro forma financial information is
that of Werner Holding Co. (PA), Inc., the Issuer's parent company. Holding is a
guarantor of the debt of the Issuer and has no substantial operations or assets
other than its investment in the Issuer. As a result, the consolidated financial
condition and results of operations of Holding are substantially the same as
those of the Issuer. The summary historical financial information for each of
the years in the two-year period ended December 31, 1994 and the balance sheet
information at December 31, 1995 have been derived from the audited historical
consolidated financial statements of the Company. The summary historical
financial information for each of the years in the three-year period ended
December 31, 1997 and the pro forma financial information for the year ended
December 31, 1997 have been derived from, and should be read in conjunction
with, the audited Consolidated Financial Statements (including the notes
thereto) appearing elsewhere in this Prospectus. The unaudited pro forma
operating data reflects the Transactions as if they had occurred on January 1,
1997. The pro forma financial information does not purport to represent what the
Company's results of operations would actually have been had the Transactions in
fact occurred on the assumed date or to project the Company's results of
operations for any future date or period. The following table should also be
read in conjunction with "Selected Consolidated Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
13
<PAGE> 15
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
----------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $277.9 $328.8 $336.0 $366.9 $416.3
Cost of sales.......................... 208.4 241.4 248.9 265.0 300.1
------ ------ ------ ------ ------
Gross profit........................... 69.5 87.4 87.1 101.9 116.2
General and administrative expense..... 18.3 22.1 25.0 27.0 31.2
Selling and distribution expense....... 33.8 37.9 47.1 47.9 48.9
Recapitalization expense............... -- -- -- -- 22.7
Non-cash compensation charge........... -- -- -- -- 78.5
------ ------ ------ ------ ------
Operating profit (loss)................ 17.4 27.4 15.0 27.0 (65.1)
MIICA investment gains (losses)........ 4.2 (4.0) 1.3 9.5 (14.6)
Interest expense....................... 6.6 5.5 7.2 7.5 9.0
Net income (loss)...................... 4.6 11.3 6.3 19.4 (90.5)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and equivalents................... $ 7.8 $ 0.1 $ 0.6 $ 1.0 $ 3.1
Insurance fund investments............. 44.2 46.1 68.2 80.9 58.6
Working capital........................ 47.7 42.5 59.4 49.2 30.1
Total assets........................... 183.7 199.8 234.6 261.2 288.2
Reserve for losses and loss adjustment
expenses............................ 33.7 36.7 41.5 45.3 49.6
Total debt (including current
maturities)......................... 73.1 60.4 83.5 83.4 322.5
Common shareholders' equity
(deficit)(d)........................ 41.3 49.8 62.1 75.1 (153.7)
OTHER FINANCIAL DATA:
Cash flows provided by (used in)
operating activities................ $ 17.5 $ 18.3 $ (1.4) $ 19.5 $ 17.2
Cash flows used in investing
activities.......................... (10.0) (11.1) (18.9) (15.8) (3.6)
Cash flows (used in) provided by
financing activities................ (2.0) (15.0) 20.8 (3.3) (11.5)
EBITDA(a).............................. 30.2 32.0 27.2 46.1 (69.3)
Adjusted EBITDA(a)..................... 32.8 41.8 37.3 50.2 58.3
Depreciation and amortization.......... 6.9 7.4 8.0 9.2 11.5
Net cash interest expense(b)........... 6.6 5.0 6.9 7.5 8.7
Capital expenditures................... 3.5 8.1 12.5 13.0 11.7
Dividends declared per share........... -- 14.75 10.20 11.25 10.50
Ratio of earnings to fixed
charges(c).......................... 3.0x 3.7x 2.2x 3.9x --
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
PRO FORMA OPERATING DATA:
Net sales................................................. $416.3
EBITDA(a)................................................. (65.0)
Interest expense.......................................... 31.9
Net cash interest expense(b).............................. 29.2
Ratio of earnings to fixed charges(c)..................... --
</TABLE>
See Notes to Summary Historical and Pro Forma Financial Information
14
<PAGE> 16
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN MILLIONS)
(a) EBITDA represents earnings before interest, income taxes, depreciation and
amortization.
The following table presents a reconciliation of EBITDA to Adjusted EBITDA:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
----- ----- ----- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
EBITDA..................................... $30.2 $32.0 $27.2 $46.1 $(69.3)
Reduction in management compensation(i).... 2.4 1.6 3.5 2.8 4.3
Non-recurring expenses(ii)................. -- -- 2.7 4.6 0.9
MIICA investment income(iii)............... 3.4 3.0 3.4 4.6 4.6
Exclusion of historic MIICA (income)
loss..................................... (4.2) 4.0 (1.3) (9.5) 14.6
Non-recurring private company
expenses(iv)............................. 1.0 1.2 1.8 1.6 2.0
Non-cash compensation charge (v)........... -- -- -- -- 78.5
Recapitalization expense (vi).............. -- -- -- -- 22.7
----- ----- ----- ----- ------
Adjusted EBITDA............................ $32.8 $41.8 $37.3 $50.2 $ 58.3
===== ===== ===== ===== ======
</TABLE>
EBITDA is presented because it is commonly used by certain investors to analyze
and determine a company's ability to service and/or incur debt. Adjusted EBITDA
is presented because it is relevant to holders of the Notes as a meaningful
historical measure with respect to periods prior to the Recapitalization and is
specifically incorporated in the definition of Consolidated Net Income in the
Indenture. However, EBITDA and Adjusted EBITDA should not be considered in
isolation or as a substitute for net income, cash flows or other income or cash
flows data prepared in accordance with generally accepted accounting principles
or as a measure of a company's profitability or liquidity. In addition, EBITDA
and Adjusted EBITDA, as described above, may not be comparable to such
measurements as used by other companies. Management of the Company believes that
the Adjusted EBITDA measure provides relevant and useful information to
potential investors. Its importance is exhibited by the required computations in
covenants contained in both the Indenture as well as the Senior Credit Facility.
An explanation of the reconciling items from EBITDA to Adjusted EBITDA follows:
(i) The reduction in management compensation relates to agreed upon
reductions to certain benefits paid to family members employed by the
Company. Such benefits have not continued subsequent to the
Recapitalization.
(ii) Non-recurring expenses consist of the following: (i) $1.8, $3.8 and
$0.7 in 1995, 1996, and 1997 respectively, relating to the costs of
temporary warehousing space that was not utilized (and is no longer
being maintained) and costs of start-up and incremental inventory
carrying costs associated with the modernization of the Company's
Greenville remelt operation (which are no longer being incurred); and
(ii) $0.9, $0.8 and $0.2 in 1995, 1996, and 1997 respectively, relating
to the closing of certain wood ladder production facilities and related
warehouse facilities.
(iii) For purposes of computing Adjusted EBITDA, the Company has assumed a
7.7% return on the investment portfolio of MIICA. Such 7.7% return
represents the five-year average return on investment assets for
commercial casualty lines as reported by "Best's Aggregates &
Averages," 1997 Edition. The balance of the investment portfolio used
in computing the 7.7% return is the lesser of the December 31, 1997
investment balance of $58.6 and the investment balance as of the
beginning of the respective period.
(iv) Private company expenses consist of items that have not continued
following the Recapitalization. These expenses include family-related
charitable contributions and research and development grants to
educational institutions.
(v) The non-recurring non-cash compensation charge (and a corresponding
credit to shareholders' equity) of $78.5 is associated with (a) the
accelerated vesting, as a result of the Recapitalization, of outstanding
restricted Pre-Recapitalization Class B Stock previously granted to
certain key
15
<PAGE> 17
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION -- CONTINUED
management employees; (b) the accelerated vesting, as a result of the
Recapitalization, of outstanding restricted Pre-Recapitalization Class B
Stock previously granted to a former key management employee upon his
separation from the Company; and (c) changes in the terms of the plan
under which such stock was granted.
(vi) Recapitalization expense of $22.7 represents investment banker fees,
transaction fees, legal and accounting fees, transaction bonuses paid to
certain Company employees and other miscellaneous costs incurred in
connection with the Recapitalization.
(b) Net cash interest expense is defined as interest expense less amortization
of deferred financing costs and original issue discount.
(c) For purposes of the computation, the ratio of earnings to fixed charges has
been calculated by dividing (i) income before income taxes and extraordinary
charge plus fixed charges by (ii) fixed charges. Fixed charges are equal to
interest expense plus the portion of the rent expense estimated to represent
interest. The ratio of earnings to fixed charges is not meaningful for
periods that result in a deficit. For the historical and pro forma year
ended December 31, 1997, the deficiency of earnings to fixed charges was
$89.9 and $109.5, respectively.
(d) The shareholders' deficit at December 31, 1997 was the result of the
Recapitalization and the recording of related expenses, net of income tax
benefits. In connection with the Recapitalization, the Investors made an
equity investment of approximately $122.7, representing approximately 67% of
the outstanding capital stock and voting power of the Company.
16
<PAGE> 18
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the following
risk factors, as well as the other information set forth elsewhere in this
Prospectus. This Prospectus contains, in addition to historical information,
certain forward-looking statements that are subject to risks and other
uncertainties. The Company's actual results may differ materially from those
anticipated in these forward-looking statements. Factors that might cause such a
difference include those discussed below, as well as general economic and
business conditions, competition and other factors discussed elsewhere in this
Prospectus. All forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
cautionary statements set forth herein.
SUBSTANTIAL LEVERAGE; DEBT SERVICE OBLIGATIONS; LIQUIDITY
In connection with the Transactions, the Company incurred a significant
amount of indebtedness, the effect of which was to increase the Company's
indebtedness from December 31, 1996 by $239.1 million. At December 31, 1997, the
Company had $322.5 million of consolidated indebtedness, of which $191.5 million
was Senior Debt. Scheduled payments of principal due in each of the years 1998
through 2000 are $1.5 million. Projected interest requirements for the same
period, assuming current interest rates, range from $26.3 million to $28.3
million annually.
The Company's ability to make scheduled payments of principal of, or to pay
the interest, if any, on, or to refinance its indebtedness (including the
Notes), or to fund planned capital expenditures or finance acquisitions will
depend on its future financial and operating performance, which to a certain
extent is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond its control. Based on the current
and anticipated level of operations, management believes that cash flows from
operations and available cash, together with available borrowings under the
Senior Credit Facility, will be adequate to meet the Company's anticipated
future requirements for working capital, budgeted capital expenditures,
acquisition financing and scheduled payments of principal and interest on its
indebtedness, including the Notes, for the next 12 months. The Company, however,
may need to refinance all or a portion of the principal of the Notes on or prior
to maturity. There can be no assurance that the Company's business will generate
sufficient cash flows from operations or that future borrowings will be
available under the Senior Credit Facility in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or make anticipated
capital expenditures and to fund future acquisitions. In addition, there can be
no assurance that the Company will be able to effect any refinancing on
commercially reasonable terms, or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations is required to be
dedicated to the payment of interest on the Notes and the Company's other
existing indebtedness, thereby reducing the funds available to the Company for
other purposes; (iii) the agreements governing the Company's long-term
indebtedness contain certain restrictive financial and operating covenants; (iv)
certain indebtedness under the $320 million Senior Credit Facility, of which
$186.5 million was outstanding at December 31, 1997, is at variable rates of
interest which could cause the Company to be vulnerable to increases in interest
rates; (v) all of the indebtedness outstanding under the Senior Credit Facility
is secured by substantially all of the assets of the Company and will become due
prior to the time the principal on the Notes will become due; (vi) the Company
is substantially more leveraged than certain of its competitors, which might
place the Company at a competitive disadvantage; (vii) the Company may be
hindered in its ability to adjust rapidly to changing market conditions; and
(viii) the Company's substantial degree of leverage could make it more
vulnerable in the event of a downturn in general economic conditions or in its
business. In addition, the degree to which the Company is leveraged could
prevent it from repurchasing all of the Notes tendered to it upon the occurrence
of a Change of Control. See "Description of the
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<PAGE> 19
New Notes -- Change of Control," "The Senior Credit Facility" and "-- Potential
Inability to Fund a Change of Control Offer."
SUBORDINATION OF NEW NOTES; ASSET ENCUMBRANCE
The New Notes will be general unsecured obligations of the Issuer that will
be subordinated to all Senior Debt of the Issuer. The Note Guarantees will be
general unsecured obligations of the Guarantors that will be subordinated to all
Senior Debt of the Guarantors. At December 31, 1997, (i) the outstanding Senior
Debt of the Issuer was $186.5 million, all of which was Secured Debt, (ii) the
Issuer had no Pari Passu Indebtedness outstanding and no indebtedness that would
be subordinate or junior in right of payment to the Notes, (iii) the outstanding
Senior Debt of the Guarantors was $191.5 million, all of which was Secured Debt,
and (iv) the Guarantors had no Pari Passu Indebtedness and no indebtedness that
was subordinate or junior in right of payment to the Note Guarantees. Although
the Indenture contains limitations on the amount of additional indebtedness
which the Issuer and the Subsidiary Guarantors may incur, under certain
circumstances the amount of such Indebtedness could be substantial and such
Indebtedness may be Senior Debt. See "Description of the New Notes." The
Indenture provides that the Issuer and the Restricted Subsidiaries may not incur
or otherwise become liable for any indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes.
The Issuer may not pay principal of, premium on, or interest or Liquidated
Damages on, the Notes, make any deposit pursuant to defeasance provisions or
repurchase or redeem or otherwise retire any Notes (i) if any Designated Senior
Debt (as defined) is not paid when due or any other default on Designated Senior
Debt occurs and the maturity of such Designated Senior Debt is accelerated in
accordance with its terms or (ii) if any other default on Designated Senior Debt
occurs that permits the holders of such Designated Senior Debt to accelerate the
maturity of such Senior Debt in accordance with its terms and the Trustee
received notice of such default, unless, in either case, the default has been
cured or waived, any such acceleration has been rescinded or such Senior Debt
has been paid in full or, in the case of any non-payment default, 179 days have
passed since the default notice was given. Upon any payment or distribution to
creditors of the Issuer in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Issuer or its property, the
holders of Senior Debt will be entitled to receive payment in full in cash or
Cash Equivalents (as defined) before the holders of the Notes will be entitled
to receive any payment (other than in the form of Permitted Junior Securities
(as defined)). See "Description of the New Notes -- Subordination."
Substantially similar provisions are applicable to the Note Guarantees. The New
Notes and the Note Guarantees will also be unsecured and thus, in effect, will
rank junior to any Secured Debt of the Issuer or the Guarantors. The
indebtedness outstanding under the Senior Credit Facility is secured by liens on
substantially all of the assets of the Company.
In addition, under certain circumstances, the Note Guarantee provided by
any Guarantor could be set aside under fraudulent conveyance or similar laws.
See "-- Fraudulent Conveyance; Preferential Transfer." In any such case, the
Notes would be effectively subordinated to all liabilities of such Guarantor,
including trade debt.
RESTRICTIVE LOAN COVENANTS
The Senior Credit Facility includes certain covenants that, among other
things, restrict: (i) the making of investments, loans and advances and the
paying of dividends and other restricted payments; (ii) the incurrence of
additional indebtedness; (iii) the granting of liens, other than liens created
pursuant to the Senior Credit Facility and certain permitted liens; (iv)
mergers, consolidations, and sales of all or a substantial part of the Company's
business or property; (v) the sale of assets; and (vi) the making of capital
expenditures. The Senior Credit Facility also requires the Company to maintain
certain financial ratios, including interest coverage and leverage ratios. All
of these restrictive covenants may restrict the Company's ability to expand or
to pursue its business strategies. The ability of the Company to comply with
these and other provisions of the Senior Credit Facility may be affected by
changes in economic or
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<PAGE> 20
business conditions, results of operations or other events beyond the Company's
control. The breach of any of these covenants could result in a default under
the Senior Credit Facility, in which case, depending on the actions taken by the
lenders thereunder or their successors or assignees, such lenders could elect to
declare all amounts borrowed under the Senior Credit Facility, together with
accrued interest, to be due and payable, and the Company could be prohibited
from making payments with respect to the Notes until the default is cured or all
Senior Debt is paid or satisfied in full. If the Company were unable to repay
such borrowings, such lenders could proceed against their collateral. If the
indebtedness under the Senior Credit Facility were to be accelerated, there can
be no assurance that the assets of the Company would be sufficient to repay in
full such indebtedness and the other indebtedness of the Company, including the
Notes. See "The Senior Credit Facility," "Description of the New
Notes -- Subordination."
OPERATION THROUGH SUBSIDIARIES
The Issuer conducts substantially all of its operations through its
subsidiaries. As a result, the Issuer is required to rely upon repayment from
its subsidiaries for the funds necessary to meet its obligations, including the
payment of interest on and principal of the Notes. The ability of the
subsidiaries to make such payments will be subject to, among other things,
applicable state laws including laws that restrict the amount of a corporation's
dividends to the amount of such corporation's capital surplus. In addition, for
so long as MIICA remains in existence, the Issuer's ability to receive dividends
or loans from MIICA will be strictly limited by applicable insurance company
laws and regulations. Claims of creditors of the Issuer's subsidiaries will
generally have priority as to the assets of such subsidiaries over claims of the
Issuer.
Although the Note Guarantees provide the holders of the Notes with a direct
claim against the assets of the Subsidiary Guarantors, enforcement of the Note
Guarantees against any Subsidiary Guarantor may be subject to legal challenge in
a bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
such Subsidiary Guarantor and would be subject to certain defenses available to
guarantors generally, including defenses to the effect that a creditor must
proceed against the primary obligor (the Issuer) prior to proceeding against any
Guarantor and that the obligation of a Guarantor can be no greater than the
obligation of the Issuer, as well as typical suretyship defenses. See
"-- Fraudulent Conveyance; Preferential Transfer." Although the Indenture
contains waivers of most guarantor defenses, certain of those waivers may not be
enforced by a court in a particular case. To the extent that the Note Guarantees
are not enforceable, the Notes would be effectively subordinated to all
liabilities of the Subsidiary Guarantors, including trade payables of such
Subsidiary Guarantors, whether or not such liabilities constitute Senior Debt
under the Indenture. In addition, the payment of dividends to the Issuer by its
subsidiaries is contingent upon the earnings of those subsidiaries and subject
to various business considerations and, for certain subsidiaries, the Indenture
will permit restrictive loan covenants to be contained in the instruments
governing the indebtedness of such subsidiaries, including the covenants which
restrict in certain circumstances the payment of dividends and distributions and
the transfer of assets to the Issuer. See "The Senior Credit Facility," and
"Description of the New Notes -- Certain Covenants -- Dividend and Other Payment
Restrictions Affecting Subsidiaries."
The Company is currently undertaking a review of the desirability of
operating through all the Issuer's direct and indirect subsidiaries, including
the Subsidiary Guarantors. In the event certain of the Issuer's subsidiaries are
deemed no longer necessary, it is expected that such subsidiaries will be
consolidated into the Issuer or one of its remaining subsidiaries. Such
consolidation will have no impact however upon holders of the Notes or the
consolidated results of operations of the Company.
CONTROL OF WERNER
Approximately 67% of the outstanding shares of voting capital stock of
Holding are held by a subsidiary of Investcorp and affiliates of Investcorp
which have entered into revocable management services or similar agreements with
an affiliate of Investcorp, pursuant to which such affiliate has the authority
to direct the voting of such shares for as long as such agreements are in
effect. Accordingly,
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<PAGE> 21
Investcorp and its affiliates control Holding and have the power to elect the
majority of its directors, to appoint new management and to approve any action
requiring the approval of the holders of its capital stock voting as a single
class, including adoption of most amendments to Holding's articles of
incorporation and approval of mergers or sales of substantially all of Werner's
assets. The directors so elected will have the authority to effect decisions
affecting the capital structure of both Holding and the Issuer, including the
issuance of additional capital stock, the implementation of stock repurchase
programs and the declaration of dividends.
DEPENDENCE ON KEY CUSTOMERS
The Company's 10 largest customers accounted for 48.1% of the Company's
1997 net sales. The Company's largest customer, The Home Depot, accounted for
18.0% of the Company's 1997 net sales. The Company does not have contractual
agreements with most of these key climbing products customers, including The
Home Depot, for the supply of products. The loss of certain of these key
customers or a significant decrease in the volume of products supplied to any of
such customers could have a material adverse effect on the Company. See
"Business -- Marketing and Distribution."
ANTICIPATED COST SAVINGS
Management has identified a number of cost reduction opportunities from
which the Company expects to realize up to approximately $20 million in annual
savings over the next five years, at an estimated cost of up to approximately
$49 million. These include: (i) adding aluminum remelting capability to certain
of the Company's manufacturing sites, (ii) modernizing a number of extrusion
presses, (iii) consolidating warehouses and production facilities and (iv)
constructing a new extension ladder production line. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General," "Business -- Overview" and "Business -- Business
Strategy -- Achieve Cost Reductions."
These cost savings and capital expenditure estimates were prepared solely
by members of the management of the Company. The estimates necessarily reflect
numerous assumptions as to future sales levels and other operating results, the
availability of funds for capital expenditures as well as general industry and
business conditions and other matters, many of which are beyond the control of
the Company. All of these forward-looking statements are based on estimates and
assumptions made by management of the Company, which although believed to be
reasonable, are inherently uncertain and difficult to predict. There can be no
assurance that the savings anticipated in these forward-looking statements will
be achieved despite incurring the planned capital expenditures. In addition,
there can be no assurance that unforeseen costs and expenses or other factors
will not offset the estimated cost savings or other components or the Company's
plan in whole or in part.
COMPETITION
The Company competes in the climbing product market with a number of
national and regional manufacturers. The Company competes in the extruded
products market with several integrated primary aluminum producers and various
independent producers of aluminum extruded products. Some of the Company's
competitors in the climbing products and the extruded products markets have
greater financial resources and are less leveraged than the Company. Some of the
Company's extruded products competitors are larger than the Company. The Company
competes on the basis of, among other things, competitive prices, prompt
availability, product differentiation, quality products and services, and a
broad product offering. See "Business -- Competition."
POTENTIAL FOR FUTURE LEVERAGE
Although the Indenture and the Senior Credit Facility contain limitations
on the amount of additional indebtedness which the Issuer and the Subsidiary
Guarantors may incur, under certain circumstances the Company could incur
substantial additional indebtedness, some or all of which could be senior in
20
<PAGE> 22
right of payment to the Notes. While the Company has no plans to incur
additional debt for any purposes other than to fund its working capital needs,
its incurrence of additional debt in the future, as part of a capitalized lease
transaction, leveraged acquisition or otherwise, could be permitted if the
Company satisfied the restrictive covenants under the Indenture, the Senior
Credit Facility and any other material agreements it enters into from time to
time relating to the incurrence of indebtedness. See "The Senior Credit
Facility," "Description of the New Notes -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock."
LEGAL PROCEEDINGS
The Company is involved from time to time in various legal proceedings and
claims incident to the normal conduct of its business. Although it is impossible
to predict the outcome of any pending legal proceeding, the Company believes
that such legal proceedings and claims, individually and in the aggregate, are
either without merit, are covered by insurance or are adequately reserved for,
and will not have a material adverse effect on its financial condition or
results of operations.
Due to the nature of the Company's products, the Company is subject to
product liability claims involving personal injuries allegedly related to the
Company's products. The Company believes that its insurance is generally
adequate to cover product liability claims. Nevertheless, currently pending
claims and any future claims are subject to the uncertainties related to
litigation and the ultimate outcome of any such proceedings or claims cannot be
predicted. Due to uncertainty with respect to the nature and extent of
manufacturer's and distributors' liability for personal injuries, there is also
no assurance that the product liability insurance of the Company is or will be
adequate to cover such claims. Furthermore, there can be no assurance that
insurance will remain available or, if available, that it will not be
prohibitively expensive. The loss of insurance coverage could have a material
adverse effect on the Company's results of operations and financial condition.
In addition, an action was recently filed, purporting in part to be brought
derivatively on behalf of the Company alleging breach of fiduciary duty by
various members of the Company's management and in part to be brought by the
plaintiffs individually against the Company, certain affiliated entities and
certain current and former officers and directors of the Company. The plaintiffs
seek money damages in an unspecified amount. Management believes that the
ultimate resolution of this lawsuit will not have a material adverse effect on
the Company's financial condition. See "Business -- Legal Proceedings."
SENSITIVITY TO ECONOMIC CYCLES AND WEATHER CONDITIONS
A significant percentage of the Company's sales of climbing products is
attributable to new residential and nonresidential constructions, which are
affected by such cyclical factors as interest rates, inflation, consumer
spending habits and employment. Similarly, a significant percentage of the
Company's sales of extruded products is attributable to the new and used
automobile and automobile parts markets, which are also affected by such
cyclical factors. Sales of climbing equipment are also sensitive to prevailing
weather conditions. Unusually severe weather can reduce or defer sales of
climbing products by delaying elective home maintenance and discouraging
do-it-yourself projects, which account for a growing portion of the Company's
sales.
AVAILABILITY AND PRICING OF RAW MATERIALS
The Company purchases aluminum, glass and other raw materials from various
suppliers. While all such materials are available from numerous independent
suppliers, commodity raw materials are subject to price fluctuations. There have
been historical periods of rapid and significant movements in the price of
aluminum, both upward and downward. Historically, the Company has entered into
futures contracts with respect to its purchases of aluminum to minimize or hedge
commodity price fluctuations. However, the Company's results of operations and
financial condition have in the past been, and may again in the future be,
adversely affected by increases in raw material or component costs or their lack
of availability. See "Business -- Industry" and "Business -- Raw Materials and
Suppliers."
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<PAGE> 23
ENVIRONMENTAL REGULATION
The Company's operations are subject to a wide variety of federal, state
and local laws and regulations governing, among other things, emissions to air,
discharge to waters, the generation, handling, storage, transportation,
treatment and disposal of hazardous substances and other materials, and employee
health and safety matters. Also, as an owner and/or operator of real property or
a generator of hazardous substances, the Company may be subject to environmental
cleanup liability, regardless of fault, pursuant to the Comprehensive
Environmental Response Compensation and Liability Act or analogous state laws.
The Company believes that its operations and facilities have been and are being
operated in compliance in all material respects with applicable environmental
and health and safety laws and regulations, many of which provide for
substantial fines and criminal sanctions for violations. However, the operation
of manufacturing plants entails risks of financial exposure for environmental
noncompliance and cleanup liabilities. There can be no assurance that the
Company will not incur costs in the future for cleanup and other remedial
activities that will have a material adverse effect on the Company. In addition,
potentially significant expenditures could be required in order to comply with
evolving environmental and health and safety laws, regulations or requirements
that may be adopted or imposed in the future. See "Business -- Environmental
Matters."
MIICA INVESTMENT PORTFOLIO
In connection with the Insurance Transfer, MIICA liquidated a substantial
portion of its insurance fund investments, the proceeds of which were used to
pay insurance premiums and fees associated with the Insurance Transfer of
approximately $41.5 million. The remainder of MIICA's investment portfolio
consists of "small cap" stocks, non-investment grade securities and real estate
investments, the value of which may fluctuate depending upon economic and market
conditions. Because the majority of MIICA's investment portfolio has been
liquidated, the Company believes that any such fluctuations will not have a
material impact upon the operations and financial condition of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General."
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
A Change of Control could require the Issuer to refinance substantial
amounts of indebtedness. Upon the occurrence of a Change of Control each holder
of Notes would have the right to require the Issuer to repurchase all or a
portion of such holder's Notes at a price equal to 101% of the aggregate
principal amount of the Notes, together with accrued and unpaid interest, and
Liquidated Damages if any, to the date of repurchase. However, the Senior Credit
Facility prohibits the purchase of the Notes by the Issuer in the event of a
Change of Control, unless and until such time as the indebtedness under the
Senior Credit Facility is repaid in full. The Issuer's failure to purchase the
Notes would result in a default under the Indenture and the Senior Credit
Facility, which, in turn, could result in amounts outstanding under the Senior
Credit Facility being declared due and payable. Any such declaration could have
adverse consequences to the Company and the holders of the Notes. In the event
of a Change of Control, there can be no assurance that the Issuer would have
sufficient assets to satisfy all of its obligations under the Senior Credit
Facility and the Notes. See "The Transactions," "The Senior Credit Facility" and
"Description of the New Notes -- Repurchase at the Option of Holders -- Change
of Control."
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success is largely dependent upon the
abilities and experience of its senior management team, including the Management
Shareholders. The loss of the services of one or more of these senior executives
without a suitable replacement could have a material adverse effect on the
Company's business and future operations. The Company has entered into
employment arrangements with the Management Shareholders which expire in
November 2000. The Company does not
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<PAGE> 24
maintain key man life insurance with respect to any of its executive officers.
See "Management -- Employment Arrangements Following Consummation of the
Recapitalization."
In April 1998, Howard L. Solot, Chief Operating Officer of the Company,
announced his intention to retire from the Company by the end of 1999, or sooner
if a suitable replacement Chief Operating Officer can be found, although he will
continue to be a Director of the Company.
FRAUDULENT CONVEYANCE; PREFERENTIAL TRANSFER
If the court in a lawsuit brought by an unpaid creditor or representative
of creditors, such as a trustee in bankruptcy, were to find under relevant
federal and state fraudulent conveyance statutes that the Issuer or any
Guarantor did not receive fair consideration or reasonably equivalent value for
incurring the indebtedness represented by the Notes or its Note Guarantee, and
that, at the time of such incurrence, the Issuer or such Guarantor (i) was
insolvent, (ii) was rendered insolvent by reason of such incurrence, (iii) was
engaged in a business or transaction for which the assets remaining with the
Issuer or such Guarantor constituted unreasonably small capital or (iv) intended
to incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, such court, subject to applicable statutes of limitation,
could avoid the Issuer's obligations under the Notes or the Guarantor's
obligations under the Note Guarantees, subordinate the Notes or the Note
Guarantees to other indebtedness of the Issuer or the Guarantors or take other
action detrimental to the holders of the Notes.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than all of that company's assets at a fair valuation, or if the present
fair salable value of that company's 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. Moreover, regardless of solvency, a court could avoid an
incurrence of indebtedness, including the Notes, if it determined that such
transaction was made with intent to hinder, delay or defraud creditors, or a
court could subordinate the indebtedness, including the Notes, to the claims of
all existing and future creditors on similar grounds. Based upon financial and
other information currently available to it, management believes the Issuer was
solvent at the time of the Transactions and continues to be solvent. However,
there can be no assurance as to what standard a court would apply in order to
determine whether the Issuer or the Guarantors were "insolvent" upon
consummation of the sale of the Notes and the Note Guarantees.
Additionally, under federal bankruptcy or applicable state insolvency law,
if certain bankruptcy or insolvency proceedings were initiated by or against the
Issuer or any Guarantor within 90 days after any payment by the Issuer or any
Guarantor with respect to the Notes or the Note Guarantees or the incurrence of
any future Note Guarantee or if the Issuer or any Guarantor anticipated becoming
insolvent at the time of such payment or incurrence, all or a portion of such
payment or such future Note Guarantee could be avoided as a preferential
transfer and the recipient of such payment could be required to return such
payment.
LACK OF PUBLIC MARKET
The Notes are new securities for which there currently is no market.
Although the Initial Purchasers (as defined) have informed the Issuer that they
currently intend to make a market in the Notes, they are not obligated to do so
and any such market making may be discontinued at any time without notice. In
addition, such market making activity may be limited during the pendency of this
Exchange Offer. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Notes. The Old Notes are eligible for trading by
qualified buyers in the PORTAL market. Following consummation of the Exchange
Offer, the New Notes will not be eligible for PORTAL trading. The Issuer does
not intend to apply for listing of the Notes on any securities exchange or for
quotation through The Nasdaq National Market.
This Exchange Offer is not conditioned upon any minimum or maximum
aggregate principal amount of Notes being tendered for exchange. No assurance
can be given as to the liquidity of the
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<PAGE> 25
trading market for the Exchange Notes, or, in the case of non-tendering holders
of Notes, the trading market for the Notes following the Exchange Offer.
The liquidity of, and trading market for, the Notes also may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of, and prospects for, the Company.
IMPACT OF THE YEAR 2000
Based on recent assessments, the Company has determined that it will be
required to modify certain portions of its software so that its computer systems
will function properly with respect to dates in the Year 2000 and thereafter.
The Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 issue will not pose significant
operational problems for its computer systems. However, if such modifications
are not made, or are not timely completed, the Year 2000 issue could have a
material adverse impact on the operations of the Company.
The Company has also initiated communications with its significant
suppliers and customers regarding the Year 2000 issue. However, there can be no
guarantee that the systems of these other companies will be timely converted and
the failure of the Company's significant suppliers and customers to make
necessary Year 2000 modifications could have a material adverse impact on the
Company's results and operations.
The Company will primarily utilize internal resources to reprogram, or
replace, and test the software for Year 2000 modifications. The Company
anticipates completing the Year 2000 project by December 31, 1998, which is
prior to any impact of the Year 2000 on its operating systems. The Company
estimates the cost of the project to be approximately $1 million.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates
which were derived utilizing numerous assumptions of future events. However,
there can be no guarantee that these estimates and the timetable will be
achieved and actual results could differ materially from those anticipated. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Impact of the Year 2000".
THE TRANSACTIONS
On October 8, 1997, Holding entered into the Recapitalization Agreement,
which was amended and restated on October 27, 1997, with the Investors. On
November 24, 1997, pursuant to the Recapitalization Agreement, Holding redeemed
approximately $330.7 million of its outstanding equity and the Investors
invested approximately $122.7 million in new equity of Holding. The remainder of
the funds used to redeem the then current shareholders' equity interests were
provided by the Old Notes Offering and the Senior Credit Facility.
THE RECAPITALIZATION
Pursuant to the closing of the Recapitalization, Holding filed Restated
Articles of Incorporation of Holding (the "Restated Articles") with the
Department of State of the Commonwealth of Pennsylvania. The Restated Articles
reclassified all of Holding's capital stock as follows: (i) each share of Pre-
Recapitalization Class A Stock held by Non-Management Shareholders were
reclassified into the right to retain 0.1376 of a fully paid and non-assessable
share of Class A Stock and the right to receive 0.8624 of a fully paid and
non-assessable share of Class A-I Stock and each share of Pre-Recapitalization
Class B Stock held by Non-Management Shareholders was reclassified into the
right to retain 0.1376 of a fully paid and non-assessable share of Class B Stock
and the right to receive 0.8624 of a fully paid and non-assessable share of
Class B-I Stock; (ii) each share of Class A Stock and Class B Stock held by
Management Shareholders was reclassified into the fractions of fully paid and
non-
24
<PAGE> 26
assessable shares of Class A Stock and Class A-I Stock, and Class B Stock and
Class B-I Stock, respectively, as set forth in the Recapitalization Agreement;
and (iii) Class C Common Stock, Class D Common Stock, Class E Common Stock and
Common Stock was newly authorized for issuance.
On the Recapitalization Closing Date, (i) the Class A-I Stock and the Class
B-I Stock was redeemed at the cash redemption price of $2,421.29 per share, plus
the Market Participation Right; (ii) the pre-Recapitalization shareholders
retained the outstanding shares of Class A Stock and Class B Stock; and (iii)
the Investors purchased approximately $122.7 million of Holding's Class C Common
Stock, Class D Common Stock and Class E Common Stock. Prior to the
Recapitalization, Non-Management Shareholders held an aggregate of 106,894
shares, and Management Shareholders held an aggregate of 54,177 shares, of
Pre-Recapitalization Class A Stock and Pre-Recapitalization Class B Stock. In
connection with the Recapitalization, these shares were reclassified such that
the pre-Recapitalization shareholders retained Class A Stock and Class B Stock
at average ratios of 13.76% for Non-Management Shareholders and 18.07% for
Management Shareholders. Thus, following the Recapitalization, the
pre-Recapitalization shareholders continue to own approximately 33% of the
outstanding voting equity of Holding, approximately 13% of which is owned by the
Management Shareholders. Immediately following the Recapitalization, the
Investors owned approximately 67% of the outstanding voting equity of Holding.
The terms of the Recapitalization, including the amount of the Cash
Redemption Price and $122.7 million equity investment amount, were based on the
equity value of the Company at the time of the Recapitalization, as agreed
between the Investors and the Company. Reasons for the Recapitalization included
meeting certain Pre-Recapitalization shareholder needs and giving the Company
resources to support its growth, new product development and market expansion.
Market Participation Right. If, prior to the tenth anniversary of the
Closing Date (i) there is an initial underwritten public offering of at least
10% of the common equity of Holding, or the Investors sell a majority of their
shares of Holding (which sale may or may not result in a Change of Control under
the terms of the Notes), and (ii) at the time of such initial public offering or
sale of shares, Holding's equity value equals or exceeds certain target values
that imply significant annual compound rates of return (between 20% and 40%) to
the post-Recapitalization shareholders, then those persons who have the Market
Participation Right shall be entitled to receive an aggregate amount equal to up
to 5% of Holding's equity value (the "Payment"). The Payment will be payable in
cash, provided that Holding, in its discretion, may make up to half of the
Payment in notes or similar obligations with market terms which Holding's Board
of Directors in good faith believes are of equivalent value.
CAPITAL STOCK FOLLOWING THE RECAPITALIZATION
The following table sets forth the authorized and outstanding shares of
capital stock of Holding following the consummation of the Recapitalization:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
AS OF THE RECAPITALIZATION
TITLE AUTHORIZED SHARES CLOSING DATE
----- ----------------- --------------------------
<S> <C> <C>
Class A Common Stock, par value $0.01 per share... 5,000 2,058.6786
Class A-I Common Stock, par value $0.01 per
share........................................... 13,000 --
Class B Common Stock, par value $0.01 per share... 25,000 22,438.0969
Class B-I Common Stock, par value $0.01 per
share........................................... 140,000 --
Class C Common Stock, par value $0.01 per share... 45,000 4,681.7850
Class D Common Stock, par value $0.01 per share... 1,000 1,000.0000
Class E Common Stock, par value $0.01 per share... 50,000 45,000.0000
Common Stock, par value $0.01 per share........... 131,000 --
------- -----------
Total........................................... 410,000 75,178.5605
------- -----------
</TABLE>
25
<PAGE> 27
Holders of the Class A Common Stock and Class B Common Stock are entitled
to one vote per share and holders of the Class D Common Stock are entitled to
50.6818 votes per share on all matters as to which shareholders may be entitled
to vote pursuant to the Pennsylvania Business Corporation Law of 1988. Class C
Common Stock and Class E Common Stock have no voting rights. Upon the occurrence
of a sale of 100% of the outstanding equity securities of Holding, a sale of
substantially all the assets of the Company or a public offering of any equity
securities of Holding, each outstanding share of Class A Common Stock, Class B
Common Stock, Class C Common Stock, Class D Common Stock and Class E Common
Stock will convert into one share of Common Stock of Holding. When issued,
Common Stock of Holding will have one vote per share.
THE SENIOR CREDIT FACILITY
As part of the Transactions, the Issuer entered into the Senior Credit
Facility with Bankers Trust Company ("BT"), as administrative agent and
co-arranger, Merrill Lynch Capital Corporation, as syndication agent and
co-arranger, The Chase Manhattan Bank, as documentation agent, Goldman Sachs
Credit Partners L.P. as co-agent, and the several lenders parties thereto. The
Senior Credit Facility consists of two term loan facilities in an aggregate
principal amount of $145.0 million (the "Term Loan Facilities"), a revolving
credit facility in an aggregate principal amount of up to $100.0 million (the
"Revolving Facility"), and a revolving credit facility which is subject to a
borrowing base amount not to exceed 80% of eligible receivables in an aggregate
principal amount of up to $75.0 million (the "Receivables Facility"). See "The
Senior Credit Facility."
USE OF PROCEEDS
There will be no proceeds to the Company from the Exchange of Notes
pursuant to the Exchange Offer.
26
<PAGE> 28
CAPITALIZATION
The following table sets forth the unaudited consolidated cash and
equivalents and the capitalization of the Company at December 31, 1997. This
table should be read in conjunction with "Summary Historical and Pro Forma
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
(including the notes thereto) appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(DOLLARS IN MILLIONS)
<S> <C>
Cash and equivalents (excluding MIICA)...................... $ 3.1
=======
Short-term debt:
Receivables Facility(a)................................... $ 41.5
Long-term debt (including current portion):
Senior Credit Facility:
Revolving Facility(b).................................. --
Term Loan Facilities................................... 145.0
Variable Rate Industrial Building Revenue Bonds due
2015................................................... 5.0
10% Senior Subordinated Notes due 2007, net of unamortized
discount............................................... 131.0
-------
Total debt............................................. 322.5
Total shareholders' (deficit)(c)....................... (153.7)
-------
Total capitalization................................... $ 168.8
=======
</TABLE>
(a) Permits maximum borrowings of 80% of eligible receivables as defined in the
Senior Credit Facility agreement, up to an aggregate amount of $75.0.
(b) Permits maximum borrowings of $100.0.
(c) The shareholders' deficit at December 31, 1997 was the result of the
Recapitalization and the recording of related expenses, net of income tax
benefits. In connection with the Recapitalization, the Investors made an
equity investment of approximately $122.7 representing approximately 67% of
the outstanding capital stock and voting power of the Company.
27
<PAGE> 29
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed consolidated statement of
operations (the "Unaudited Pro Forma Condensed Consolidated Statement of
Operations") is that of Werner Holding Co. (PA), Inc., the Issuer's parent
company. Holding is a guarantor of the debt of the Issuer and has no substantial
operations or assets other than its investment in the Issuer. As a result, the
consolidated financial condition and results of operations of Holding are
substantially the same as those of the Issuer.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations has
been prepared by applying pro forma adjustments to the Consolidated Statement of
Operations of the Company included elsewhere in this Prospectus. The Unaudited
Pro Forma Statement of Operations for the year ended December 31, 1997 gives pro
forma effect to the Transactions as if they were consummated as of January 1,
1997 and excludes certain nonrecurring items directly attributable to the
Transactions. The adjustments are described in the accompanying notes. The
Unaudited Pro Forma Condensed Consolidated Statement of Operations should not be
considered indicative of actual results that would have been achieved had the
Transactions been consummated on the date or for the period indicated and does
not purport to indicate results of operations as of any future date or for any
future period. The Unaudited Pro Forma Condensed Consolidated Statement of
Operations should be read in conjunction with the Consolidated Financial
Statements (including the notes thereto) appearing elsewhere in this Prospectus.
28
<PAGE> 30
WERNER HOLDING CO. (PA), INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
TRANSACTION
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales............................................... $416.3 $ 416.3
Cost of sales........................................... 300.1 300.1
------ ------- -------
Gross profit............................................ 116.2 116.2
General and administrative expense...................... 31.2 $ (3.4)(a) 27.8
Selling and distribution expense........................ 48.9 48.9
Recapitalization expense................................ 22.7 22.7
Non-cash compensation charge............................ 78.5 78.5
------ ------- -------
Operating loss.......................................... (65.1) 3.4 (61.7)
Other expense, net...................................... (15.7) (15.7)
------ ------- -------
Loss before interest and taxes.......................... (80.8) 3.4 (77.4)
Interest expense........................................ 9.0 22.9(b) 31.9
------ ------- -------
Loss before income taxes................................ (89.8) (19.5) (109.3)
Provision (benefit) for income taxes.................... 0.7 (7.4)(c) (6.7)
------ ------- -------
Net loss................................................ $(90.5) (12.1) $(102.6)
====== ======= =======
EBITDA(d)............................................... $(69.3) $ 4.3 $ (65.0)
====== ======= =======
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations.
29
<PAGE> 31
WERNER HOLDING CO. (PA), INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1997 reflects the Transactions as if they had
occurred on January 1, 1997. The pro forma adjustments are based on available
information and certain assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
(a) Reflects the following:
Reduction of management compensation as a result of
agreements signed in connection with the
Transactions.......................................... $(4.3)
Amortization of prepaid management fees ($1.0 less $0.1
which is included in historical operating results).... 0.9
-----
$(3.4)
=====
(b) Reflects the following:
Elimination of historical net interest expense including
amortization of debt issuance costs on retired debt... $(9.0)
Interest relating to $5.0 of Industrial Revenue Bonds... 0.2
Interest resulting from borrowings under the $100.0
Revolving Facility under the Senior Credit Facility at
an interest rate of LIBOR +2.25% (8.15%)(1)........... --
Interest resulting from borrowings under the Receivables
Facility at an assumed interest rate of LIBOR +1.50%
(7.40%)(2)............................................ 3.1
Interest resulting from $90.0 Tranche B term loan under
the Senior Credit Facility at an assumed interest rate
of LIBOR +2.50% (8.40%)............................... 7.6
Interest resulting from $55.0 Tranche C term loan under
the Senior Credit Facility at an assumed interest rate
of LIBOR +2.75% (8.65%)............................... 4.8
Interest resulting from $135.0 of debt issued under the
Notes, at an interest rate of 10.00%.................. 13.5
Amortization of debt issuance costs and original issue
discount of $19.3 associated with the Senior Credit
Facility and the Notes over the respective term of
indebtedness.......................................... 2.7
-----
$22.9
=====
A 25 basis point increase or decrease in the assumed average interest rate
on the variable rate debt issued in connection with the Recapitalization
Financing would change the pro forma annual interest expense by
approximately $0.5 and the pro forma annual net income by approximately
$0.3.
</TABLE>
- ---------------
(1) No amounts were borrowed under the Revolving Facility in 1997 except for
amounts issued under the letter of credit subfacility.
(2) Interest calculated using the $41.5 outstanding balance established in
connection with the Recapitalization. The Company intends to refinance the
Receivables Facility with an accounts receivables securitization facility
with an interest rate that is expected to be less than that of the
Receivables Facility in 1998.
30
<PAGE> 32
WERNER HOLDING CO. (PA), INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED -- (CONTINUED)
STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
(c) Reflects the tax effect of items (a) and (b) above at an assumed
effective tax rate of 38.0%.
(d) EBITDA represents earnings before interest, income taxes, depreciation,
and amortization.
EBITDA is presented because it is commonly used by certain investors to
analyze and determine a company's ability to service and/or incur debt.
However, EBITDA should not be considered in isolation or as a
substitute for net income, cash flows or other income or cash flow data
prepared in accordance with generally accepted accounting principles or
as a measure of a company's profitability or liquidity. In addition,
EBITDA, as described above, may not be comparable to such measurements
as used by other companies.
</TABLE>
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1997 includes the following nonrecurring items that are
directly attributable to the Recapitalization and were charged to historical
results of operations for the year ended December 31, 1997:
(1) Recapitalization expenses of $22.7 including investment banker fees,
transaction fees, legal and accounting fees, transaction bonuses paid to
certain employees and other miscellaneous transaction related expenses.
(2) Non-recurring non-cash compensation charge (and a corresponding credit to
shareholders' equity) of $78.5 for the historical and pro forma year ended
December 31, 1997 associated with (a) the accelerated vesting, as a result
of the Recapitalization, of outstanding restricted Pre-Recapitalization
Class B Stock previously granted to certain key management employees; (b)
the accelerated vesting, as a result of the Recapitalization, of outstanding
restricted Pre-Recapitalization Class B Stock previously granted to a former
key management employee upon his separation from the Company; and (c)
changes in the terms of the plan under which such stock was granted.
31
<PAGE> 33
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following selected consolidated historical financial data is that of
Werner Holding Co. (PA), Inc., the Issuer's parent company. Holding is a
guarantor of the debt of the Issuer and has no substantial operations or assets
other than its investment in the Issuer. As a result, the consolidated financial
condition and results of operations of Holding are substantially the same as
those of the Issuer. The selected consolidated historical financial data for
each of the years in the two-year period ended December 31, 1994 and the balance
sheet information at December 31, 1995 have been derived from the audited
historical consolidated financial statements of the Company. The selected
consolidated historical and pro forma financial data for each of the years in
the three-year period ended December 31, 1997 have been derived from, and should
be read in conjunction with, the audited Consolidated Financial Statements
(including the notes thereto) appearing elsewhere in this Prospectus. The
unaudited pro forma operating data reflects the Transactions as if they had
occurred on January 1, 1997 and excludes certain nonrecurring items directly
attributable to the Transactions. The pro forma financial information does not
purport to represent what the Company's results of operations would actually
have been had the Transactions in fact occurred on the assumed date or to
project the Company's results of operations for any future date or period. The
following table should also be read in conjunction with "Unaudited Pro Forma
Condensed Consolidated Statement of Operations" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................... $277.9 $328.8 $336.0 $366.9 $416.3
Cost of sales............................... 208.4 241.4 248.9 265.0 300.1
------ ------ ------ ------ ------
Gross profit............................. 69.5 87.4 87.1 101.9 116.2
General and administrative expenses......... 18.3 22.1 25.0 27.0 31.2
Selling and distribution expenses........... 33.8 37.9 47.1 47.9 48.9
Recapitalization expense.................... -- -- -- -- 22.7
Non-cash compensation charge................ -- -- -- -- 78.5
------ ------ ------ ------ ------
Operating profit (loss)..................... 17.4 27.4 15.0 27.0 (65.1)
MIICA investment gains (losses)............. 4.2 (4.0) 1.3 9.5 (14.6)
Other income (expense), net................. 1.7 1.2 2.9 0.4 (1.1)
------ ------ ------ ------ ------
Income (loss) before interest and taxes..... 23.3 24.6 19.2 36.9 (80.8)
Interest expense............................ 6.6 5.5 7.2 7.5 9.0
------ ------ ------ ------ ------
Income (loss) before provision for income
taxes.................................... 16.7 19.1 12.0 29.4 (89.8)
Income taxes................................ 5.7 7.8 5.1 10.0 0.7
------ ------ ------ ------ ------
Income (loss) before discontinued operations
and extraordinary charge................. 11.0 11.3 6.9 19.4 (90.5)
------ ------ ------ ------ ------
Loss from discontinued operations(a)........ 6.4 -- -- -- --
------ ------ ------ ------ ------
Income (loss) before extraordinary charge... 4.6 11.3 6.9 19.4 (90.5)
Extraordinary charge(b)..................... -- -- 0.6 -- --
------ ------ ------ ------ ------
Net income (loss)........................... $ 4.6 $ 11.3 $ 6.3 $ 19.4 $(90.5)
====== ====== ====== ====== ======
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and equivalents........................ $ 7.8 $ 0.1 $ 0.6 $ 1.0 $ 3.1
Insurance fund investments.................. 44.2 46.1 68.2 80.9 58.6
Working capital............................. 47.7 42.5 59.4 49.2 30.1
Total assets................................ 183.7 199.8 234.6 261.2 288.2
Reserve for losses and loss adjustment
expenses................................. 33.7 36.7 41.5 45.3 49.6
Total debt (including current maturities)... 73.1 60.4 83.5 83.4 322.5
Common shareholders' equity (deficit)(f).... 41.3 49.8 62.1 75.1 (153.7)
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Cash flow provided by (used in) operating
activities............................... $ 17.5 $ 18.3 $ (1.4) $ 19.5 $ 17.2
Cash flows used in investing activities..... (10.0) (11.1) (18.9) (15.8) (3.6)
Cash flows (used in) provided by financing
activities............................... (2.0) (15.0) 20.8 (3.3) (11.5)
EBITDA(c)................................... 30.2 32.0 27.2 46.1 (69.3)
Adjusted EBITDA(c).......................... 32.8 41.8 37.3 50.2 58.3
Depreciation and amortization............... 6.9 7.4 8.0 9.2 11.5
Net cash interest expense(d)................ 6.6 5.0 6.9 7.5 8.7
Capital expenditures........................ 3.5 8.1 12.5 13.0 11.7
Dividends declared per share................ -- 14.75 10.20 11.25 10.50
Ratio of earnings to fixed charges(e)....... 3.0x 3.7x 2.2x 3.9x --
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
PRO FORMA OPERATING DATA:
Net sales................................................. $416.3
EBITDA(c)................................................. (65.0)
Interest expense.......................................... 31.9
Net cash interest expense(d).............................. 29.2
Ratio of earnings to fixed charges(e)..................... --
</TABLE>
See Notes to Selected Consolidated Historical Financial Data
33
<PAGE> 35
NOTES TO SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)
(a) Represents losses incurred by the Company in connection with exiting its
architectural building products business.
(b) Reflects expenses incurred in regard to the early extinguishment of debt,
net of income tax benefits of $0.4.
(c) EBITDA represents earning before interest, income taxes, depreciation and
amortization.
The following table presents a reconciliation of EBITDA to Adjusted EBITDA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1993 1994 1995 1996 1997
----- ----- ----- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
EBITDA..................................... $30.2 $32.0 $27.2 $46.1 $(69.3)
Reduction in management compensation(i).... 2.4 1.6 3.5 2.8 4.3
Non-recurring expenses(ii)................. -- -- 2.7 4.6 0.9
MIICA investment income(iii)............... 3.4 3.0 3.4 4.6 4.6
Exclusion of historic MIICA (income)
loss..................................... (4.2) 4.0 (1.3) (9.5) 14.6
Non-recurring private company
expenses(iv)............................. 1.0 1.2 1.8 1.6 2.0
Non-cash compensation charge(v)............ -- -- -- -- 78.5
Recapitalization expense(vi)............... -- -- -- -- 22.7
----- ----- ----- ----- ------
Adjusted EBITDA............................ $32.8 $41.8 $37.3 $50.2 $ 58.3
===== ===== ===== ===== ======
</TABLE>
EBITDA is presented because it is commonly used by certain investors to
analyze and determine a company's ability to service and/or incur debt.
Adjusted EBITDA is presented because it is relevant to holders of the Notes
as a meaningful historical measure with respect to periods prior to the
Recapitalization and is specifically incorporated in the definition of
Consolidated Net Income in the Indenture. However, EBITDA and Adjusted
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows or other income or cash flows data prepared in accordance
with generally accepted accounting principles or as a measure of a company's
profitability or liquidity. In addition, EBITDA and Adjusted EBITDA, as
described above, may not be comparable to such measurements as used by other
companies. Management of the Company believes that the Adjusted EBITDA
measure provides relevant and useful information to potential investors. Its
importance is exhibited by the required computations in covenants contained
in both the Indenture as well as the Senior Credit Facility. An explanation
of the reconciling items from EBITDA to Adjusted EBITDA follows:
<TABLE>
<S> <C>
(i) The reduction in management compensation relates to agreed
upon reductions to certain benefits paid to family members
employed by the Company. Such benefits have not continued
subsequent to the Recapitalization.
(ii) Non-recurring expenses consist of the following: (i) $1.8,
$3.8 and $0.7 in 1995, 1996 and 1997, respectively, relating
to costs of temporary warehousing space that was not
utilized (and is no longer being maintained) and costs of
start-up and incremental inventory carrying costs associated
with the modernization of the Company's Greenville remelt
operation (which are no longer being incurred); and (ii)
$0.9, $0.8 and $0.2 in 1995, 1996 and 1997, respectively,
relating to the closing of certain wood ladder production
facilities and temporary warehouse facilities.
</TABLE>
34
<PAGE> 36
<TABLE>
<S> <C>
(iii) For purposes of computing Adjusted EBITDA, the Company has
assumed a 7.7% return on the investment portfolio of MIICA.
Such 7.7% return represents the five-year average return on
investment assets for commercial casualty lines as reported
by "Best's Aggregates & Averages", 1997 Edition. The balance
of the investment portfolio used in computing the 7.7%
return is the lesser of the December 31, 1997 investment
balance of $58.6 and the investment balance as of the
beginning of the respective period.
(iv) Private company expenses consist of items that have not
continued following the Recapitalization. These expenses
include family-related charitable contributions and research
and development grants to educational institutions.
(v) The non-recurring non-cash compensation charge (and a
corresponding credit to shareholders' equity) of $78.5 is
associated with (a) the accelerated vesting, as a result of
the Recapitalization, of outstanding restricted
Pre-Recapitalization Class B Stock previously granted to
certain key management employees; (b) the accelerated
vesting, as a result of the Recapitalization, of outstanding
restricted Pre-Recapitalization Class B Stock previously
granted to a former key management employee upon his
separation from the Company; and (c) changes in the terms of
the plan under which such stock was granted.
(vi) Recapitalization expense of $22.7 represents investment
banker fees, transaction fees, legal and accounting fees,
transaction bonuses paid to certain Company employees and
other miscellaneous costs incurred in connection with the
Recapitalization.
</TABLE>
(d) Net cash interest expense is defined as interest expense less amortization
of deferred financing costs and original issue discount.
(e) For purposes of the computation, the ratio of earnings to fixed charges has
been calculated by dividing (i) income before income taxes and extraordinary
charge plus fixed charges by (ii) fixed charges. Fixed charges are equal to
interest expense plus the portion of the rent expense estimated to represent
interest. The ratio of earnings to fixed charges is not meaningful for
periods that result in a deficit. For the historical and pro forma year
ended December 31, 1997, the deficiency of earnings to fixed charges was
$89.9 and $109.5, respectively.
(f) The shareholders' deficit at December 31, 1997 was the result of the
Recapitalization and the recording of related expenses, net of income tax
benefits. In connection with the Recapitalization, the Investors made an
equity investment of approximately $122.7, representing approximately 67% of
the outstanding capital stock and voting power of the Company.
35
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Consolidated Historical Financial Data," "Unaudited Pro Forma Condensed
Consolidated Statement of Operations" and the Consolidated Financial Statements
of the Company and the notes thereto included elsewhere in this Prospectus. This
Prospectus contains, in addition to historical information, forward-looking
statements that are subject to risks and other uncertainties. The Company's
actual results may differ materially from those anticipated in these
forward-looking statements.
GENERAL
Werner is the nation's largest manufacturer and marketer of ladders and
other climbing products. The Company also manufactures and sells aluminum
extruded products and more complex fabricated components. The Company's net
sales have increased at a five-year CAGR of 11.9% during the period from fiscal
1992 to fiscal 1997. For the year ended December 31, 1997, the Company had net
sales of $416.3 million and Adjusted EBITDA of $58.3 million.
Ladders and Other Climbing Products. Net sales of climbing products have
accounted for approximately 75% of the Company's consolidated net sales over the
past five years. Net sales of the Company's climbing products have increased at
a CAGR of 14.4% during the period from fiscal 1992 to fiscal 1997. The Company
has grown its climbing products sales primarily by (i) increasing sales to
leading home improvement retailers, hardware cooperatives and professional
distributors, (ii) increasing its sales of fiberglass climbing products, and
(iii) selling more higher grade and higher value products.
Aluminum Extruded Products. Net sales for the Company's aluminum extruded
products business have increased at a CAGR of 5.9% during the period from fiscal
1992 to fiscal 1997. In 1995, the Company began to shift its extruded products
focus away from lower margin lineal extruded products to higher margin precision
extrusions and highly engineered fabricated components. This strategic
repositioning of the extruded business included reducing sales to less
profitable customers and directing selling efforts toward a design intensive
business in which the Company has experienced lead time for new business of six
months to several years. Accordingly, sales of extruded products were adversely
affected in 1995 and 1996, and management does not expect to realize the full
benefit of the Company's strategic shift until 1998.
MIICA. Prior to March 31, 1998, MIICA provided product liability, workers'
compensation and environmental insurance to the Company and its subsidiaries. In
the first quarter of 1998, after an extensive evaluation of the cost and
efficiency of providing such insurance, the Company decided to obtain such
insurance from an external commercial insurance company and made a decision to
discontinue MIICA's operations.
As a result of its decision, the Company effectively completed the transfer
of MIICA's outstanding product and workers' compensation liabilities to a
commercial insurance company in exchange for the payment of premiums of $41.5
million, thereby extinguishing the Company's exposure with respect thereto. To
pay the $41.5 million of insurance premiums, MIICA liquidated a substantial
portion of its investment portfolio.
Prior to March 31, 1998 MIICA maintained an investment portfolio which
consisted of investments in debt and equity securities, real estate and other
investments. Historically, MIICA did not hold any material assets other than its
insurance fund. In recent years, the insurance fund was comprised of "small cap"
stocks and other non-investment grade securities of higher risk which resulted
in volatile
36
<PAGE> 38
investment income (loss). MIICA had the following investment income (loss),
which is included in other income (expense) in the Company's Consolidated
Financial Statements included elsewhere herein:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
- --------------------------------
1995 1996 1997
- -------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
$1.3 $9.5 $(14.6)
</TABLE>
Since late 1996, MIICA was in the process of realigning its portfolio to a
more traditional mix of investments. Large fluctuations in investment income
(loss) occurred as a result of changes in the market value of these higher risk
investments and as certain of these higher risk investments were sold. Because a
substantial portion of MIICA's portfolio has been liquidated, the Company does
not expect future investment income to be significant or as volatile as in years
past. No assurances can be made that MIICA's portfolio will not experience
fluctuations in market value. However, the Company does not expect such
fluctuations to be significant to its financial condition and future operating
results. See "Risk Factors -- MIICA Investment Portfolio."
MIICA, which is not a Guarantor of the Notes, had shareholder's equity of
$17.5 million at December 31, 1997. The Company's ability to receive dividends
or loans from MIICA is strictly limited by applicable insurance company laws and
regulations. Accordingly, although the Company believes MIICA has been useful in
meeting its insurance needs, MIICA's assets are available as credit support for
the Notes only to the extent that dividends are permitted to be paid by
applicable laws and regulations. For further information regarding MIICA, see
"Summary -- Recent Development," "Risk Factors -- MIICA Investment Portfolio"
and Notes M and P to the Consolidated Financial Statements of the Company.
Certain expenses. Included in the results of operations of the Company for
the years ended December 31, 1995, 1996 and 1997 are aggregate expenses of $4.5
million, $6.2 million, and $104.1 million, respectively, consisting of the
following:
(i) $1.8 million, $3.8 million and $0.7 million in 1995, 1996 and
1997, respectively, relating to costs of temporary warehousing space that
was not utilized (and is no longer being maintained) and costs of start-up
and incremental inventory carrying costs associated with the modernization
of the Company's Greenville remelt operation (which are no longer being
incurred); and $0.9 million, $0.8 million and $0.2 million in 1995, 1996
and 1997, respectively, relating to the closing of certain wood ladder
production facilities and temporary warehousing facilities.
(ii) $1.8 million, $1.6 million and $2.0 million in 1995, 1996 and
1997, respectively, of private company expenses such as family-related
charitable contributions and research and development grants to educational
institutions which have not continued following the Recapitalization. See
Note (c) to Notes to Selected Consolidated Historical Financial Data.
(iii) Non-recurring non-cash compensation charge (and a corresponding
credit to shareholders' equity) of $78.5 million for the historical and pro
forma year ended December 31, 1997 associated with (a) the accelerated
vesting, as a result of the Recapitalization, of outstanding restricted
Pre-Recapitalization Class B Stock previously granted to certain key
management employees, and (b) the accelerated vesting, as a result of the
Recapitalization, of outstanding restricted Pre-Recapitalization Class B
Stock previously granted to a former key management employee upon his
separation from the Company; and (c) changes in the terms of the plan under
which such stock was granted.
(iv) Recapitalization expense of $22.7 million in 1997.
The Transactions. As part of the Recapitalization, the Investors made an
equity investment of approximately $122.7 million and existing shareholders
retained capital stock valued at $59.3 million based on the price paid by the
Investors. In addition, pursuant to the Recapitalization Financing, the Company
completed the Old Notes Offering and entered into the Senior Credit Facility.
The Recapitalization has been accounted for as such and, accordingly, has had
and will have no impact on the
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<PAGE> 39
historical basis of assets and liabilities. As a result of the Transactions, the
Company incurred approximately $51.8 million in fees and expenses and other
costs.
RESULTS OF OPERATIONS
The table below sets forth the Company's results of operations for the
periods indicated:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 1996 1997
-------------- -------------- --------------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Climbing products.................... $248.0 73.8% $277.3 75.6% $314.2 75.5%
Extruded products.................... 88.0 26.2 89.6 24.4 102.1 24.5
------ ----- ------ ----- ------ -----
Total net sales........................ 336.0 100.0 366.9 100.0 416.3 100.0
Gross profit........................... 87.1 25.9 101.9 27.8 116.2 27.9
General and administrative expense..... 25.0 7.4 27.0 7.4 31.2 7.5
Selling and distribution expense....... 47.1 14.0 47.9 13.1 48.9 11.7
Recapitalization expense............... -- -- -- -- 22.7 5.5
Non-cash compensation charge........... -- -- -- -- 78.5 18.9
Other income (expense), net............ 4.2 1.2 9.9 2.7 (15.7) (3.8)
Interest expense....................... 7.2 2.1 7.5 2.0 9.0 2.2
Income taxes........................... 5.1 1.5 10.0 2.7 0.7 --
Extraordinary charge................... 0.6 0.2 -- -- -- --
------ ----- ------ ----- ------ -----
Net income (loss)...................... $ 6.3 1.9% $ 19.4 5.3% $(90.5) (21.7)%
====== ===== ====== ===== ====== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Sales. Net sales increased $49.4 million, or 13.5%, to $416.3 million
for the year ended December 31, 1997 from $366.9 million for the year ended
December 31, 1996.
Net sales of climbing products increased $36.9 million, or 13.3%, to $314.2
million for the year ended December 31, 1997 from $277.3 million for the year
ended December 31, 1996. The increase in net sales of climbing products was
primarily due to significant growth in the volume of fiberglass and aluminum
step and extension ladders sold, particularly to power retailers.
Net sales of extruded products increased $12.5 million, or 14.0%, to $102.1
million for the year ended December 31, 1997 from $89.6 million for the year
ended December 31, 1996. This increase was primarily due to an increase in sales
volume. Sales volume in the year ended December 31, 1996 was adversely impacted
by the Company's strategic repositioning plan initiated in 1995.
Gross Profit. Gross profit increased $14.3 million, or 14.0%, to $116.2
million for the year ended December 31, 1997 from $101.9 million for the year
ended December 31, 1996. This increase was primarily due to increased sales
volume, as described above, partially offset by the higher cost of wood raw
materials. Gross profit margin for the year ended December 31, 1997 and 1996 was
27.9% and 27.8%, respectively.
General and Administrative Expense. General and administrative expense
increased $4.2 million, or 15.6%, to $31.2 million for the year ended December
31, 1997 from $27.0 million for the year ended December 31, 1996. This increase
was primarily due to $2.2 million in special non-recurring retirement bonuses.
Selling and Distribution Expense. Selling and distribution expense
increased $1.0 million, or 2.1%, to $48.9 million for the year ended December
31, 1997 from $47.9 million for the year ended
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<PAGE> 40
December 31, 1996. This increase was primarily the result of increased sales
volume. For the year ended December 31, 1997, selling and distribution expense
as a percentage of net sales decreased to 11.7% from 13.1% for the year ended
December 31, 1996. This decrease was primarily due to reduced costs resulting
from the closing of the Youngstown, OH warehouse as well as lower commissions
paid to the Company's manufacturers' representatives resulting from a change in
the Company's commission plan in the third quarter of 1997.
Non-Cash Compensation Charge. The non-recurring non-cash compensation
charge (and a corresponding credit to shareholders' equity) of $78.5 million
represents (a) the accelerated vesting, as a result of the Recapitalization, of
outstanding restricted Pre-Recapitalization Class B Stock previously granted to
certain key management employees; (b) the accelerated vesting, as a result of
the Recapitalization, of outstanding restricted Pre-Recapitalization Class B
Stock previously granted to a former key management employee resulting from a
change in terms of such stock upon his separation from the Company; and (c)
changes in the terms of the plan under which such stock was granted.
Recapitalization Expense. Recapitalization expense relates to fees and
expenses incurred in connection with the Recapitalization.
Other Income (Expense), Net. Other income (expense), net decreased $25.6
million, or 258.6%, to ($15.7) million for the year ended December 31, 1997 from
$9.9 million for the year ended December 31, 1996. This decrease was primarily
due to $14.6 million of investment losses incurred by MIICA during the year
ended December 31, 1997 as compared to MIICA investment income of $9.5 million
for the year ended December 31, 1996. The losses for the year ended December 31,
1997 were primarily due to losses of approximately $8.8 million on special
expiration price options (trading securities) resulting from either selling or
exercising such options or by allowing them to expire and approximately $9.9
million of losses relating to the write-down for the other than temporary
decline in market value of certain investments classified as available for sale.
The Company continuously reviews its investment portfolio for impairment. During
1997, it was determined that a write-down for certain investments was necessary
since the market value of the securities was less than their cost for an
extended period of time, the financial condition of the issuer of the securities
was weak due to sustained operating losses and capital deficiencies, and future
operating projections did not support the ability to recover such losses. As of
December 31, 1997 the Company no longer has investments in special expiration
price options.
Interest Expense. Interest expense increased $1.5 million, or 20.0%, to
$9.0 million for the year ended December 31, 1997 from $7.5 million for the year
ended December 31, 1996. The increase was primarily due to the debt incurred as
a result of the Transactions.
Income Taxes. Income taxes decreased $9.3 million, or 93.0%, to $0.7
million for the year ended December 31, 1997 from $10.0 million for the year
ended December 31, 1996. This decrease was primarily due to lower taxable income
for the year ended December 31, 1997 as compared to the year ended December 31,
1996 due to charges associated with the Transactions and increased interest
expense. Additionally, during the year ended December 31, 1997 the Company
recorded a non-cash compensation charge of $78.5 million which was not
deductible for income tax purposes.
Net Income (Loss). The net loss for 1997 was $90.5, a $109.9 decrease from
net income of $19.4 million for 1996. The net loss for 1997 includes (on a
pretax basis) a non-cash compensation charge of $78.5 million, Recapitalization
expense of $22.7 million and $14.6 million of investment losses attributable to
MIICA, all of which are discussed above. For 1996, net income includes pretax
investment income attributable to MIICA of $9.5 million. Excluding the after tax
effect of these items, net income increased $2.9 million or 22.0% to $16.1
million for 1997 from $13.2 million for 1996. This increase was primarily due to
the increase in sales and gross profit described above.
39
<PAGE> 41
YEAR ENDED DECEMBER 31, 1996 AS COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales. Net sales increased $30.9 million, or 9.2%, to $366.9 million
for 1996 from $336.0 million for 1995.
Net sales of climbing products increased $29.3 million, or 11.8%, to $277.3
million in 1996 from $248.0 million in 1995. This increase was primarily due to
increased sales volume in both fiberglass and aluminum climbing products, which
was achieved through the ongoing successful growth of the Company's customer
base, new product development and increased marketing efforts. During 1996, the
Company became the sole supplier to a major hardware cooperative. In addition,
the Company benefited from the full year effect of price increases of aluminum,
fiberglass and wood climbing products implemented in the second quarter of 1995
in response to increases in underlying raw material costs. Overall, average unit
sales prices for climbing products increased 4.3% over 1995.
Net sales of extruded products increased $1.6 million, or 1.8%, to $89.6
million for 1996 from $88.0 million for 1995.
Gross Profit. Gross profit increased $14.8 million, or 17.0%, to $101.9
million for 1996 from $87.1 million for 1995. This increase was primarily due to
the factors described above as well as a more favorable sales mix toward higher
margin products. Gross profit margin was 27.8% for 1996 and 25.9% for 1995.
General and Administrative Expense. General and administrative expense
increased $2.0 million, or 8.0%, to $27.0 million for 1996 from $25.0 million
for 1995. This increase was primarily due to the additional overhead required
for the growth in net sales described above.
Selling and Distribution Expense. Selling and distribution expense
increased $0.8 million, or 1.7%, to $47.9 million for 1996 from $47.1 million
for 1995. This increase was primarily the result of the factors described above.
In 1996, selling and distribution expense as a percentage of net sales decreased
to 13.1% from 14.0% for 1995. This decrease was due to a decrease in the
warehouse and distribution expenses in the Greenville, PA and Chicago, IL
distribution centers.
Other Income (Expense), Net. Other income (expense), net increased $5.7
million, or 135.7%, to $9.9 million for 1996 from $4.2 million for 1995. This
increase was primarily due to MIICA investment income of $9.5 million for 1996,
resulting in part from gains on securities sold, compared to $1.3 million of
MIICA investment income for 1995, partially offset by an increase in
miscellaneous income in 1995.
Interest Expense. Interest expense increased $0.3 million, or 4.2%, to
$7.5 million for 1996 from $7.2 million for 1995.
Income Taxes. Income taxes increased $4.9 million, or 96.1%, to $10.0
million for 1996 from $5.1 million for 1995. This increase was primarily due to
a $17.4 million increase in pre-tax income from 1995 to 1996, slightly offset by
a decrease in the effective tax rate from 42.8% for 1995 to 34.0% for 1996, due
primarily to lower state income taxes.
Net Income. Net income increased $13.3 million, or 207%, to $19.4 million
for 1996 from $6.3 million for 1995. Part of the increase was due to the pretax
investment income attributable to MIICA of $9.5 million for 1996 compared to
$1.3 million for 1995. Excluding the after tax effect of the investment income
attributable to MIICA, net income increased $7.2 million, or 120%, to $13.2
million for 1996 from $6.0 million for 1995. This increase was primarily due to
the increase in sales and gross profit described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred a significant amount of indebtedness in connection
with the Transactions. At December 31, 1997, the Company had approximately
$322.5 million of consolidated indebtedness, including $131.0 million of
indebtedness, net of the original issue discount, pursuant to the Notes, and
40
<PAGE> 42
$186.5 million of borrowings under the Senior Credit Facility. The Senior Credit
Facility provides for $145.0 million of Term Loan Facilities, a $100.0 million
Revolving Facility and a $75.0 million Receivables Facility.
Prior to the Recapitalization, the Company historically met its working
capital needs and capital expenditure requirements primarily through a
combination of operating cash flow and borrowing under its then-existing credit
facility and the issuance of notes. Following the Transactions, the Company
satisfies its debt service requirements and meets its operating, working capital
and capital expenditure needs through a combination of operating cash flow and
funds available under the Receivables Facility. See "The Transactions" and "The
Senior Credit Facility."
In connection with the Transactions, the Company refinanced all of its
existing debt except for the Variable Rate Demand Industrial Building Revenue
Bonds due 2015 (the "IRBs") with the proceeds from the Notes, the Term Loan
Facility and the Receivables Facility. As of December 31, 1997, the IRBs had an
outstanding principal balance of $5.0 million.
Net cash flows from operating activities decreased $2.3 million to $17.2
million for the year ended December 31, 1997 from $19.5 million for the year
ended December 31, 1996. This is primarily attributable to the increase in
operating profit (exclusive of the non-cash compensation charge and
Recapitalization expenses in 1997) from 1996 to 1997, which was more than offset
by the increase in operating working capital (receivables, inventory, accounts
payable and accrued expenses) of $14.8 million and the 1997 payment of
supplemental retirement bonuses of $2.2 million. Operating working capital
generally increased as a result of the growth in sales. Net cash from operating
activities increased by $20.9 million from cash used of $1.4 million in 1995 to
cash provided of $19.5 million in 1996. This is primarily the result of
increased operating profits combined with reduced operating working capital of
$7.9 million. Inventory was reduced in 1996 due to a reduction of the previous
year's buildup of extrusion log inventory during the Greenville remelt
modernization project, and accounts receivable and accounts payable increased by
comparable amounts due to the growth in sales. Cash flow used in investing
activities decreased $12.2 million to $3.6 million in 1997 from $15.8 million in
1996. This decrease was due primarily to an increase in sales of debt and equity
securities at MIICA in connection with its process of realigning its investment
portfolio, as well as the Company's sale of real estate and a reduction in
capital expenditures.
The Company's ability to make scheduled payments of principal ($1.5 million
for each of the years 1998 through 2000), or to pay interest (ranging from $26.3
million to $28.3 million annually for years 1998 to 2000, assuming current
interest rates), if any, on, or to refinance its indebtedness (including the
Notes), or to fund planned capital expenditures or finance acquisitions, will
depend on its future financial and operating performance, which to a certain
extent is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond its control. Based on the current
and anticipated level of operations, management believes that cash flow from
operations and available cash, together with available borrowings under the
Senior Credit Facility, will be adequate to meet the Company's anticipated
future requirements for working capital, budgeted capital expenditures, and
scheduled payments of principal and interest on its indebtedness, including the
Notes, for the next 12 months. The Company, however, may need to refinance all
or a portion of the principal of the Notes on or prior to maturity. There can be
no assurance that the Company's business will generate sufficient cash flows
from operations or that future borrowings will be available under the Senior
Credit Facility in an amount sufficient to enable the Company to service its
indebtedness, including the Notes, or make anticipated capital expenditures and
fund potential future acquisitions.
In addition, there can be no assurance that the Company will be able to
effect any refinancing on commercially reasonable terms, or at all.
CAPITAL EXPENDITURES
The Company's capital expenditures were $12.5 million, $13.0 million and
$11.7 million, in 1995, 1996 and 1997, respectively. Approximately $3 million to
$5 million of the amount expended in each of
41
<PAGE> 43
such years has been for the renewal and replacement of existing facilities and
equipment; thus in an economic downturn, the Company believes it will be able to
adjust the amount spent on capital expenditures without compromising the base
need of its operations. The Company expects to spend approximately $18 million
to $20 million in 1998 for various capital projects, including quality
enhancement, cost improvement, efficiency improvement, increased capacity and
normal maintenance projects.
SEASONALITY, WORKING CAPITAL AND CYCLICALITY
Sales of certain products of the Company are subject to seasonal variation.
Demand for the Company's ladder products is affected by residential housing
starts and existing home sales, commercial construction activity, and overall
home improvement expenditures. Due to seasonal factors associated with the
construction industry, sales of products and working capital are typically
higher during the second and third quarters than at other times of the year. The
Company expects to use the Senior Credit Facility to meet any seasonal
variations in its working capital requirements. The residential and commercial
construction markets are sensitive to cyclical changes in the economy.
RAW MATERIAL COSTS AND INFLATION
The rate of inflation over recent years has been relatively low and has not
had a significant effect on the Company's results of operations. The Company
purchases aluminum, glass and other raw materials from various suppliers. While
all such materials are available from numerous independent suppliers, commodity
raw materials are subject to price fluctuations. There have been historical
periods of rapid and significant movements in the price of aluminum, both upward
and downward. Historically, the Company has entered into futures contracts with
respect to its purchases of aluminum to minimize or hedge commodity price
fluctuations. See "Business -- Raw Materials and Suppliers". Additionally, the
Company has been successful in passing the majority of these increases on to its
customers after a period of 60 to 90 days.
IMPACT OF THE YEAR 2000
Based on recent assessments, the Company has determined that it will be
required to modify certain portions of its software so that its computer systems
will function properly with respect to dates in the Year 2000 and thereafter.
The Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 issue will not pose significant
operational problems for its computer systems. However, if such modifications
are not made, or are not timely completed, the Year 2000 issue could have a
material adverse impact on the operations of the Company.
The Company has also initiated communications with its significant
suppliers and customers regarding the Year 2000 issue. However, there can be no
guarantee that the systems of these other companies will be timely converted and
the failure of the Company's significant suppliers and customers to make
necessary Year 2000 modifications could have a material adverse impact on the
Company's results and operations.
The Company will primarily utilize internal resources to reprogram, or
replace, and test the software for Year 2000 modifications. The Company
anticipates completing the Year 2000 project by December 31, 1998, which is
prior to any impact of the Year 2000 on its operating systems. The Company
estimates the cost of the project to be approximately $1 million.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates
which were derived utilizing numerous assumptions of future events. However,
there can be no guarantee that these estimates and the timetable will be
achieved and actual results could differ materially from those anticipated.
42
<PAGE> 44
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is designed to provide holders of Old Notes with an
opportunity to acquire New Notes which, unlike the Old Notes, will be freely
tradable at all times, subject to any restrictions on transfer imposed by state
"blue sky" laws and provided that (i) the holder is not an affiliate of the
Company within the meaning of the Securities Act, and (ii) the holder represents
that the New Notes are being acquired in the ordinary course of such holder's
business and the holder is not engaged in, and does not intend to engage in, a
distribution of the New Notes. The outstanding Old Notes in the aggregate
principal amount of $135.0 million were originally issued and sold on November
24, 1997 (the "Original Issue Date") in order to provide financing in connection
with the Recapitalization. The original sale of Old Notes to Chase Securities
Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs &
Co. (the "Initial Purchasers") was not registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act and
the concurrent resale of the Old Notes to investors was not registered under the
Securities Act in reliance upon the exemptions provided by Rule 144A and
Regulation S promulgated under the Securities Act. The Old Notes may not be
reoffered, resold or transferred other than pursuant to a registration statement
filed pursuant to the Securities Act or unless an exemption from the
registration requirements of the Securities Act is available. Pursuant to Rule
144, Old Notes may generally be resold (a) commencing one year after the
Original Issue Date, in an amount up to, for any three-month period, the greater
of 1% of the Old Notes then outstanding or the average weekly trading volume of
the Old Notes during the four calendar weeks immediately preceding the filing of
the required notice of sale with the Commission and (b) commencing two years
after the Original Issue Date, in any amount and otherwise without restriction
by a holder who is not, and has not been for the preceding 90 days, an affiliate
of the Company. The Old Notes are eligible for trading in the PORTAL Market, and
may be resold to certain Qualified Institutional Buyers pursuant to Rule 144A
and to certain non-U.S. persons pursuant to Regulation S. Certain other
exemptions may also be available under other provisions of the federal
securities laws for the resale of the Old Notes.
In connection with the original issue and sale of the Old Notes, the Issuer
and the Guarantors entered into a Registration Rights Agreement, pursuant to
which they agreed to file with the Commission a registration statement covering
the exchange by the Issuer of the New Notes for the Old Notes (the "Exchange
Offer Registration Statement"). The Registration Rights Agreement provides that
(i) the Issuer and the Guarantors will file the Exchange Offer Registration
Statement with the Commission on or prior to 90 days after the Original Issue
Date, (ii) the Issuer and the Guarantors will use their respective best efforts
to have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 180 days after the Original Issue Date, (iii) unless
the Exchange Offer would not be permitted by applicable law or Commission
policy, the Issuer and the Guarantors will commence the Exchange Offer and use
their respective best efforts to issue on or prior to 30 business days after the
date on which the Exchange Offer Registration Statement is declared effective by
the Commission, New Notes in exchange for all Old Notes tendered prior thereto
in the Exchange Offer, and (iv) if obligated to file a shelf registration
statement covering the Old Notes (a "Shelf Registration Statement"), the Issuer
will file the Shelf Registration Statement with the Commission on or prior to 90
days after such filing obligation arises and use its best efforts to cause the
Shelf Registration Statement to be declared effective by the Commission on or
prior to 135 days after such obligation arises and cause such Shelf Registration
Statement to remain effective and usable for a period of two years following the
initial effectiveness thereof. If (a) the Issuer and the Guarantors fail to file
any of the registration statements required by the Registration Rights Agreement
on or before the date specified for such filing, (b) any of such registration
statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness, (c) the Issuer fails to consummate the offer
within 30 business days after the date on which the Exchange Offer Registration
Statement is declared effective, or (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities
43
<PAGE> 45
(as defined below) during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), the Issuer and the Guarantors will pay liquidated
damages ("Liquidated Damages") to each holder of Transfer Restricted Securities
(as defined), with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restrictive Securities held by such person.
The amount of the Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of Transfer Restricted Securities with respect
to each subsequent 90-day period until all Registration Defaults have been cured
up to a maximum amount of Liquidated Damages of $.20 per week per $1,000
principal amount of Transfer Restricted Securities (regardless of whether one or
more than one Registration Default is outstanding). Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease. For
purposes of the foregoing, "Transfer Restricted Securities" means each Old Note
until (i) the date on which such Old Note has been exchanged by a person other
than a broker-dealer for a New Note in the Exchange Offer, (ii) the date on
which such Old Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement, (iii) the date
on which such Old Note is distributed to the public pursuant to Rule 144 under
the Securities Act, or (iv) following the exchange by a broker-dealer in the
Exchange Offer of an Old Note for a New Note, the date on which such New Note is
sold to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of a prospectus meeting the requirements of the Securities
Act in connection with resales of securities received by the broker-dealer in
any such exchange.
The staff of the Commission has issued certain interpretive letters that
concluded, in circumstances similar to those contemplated by the Exchange Offer,
that new debt securities issued in a registered exchange for outstanding debt
securities, which new securities are intended to be substantially identical to
the securities for which they are exchanged, may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such securities from the issuer to resell pursuant to Rule 144A or
any other available exemption under the Securities Act or (ii) a person who is
an affiliate of the issuer within the meaning of Rule 405 under the Securities
Act or (iii) a person participating in the distribution of the securities
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that the new securities 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 the new
securities. However, a broker-dealer who holds outstanding debt securities that
were acquired for its own account as a result of market-making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the new
securities received by the broker-dealer in any such exchange. See " --
Consequences of Failure to Exchange; Resales of New Notes." The Company has not
requested or obtained an interpretive letter from the Commission staff with
respect to this Exchange Offer, and the Company and the holders are not entitled
to rely on interpretive advice provided by the staff to other persons, which
advice was based on the facts and conditions represented in such letters.
However, the Exchange Offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in such letters. If any
holder has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such holder (i)
could not rely on the applicable interpretations of the staff of the Commission
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction. In addition,
each broker-dealer that receives New Notes for its own account in exchange for
the Old Notes, where such Old Notes were acquired by such broker-dealers 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." By delivering the Letter of Transmittal, a
holder tendering Old Notes for exchange will represent and warrant to the
Company that the holder is acquiring the New Notes in the ordinary course of its
business and that the holder is not engaged in, and does not intend to engage
in, a distribution of the New Notes. Any holder using the Exchange Offer to
participate in a distribution of the New Notes to be acquired in the Exchange
Offer
44
<PAGE> 46
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Holders who do
not exchange their Old Notes pursuant to this Exchange Offer will continue to
hold Old Notes that are subject to restrictions on transfer.
It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph and in " -- Consequences of Failure to Exchange; Resales of
New Notes." Sales of New Notes acquired in the Exchange Offer by holders who are
"affiliates" of the Company within the meaning of the Securities Act will be
subject to certain limitation on resale under Rule 144 of the Securities Act.
Such persons will only be entitled to sell New Notes in compliance with the
volume limitations set forth in Rule 144, and sales of New Notes by affiliates
will be subject to certain Rule 144 requirements as to the manner of sale,
notice and the availability of current public information regarding the Company.
The foregoing is a summary only of Rule 144 as it may apply to affiliates of the
Company. Any such persons must consult their own legal counsel for advice as to
any restrictions that might apply to the resale of their New Notes.
The New Notes otherwise will be substantially identical in all material
respects (including interest rate, maturity, security and restrictive covenants)
to the Old Notes for which they may be exchanged pursuant to this Exchange
Offer. See "Description of the New Notes."
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuer 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 , 1998; provided, however, that if the Issuer has
extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended which date shall in any event be no later than 30 business days after
the commission has declared the Exchange Offer Registration Statement to be
effective.
As of the date of this Prospectus, $135.0 million aggregate principal
amount of the Old Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1998, to
all holders of Old Notes known to the Issuer. The Issuer's obligation to accept
Old Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under " -- Certain Conditions to the Exchange Offer"
below.
The Issuer expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving notice of such
extension to the holders thereof. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Issuer. Any Old Notes not accepted for exchange for
any reason will be returned without expense to the tendering holder thereof as
promptly as practicable after the expiration or termination of the Exchange
Offer.
The Issuer 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 Issuer
will give notice of any extension, amendment, non-acceptance or termination to
the holders of the Old Notes as promptly as practicable, such notice in the case
of any extension to be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Issuer of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Issuer will constitute a binding
agreement between the tendering holder and the Issuer
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<PAGE> 47
upon the terms and subject to the conditions set forth in this Prospectus and in
the accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal, including
all other documents required by such Letter of Transmittal, to IBJ Schroder Bank
& Trust Company (the "Exchange Agent") at one of the addresses set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition, either
(i) certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUER. THE ISSUER IS NOT ASKING
NOTEHOLDERS FOR A PROXY AND NOTEHOLDERS ARE REQUESTED NOT TO SEND THE ISSUER A
PROXY.
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 registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instruction" 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 Issuer in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuer in its sole discretion, which determination shall be final and
binding. The Issuer 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 Issuer or its counsel,
be unlawful. The Issuer also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by the Issuer
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 Issuer shall determine.
Neither the Issuer, 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 appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the Old
Notes.
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<PAGE> 48
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Issuer, proper evidence satisfactory to the Issuer of their authority to so
act must be submitted.
By tendering, each broker-dealer holder will represent to the Issuer that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder and any
beneficial holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Issuer. If
the holder is not a broker-dealer, the holder must represent that it is not
engaged in nor does it intend to engage in a distribution of the New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuer 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 Issuer shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Issuer has given
oral and 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.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible
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Institution, (ii) prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Issuer (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 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 specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial 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) of such notices
will be determined by the Issuer, 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
that have been tendered for exchange but that 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 the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Issuer 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 for exchange or the exchange of the New
Notes for such Old Notes, the Issuer determines that the Exchange Offer violates
applicable law, any applicable interpretation of the staff of the Commission or
any order of any governmental agency or court of competent jurisdiction.
The foregoing conditions are for the sole benefit of the Issuer and may be
asserted by the Issuer regardless of the circumstances giving rise to any such
condition or may be waived by the Issuer in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Issuer at
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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 Issuer 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 (the
"TIA"). In any such event, the Issuer is required to use every reasonable effort
to obtain the withdrawal of any stop order at the earliest possible time.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY OR OVERNIGHT COURIER:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10224-0084 Attention: Securities Processing Window
Attention: Reorganization Operations Subcellar One (SC1)
Department
</TABLE>
Facsimile Transmission:
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The Company will pay the reasonable and customary expenses to be incurred
in connection with the Exchange Offer, which includes fees and expenses of the
Trustee, accounting, legal, printing and related fees and expenses.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount less the unamortized original issue discount as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer will be capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Issuer 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
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other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. Old Notes not exchanged pursuant to
the Exchange Offer will continue to accrue interest at 10% per annum and will
otherwise remain outstanding in accordance with their terms. 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 Issuer does not
currently anticipate that it will register the Old Notes under the Securities
Act. However, (i) if any Initial Purchaser so requests with respect to Old Notes
not eligible to be exchanged for New Notes in the Exchange Offer and held by it
following consummation of the Exchange Offer or (ii) if any holder of Old Notes
is not eligible to participate in the Exchange Offer or, in the case of any
holder of Old Notes that participates in the Exchange Offer, does not receive
freely tradable New Notes in exchange for Old Notes, the Issuer is obligated
under the Registration Rights Agreement to exchange such holder's Old Notes for
private notes with terms identical to the New Notes (other than transfer
restrictions) or to file a registration statement on the appropriate form under
the Securities Act relating to the Old Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than (i) any such holder which is an "affiliate" of the
Issuer within the meaning of Rule 405 under the Securities Act or (ii) any
broker-dealer that purchases Notes from the Issuer to resell pursuant to Rule
144A or any other available exemption) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. A broker-dealer who holds Old
Notes that were acquired for its own account as a result of market-making or
other trading activities may be deemed to be an "underwriter" within the meaning
of the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of New Notes.
Each such broker-dealer who 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
in the Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." While the Issuer
has an obligation under the Registration Rights Agreement to update this
Prospectus by amendment or supplement for a period of 90 days following
consummation of the Exchange Offer, the Issuer has no obligation thereafter to
update the Prospectus and, therefore, holders required to deliver a prospectus
may not thereafter be able to resell because they may be unable to comply with
the prospectus delivery requirements described above.
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Issuer has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
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BUSINESS
OVERVIEW
Werner is the nation's largest manufacturer and marketer of ladders and
other climbing products. Management estimates that in 1996 the Company had
approximately 36% of the estimated $820 million domestic market for climbing
products. See "-- Industry." Werner's climbing products include aluminum,
fiberglass and wood ladders, scaffolding, stages and planks. The Company markets
its broad line of innovative products across all major price points under the
Werner name, which management believes to be the most widely-recognized climbing
products brand name by both professional and consumer end-users of climbing
products. The Company sells its products through a variety of distribution
channels, such as home improvement retailers, hardware dealers, professional
supply houses and specialty wholesale distributors. Werner is committed to
providing the highest level of customer service and is a primary supplier of
ladders to most of the largest United States home improvement retailers,
including power retailers (e.g. The Home Depot and Lowe's), and to most of the
major hardware co-operatives, including ACE Hardware, HWI and TruServ. In
addition to climbing products, the Company manufactures and sells aluminum
extruded products and more complex fabricated components to a number of
industries, including the automotive, electronics, and architectural and
construction industries. The Company's net sales have increased at a five-year
CAGR of 11.9%, from $237.1 million in fiscal 1992 to $416.3 million in fiscal
1997.
COMPETITIVE STRENGTHS
Recognized Industry Leader. Management estimates that in 1996, Werner
generated approximately three times the revenue of its largest competitor in the
domestic climbing products market and increased its market share from
approximately 32% in 1993 to approximately 36% in 1996. Management believes that
the Company's combination of (i) market leadership, (ii) breadth of product
line, (iii) nationwide production and distribution, (iv) reputation for high
quality and (v) superior customer service have enabled the Company to attract
and retain many of the largest distributors across the United States as its
customers. Management believes that these factors also enable the Company to
serve its customer base on a broad geographic basis and benefit from economies
of scale in manufacturing, purchasing and distribution. Werner serves all
segments of the climbing products market.
Strong Brand Name. The Werner brand name has nearly a 50-year history, and
management believes Werner is the most recognized name by both professional and
consumer end-users of climbing products. The Company has established its leading
brand name primarily by providing high-quality products and strong customer
service. Werner has successfully leveraged the strength of its brand name to
expand its product offerings, particularly in the fiberglass ladder category,
and to expand its market coverage by partnering with the leading home
improvement retailers, hardware dealers and professional supply houses to
distribute Werner products.
High-Quality, Innovative Product Line. Management believes that the
Company's products are regarded as the most innovative and highest quality in
the industry. The Company has consistently introduced improvements to the ladder
market, from the early development of the ALFLO(R) Twist-Proof(R) rung-to-side
rail technology, which significantly increased the structural integrity of
lightweight aluminum ladders, to the more recent introduction of premium quality
and visually-appealing fiberglass ladders. Management believes that Werner has
successfully generated incremental new sales and encouraged end-users to
purchase ladders at higher price points by continually introducing innovative,
new products. Management estimates that new or substantially improved products
introduced since 1990 accounted for approximately 48% of the Company's climbing
products sales in 1997.
Superior Customer Service. The Company's strategically located
manufacturing and distribution facilities, coupled with a broad offering of
high-quality products, allow the Company to provide its customers throughout the
United States with one-stop shopping on a cost-effective and timely basis.
Werner's strong relationships with its customers are supported by innovative
sales and marketing
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programs tailored to serve specific channels of distribution. The Company has
found that by educating and working closely with its customers it has been able
to increase their effectiveness in selling the Company's products. To this end,
the Company has developed innovative marketing and category management services
for its climbing products, customers which include (i) product mix optimization,
(ii) effective point-of-purchase merchandising and signage, (iii) training
programs, (iv) aggressive application of electronic commerce and (v) customer
inventory management programs. Management believes that these services allow the
Company to assist its customers in maximizing sales. The Company's superior
customer service has been consistently recognized in awards granted to Werner by
its customers and industry organizations.
Loyal and Diverse Customer Relationships. The Company has a broad and well
established customer base of more than 17,000 customers across all major
climbing products distribution channels. Its customer network encompasses
relationships with the major home improvement retailers, hardware dealers,
professional supply houses and wholesale distributors. Werner is a primary
supplier of ladders to most of the largest United States home improvement
retailers, including power retailers (e.g. The Home Depot and Lowe's), and to
most of the largest hardware co-operatives, including ACE Hardware, HWI and
TruServ. Werner is also a primary supplier to most of the major paint retailers,
such as Sherwin Williams and ICI. Werner attributes its ability to establish
such relationships with its customers primarily to the Company's broad offering
of high-quality products and high level of customer service. These factors have
resulted in a loyal customer base, characterized by low turnover. The Company
has had relationships with many of its major customers for over 20 years.
Vertically Integrated, Cost-Efficient Manufacturing. Werner operates
vertically integrated manufacturing facilities, which allow the Company to
cost-efficiently manufacture consistent, premium quality products as well as to
respond quickly to customer requirements. The Company believes it is the most
vertically integrated company in the climbing products industry. In the last
five years, Werner has invested more than $45 million in its facilities to
increase quality and capacity and to reduce total product and distribution
costs.
Experienced and Committed Management Team. Werner has assembled a strong
and experienced management team at both the corporate and operating levels. The
top fifteen members of Werner's senior management team have an average of over
20 years of experience with the Company. The Management Shareholders own
approximately 13% of the outstanding shares of Holding with an opportunity to
own up to approximately 22% of the shares of Holding through participation in
employee incentive plans.
BUSINESS STRATEGY
The Company intends to enhance its market leadership position and maximize
profitability and cash flow by implementing the following business strategies:
Increase Penetration of the Domestic Climbing Products Market. The Company
believes it is well positioned to continue to increase its share of the domestic
climbing products market and intends to leverage its strong brand name, broad
product line and established distribution network to increase sales through
existing customers and to develop new customer relationships. The Company also
believes that its strong strategic relationships with leading climbing products
distributors in each channel will facilitate continued market share gains as
such customers further consolidate and expand their channels. Furthermore,
management believes that as distributors continue to consolidate their vendor
bases, the Company's broad product line and ability to supply distributors
throughout the United States provide significant opportunities for domestic
growth. The Company plans to further extend its domestic market coverage by
entering new product categories within the climbing products industry in which
it does not significantly participate at this time, such as domestic platform
ladders and step stools.
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Achieve Cost Reductions. Management has identified a number of cost
reduction opportunities from which the Company expects to realize up to
approximately $20 million in annual savings over the next five years, at an
estimated cost of up to approximately $49 million. These include: (i) adding
aluminum remelting capability to certain of the Company's manufacturing sites,
(ii) modernizing a number of extrusion presses, (iii) consolidating warehouses,
and (iv) constructing a new extension ladder production line. Management
believes that these capital investments will significantly enhance the Company's
vertically integrated manufacturing capabilities, thus allowing Werner to reduce
costs, improve productivity and achieve greater economies of scale.
Continue New Product Development. Werner has invested significant
resources in product development. The Company has expended approximately 0.6% of
net sales in 1995 and 1996 and 0.5% of net sales in 1997 on product development.
The Company continues to introduce new products while focusing on higher margin
products. For example, in the third quarter of 1997, the Company introduced the
Penguin(TM), an attractive, lightweight, consumer-oriented platform ladder for
household chores. Werner's commitment to product development includes the
application of further advancements in fiberglass pultrusion technology to
climbing products as well as the introduction of new products for the stage and
scaffold markets. Management believes that Werner's cost-efficient production
capability, well recognized brand name and loyal, diverse customer relationships
will enable the Company to continue to successfully introduce new products and
to increase per capita ladder ownership.
Pursue Complementary Acquisitions and International Expansion. Werner
intends to pursue acquisitions which complement its existing manufacturing and
distribution capabilities, provide opportunities to add capacity, expand product
offerings and achieve further economies of scale. Management believes that the
international climbing products market offers significant growth opportunities
for the Company. Compared to the United States market, the international
climbing products market is highly fragmented and regionally-focused, with
smaller companies offering narrower product lines and limited marketing and
customer service support. Furthermore, management believes that as the major
United States hardware and home improvement chains expand internationally, there
will be a growing need for high-quality, dependable suppliers such as Werner to
establish a direct presence overseas. The Company has licenses in the following
countries: United Kingdom, the Netherlands, South Africa, New Zealand, Brazil,
Australia, Japan, Chile, Canada and Italy. The Company sells its products to
customers in over 60 countries around the world.
COMPANY HISTORY
R.D. Werner founded the predecessor to the Company in 1922 as a floor
covering accessories converter and wholesaler. During the post-war period, the
Company began to pursue higher value-added applications of extrusion technology
by manufacturing semi-fabricated components and finished products rather than
low margin commodity products. Werner entered the climbing products market in
1950, and invented the ALFLO(R) Twist-Proof(R) rung-to-side rail connection,
which solved many of the safety and structural problems of aluminum extension
ladders. The Werner brand name has nearly a 50 year history and management
believes Werner is the most recognized name by users of climbing products.
INDUSTRY
Ladders and Other Climbing Products
The United States climbing equipment market encompasses aluminum,
fiberglass and wood step and extension ladders, domestic platform ladders and
rolling steel warehouse ladders, aluminum scaffolding, aluminum boards and
planks, aluminum stages and certain related accessories. Management estimates
that revenues in the United States climbing products industry have grown at a
CAGR of 8.3% to approximately $820 million in 1996 from approximately $645
million in 1993.
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The climbing products market is comprised of two partially-overlapping
end-user segments: consumers and professionals. The consumer segment primarily
consists of sales through home improvement, hardware, and paint stores to
do-it-yourself users, homeowners, renters and light commercial users. The
professional segment includes sales to independent contractors, builders,
painters, plumbers and electricians, as well as to institutional customers such
as utilities, municipalities and large corporations.
The United States climbing products industry consists of approximately 15
manufacturers, ranging from small, local producers to large manufacturers with
nationwide distribution capability, such as the Company. Management estimates
that in 1996, sales of the four largest climbing products manufacturers (Werner,
Louisville Ladder, Keller Ladders, Inc., and Cuprum, S.A. de C.V.) accounted for
approximately 63% of the estimated $820 million United States climbing products
market. Werner estimates that its share of the total climbing products market
has grown to approximately 36% in 1996 from approximately 32% in 1993.
Relative to smaller, local or regional competitors, national manufacturers
such as Werner benefit from several strategic advantages, including purchasing
power, the ability to service national customer accounts on a cost-effective and
timely basis and the ability to balance production among manufacturing
facilities. In addition, national manufacturers such as the Company are less
sensitive to regional cyclical economic downturns.
Climbing products sales growth has been influenced by a number of trends,
all of which the Company expects to continue into the foreseeable future. These
trends include the consolidation of distribution channels, the continued growth
of the home improvement and new housing markets, and the development of
international markets.
Consolidating Distribution Channels. Beginning in the mid-1980s, climbing
products distribution channels consolidated as large home improvement retailers,
hardware co-operatives and wholesalers, professional supply houses and specialty
wholesale distributors increased market share at the expense of smaller
competitors. Industry analysts expect this consolidation to continue. Sales to
both the consumer and professional market segments through the power retailers
have grown faster than through other distribution channels because power
retailers have been increasing market share and enlarging the overall market for
climbing products by offering more products to the general public.
Continued Strong Home Improvement and New Housing Markets
Growth. Management expects home improvement, professional repair and
remodeling, and new housing starts to grow significantly over the next several
years. As climbing products are used in virtually all forms of construction, the
Company expects sales of its products to increase in proportion to these trends.
International Markets Growth. The Company believes that many international
markets for climbing products are approximately 20 years behind the United
States market in terms of the development of distribution channels and product
offerings. Management believes that as the major United States hardware and home
improvement chains expand internationally, there will be a growing need for
high-quality, dependable suppliers such as Werner to establish a direct presence
overseas.
Aluminum Extruded Products
Aluminum extrusion is an approximately $5 billion market in the United
States. Extrusion is a demanding manufacturing process in which hot metal is
pressed through a die to form a long length of a specific shape, known as a
lineal. A lineal can be further fabricated and finished into highly-engineered
products based on customers' design specifications. Extruded products are used
by many industries, such as transportation (e.g., truck trailer bodies and
automotive components), building products (e.g., windows, doors, hurricane
shutters, stadium seats and curtain walls), consumer durables (e.g., hardware
levels and appliances) and electrical components (e.g., buss bars, connectors
and heat sinks).
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The aluminum extruded products industry is broadly segmented into two
markets: lineal extruded products and fabricated components. See
"-- Manufacturing." The lineal segment is highly competitive and
volume-oriented, with the exception of several applications which require unique
capabilities which command higher margins. Except for these more profitable
niches, the large integrated aluminum producers tend to lead the lineal products
segment of the market because they offer the most competitive prices. In
contrast, the fabricated products segment is design and engineering-intensive
and requires sophisticated metallurgy, process control, and fabrication
expertise. Customers select component fabricators based on service,
manufacturing flexibility and timely production.
PRODUCTS
Ladders and Other Climbing Products
Werner manufactures approximately 1,500 stock keeping units of fiberglass,
aluminum, and wood climbing products and accessories. The Company produces five
principal categories of climbing equipment: (i) single and twin stepladders;
(ii) extension, straight, and multipurpose ladders; (iii) attic ladders; (iv)
stages, planks, work platforms, and scaffolds; and (v) assorted ladder
accessories.
The majority of the Company's climbing products sales are of either
aluminum or fiberglass ladders. The Company has been a leader in the climbing
products industry through the development of both proprietary aluminum extrusion
and fiberglass pultrusion technology. In the 1950s, Werner introduced aluminum
extension ladders featuring its ALFLO(R)Twist-Proof(R) rung-to-side rail
connection. In recent years, the Company has been a leader in developing
fiberglass ladder products. The Company has addressed the specific needs of the
telephone utility and industrial markets by providing electrically-and
thermally-nonconductive, weather-resistant climbing products. In addition, the
Company has broadened its product applications by introducing colorful,
attractive fiberglass climbing products to the consumer markets. The Company
entered the market for wood climbing products largely to address its customers'
requests for it to become a full-line provider of climbing products. The
Company's strategy with respect to its wood ladders is to migrate the end-user
from wood to fiberglass or aluminum climbing products while simultaneously
improving its gross margin for wood products by increasing cost-efficiency.
Through the introduction of a color-coded duty rating system correlated to
load capacity, the Company has simplified the end-user's purchasing decision and
differentiated Werner ladders from those of other suppliers. The Company's Type
III duty-rated ladders are economical, lightweight and dependable products for
most household applications. Werner's Type II duty-rated ladders are general
purpose, commercial grade climbing products for the handyman, painter or
mechanic. Werner's Type I duty-rated ladders are strong, stable industrial grade
climbing products designed for heavy do-it-yourself users and for uses in light
construction, maintenance or industrial applications. Finally, Type IA duty-
rated products are designed for extra heavy use by professional industrial,
construction, and maintenance purposes.
The Company also manufactures and sells a line of climbing products under
the All American brand name.
Aluminum Extruded Products
The Company is a manufacturer of lineal extruded products and
highly-engineered fabricated parts. The Company targets customers who require
special metallurgy, tight tolerances, unusual shapes, painting, finishing and
fabrication requirements. Werner has implemented sophisticated quality systems,
and has been awarded ISO-9002 and QS-9000 certifications by Underwriters
Laboratories, which are internationally-recognized as the highest levels of
quality certification in the industrial and automotive industries and are
required by the "Big Three" United States automakers.
End-uses of the Company's lineal extrusions include electronic equipment,
architectural products, hardware, industrial equipment and lighting products.
The Company's customers use lineal extrusions
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in a broad range of products including garage door openers, bicycle frames,
pneumatic cylinders, material handling systems, electrical connectors, curtain
walls and office partitions. Werner has technical and process capabilities
required to serve the precision lineal market and believes that there are few
other domestic manufacturers which are able to compete in this market. Werner's
metallurgical technology, die design expertise and exacting control of all
aspects of the extrusion process have contributed to the Company's success in
meeting the exacting specifications demanded in this segment. Management
believes the Company's presses and proprietary die technology offer product
features and higher production speed unavailable from most other United States
competitors. Since 1995, the Company has attempted to shift its focus away from
lower margin lineal products toward higher margin precision extrusions and
fabricated components. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The automotive market is currently the Company's primary market for
fabricated parts. The Company is a supplier to General Motors Corporation, Ford
Motor Corporation, and Chrysler Corporation. The Company has been a vendor to
various divisions of General Motors for approximately 35 years, has served Ford
for about 10 years, and has supplied Chrysler for approximately seven years.
Werner Financial
Werner Financial Inc. consists of, among other things, a claims management
entity, Phoenix Management Services, Inc. ("Phoenix"), and MIICA. Phoenix
utilizes its expertise in ladder and climbing products related liability claims
as a cost-efficient alternative to purchasing external claims management.
Prior to March 31, 1998, the Company operated MIICA as a Colorado captive
insurance company, to provide product liability, workers compensation and
environmental insurance to Holding and its subsidiaries. MIICA maintained an
insurance fund consisting of investments in debt and equity securities, real
estate and other investments to pay claims associated with these insurance
policies. In the first quarter of 1998, the Company undertook an extensive
evaluation of the cost and efficiency of providing such insurance through MIICA.
As a result of this evaluation, the Company decided to obtain such insurance
coverage from an external commercial insurance company and to discontinue the
operations of MIICA.
As a result of its decision, on March 31, 1998, the Company effectively
completed the Insurance Transfer. MIICA liquidated a substantial portion of its
investment portfolio to pay this premium. Immediately prior to the Insurance
Transfer, the Company had a reserve for such liabilities of approximately $48.5
million as of March 31, 1998. This reserve was established in conjunction with
external independent actuaries. As a result of the Insurance Transfer, MIICA
ceded and the commercial insurance company assumed MIICA's product and workers'
compensation liabilities for losses incurred prior to March 31, 1998. Under the
terms of the agreements governing the Insurance Transfer, the aggregate limit of
all such liabilities assumed by the commercial insurance company for losses
incurred on or prior to March 31, 1998 is $75 million. The Company has agreed to
indemnify the commercial insurance company for any losses in excess of this
limit.
Because MIICA is a captive insurance company licensed in Colorado, the
cessation of MIICA's operations and dissolution requires pre-approval of the
CDI. The Company believes it will obtain such approval in the second quarter of
1998. Upon receipt of this approval, it is expected that the remaining assets of
MIICA will be distributed to the Issuer and will be sold or liquidated as soon
as practicable. As required by the Senior Credit Facility, the net cash proceeds
from the disposition of these remaining assets of MIICA will be used to pay
indebtedness under the Senior Credit Facility.
In conjunction with the Insurance Transfer, the Company has obtained
product liability and workers' compensation insurance coverage for such losses
which occur on or after April 1, 1998. This insurance coverage is at guaranteed
rates over a rolling five year period and is subject to certain deductible
provisions. The Company believes that this insurance coverage is adequate for
its current and future anticipated business needs.
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MARKETING AND DISTRIBUTION
Ladders and Other Climbing Products
The Company categorizes its end-users into two major segments:
professionals and consumers. The consumer segment primarily consists of sales
through home improvement, hardware and paint stores to do-it-yourself users,
homeowners and light commercial users. The professional segment includes
independent contractors, builders, painters, plumbers and electricians, as well
as institutional customers such as utilities, municipalities and large
corporations. Professional users tend to purchase products through professional
supply houses and specialty wholesale distributors.
The Company's climbing products are sold primarily through approximately 50
independent, commissioned manufacturers' representative organizations, which
sell to three major distribution channels: (i) retail, (ii) hardware and (iii)
professional. These independent representative organizations have an average
tenure of approximately 16 years with Werner, cover a broad range of trade
fields, and possess extensive product knowledge and customer relationships. The
Company estimates that commissions from selling Werner products are the primary
source of revenue for approximately two-thirds of its representative groups.
Given its long-term relationships with, and economic importance to, its
independent representative network, Werner has historically experienced low
turnover and significant loyalty from these organizations.
The 50 independent manufacturers' representative organizations are directed
by an experienced in-house sales team of national and regional sales managers.
This sales team is composed of three national sales managers, one for each major
distribution channel, and five regionally-focused sales managers. In addition,
the Company's sales and marketing network is further supported by field
merchandisers who visit select customers on a regular basis to assist them with
product merchandising, point-of-purchase signage and sales techniques.
Aluminum Extruded Products
The Company's extruded products sales organization currently numbers
approximately 40 people, including Company salespeople and staffing provided by
15 independent manufacturers' representative organizations. The majority of the
Company's extruded products sales are in the eastern and mid-western United
States. As part of its strategic repositioning towards complex fabricated
components, the Company is adding new representation to build additional
business in the western United States. In addition, in 1996 Werner hired a new,
highly experienced marketing manager and additional dedicated market research
resources to support new market development. The Company operates on a "make-to-
order" basis with each customer. Werner is typically the key supplier for a
particular part or product and has enjoyed long-term relationships with its
customers.
MANUFACTURING
Climbing and extruded products are manufactured using common equipment and
facilities and similar production processes, which enable the Company to
leverage core technical competencies and balance product capacity and seasonal
demand. The Company is a manufacturer of aluminum, fiberglass and wood climbing
products, with vertically-integrated manufacturing facilities located in four
states. The Company believes that its ability to satisfy many of its own
manufacturing needs, including aluminum extrusions and fiberglass pultrusions,
provides it with an enhanced ability to serve its customers, significant
manufacturing flexibility and a reliable supply of low-cost components. The
Company also operates an aluminum remelt facility at its Greenville facility,
providing the Company with significant cost savings.
The first step in the production of aluminum and fiberglass ladders is the
extrusion or pultrusion of side rails and steps. The Company produces aluminum
extrusion products to meet virtually all its manufacturing needs. Werner's
aluminum raw material conversion process begins with the creation of proprietary
aluminum alloys by melting together in a reverbatory furnace commercially pure
aluminum
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ingot, select internal aluminum process scrap and other raw materials to create
alloys. In the extrusion process, aluminum billets are hydraulically pressed
through tooling dies to form the shapes necessary to build ladders and other
products.
The Company manufactures fiberglass reinforced plastic ladder siderails
using a proprietary pultrusion process. Pultrusion is a process of carefully
positioning arrays of fiberglass rovings, structural mat and surface veil,
injecting them with a liquid resin and then pulling this combination through a
temperature-controlled die. Fiberglass pultrusions can be made in numerous
colors, are electrically- and thermally-nonconductive and have excellent
structural and weathering properties. Werner's pultrusion equipment is now
designed in-house specifically for ladder rail production, which management
believes offers improved quality, higher throughput and lower costs than
competing processes or equipment.
Extrusion is a demanding manufacturing process in which hot metal is
pressed through a die to form a long length of a specific shape, known as a
lineal. A lineal can be further fabricated and finished into highly-engineered
products based on customers' design specifications. Extruded products are used
by many industries, such as transportation (truck trailer bodies and automotive
components), building products (windows, doors, stadium seats and curtain wall),
consumer durables (hardware levels and appliances) and electrical components
(connectors and heat sinks).
COMPETITION
The climbing products industry has experienced significant consolidation
over the last 10 to 15 years. The number of competitors has decreased from
roughly 65 in 1965 to approximately 15 today, with fewer than five providing a
broad product line throughout the United States. Management believes that the
Company's climbing products revenues were more than three times those of its
largest competitor in 1996. The Company competes on the basis of the variety and
quality of its products in addition to its high level of customer service.
In its extruded products business, the Company competes with integrated
primary aluminum producers, large independent producers and small independent
producers. The primary producers participate primarily in the high volume
commodity portion of the lineal segment and offer only modest levels of customer
service. The large independent extruders compete regionally or nationally, and
typically serve several niche markets. There are many small independent
extruders located throughout the United States. Most compete regionally and are
known for one or two specialty niche products.
PATENTS, TRADEMARKS AND LICENSES
The Company has over 50 patents worldwide. The Company believes that its
patents are important to its business operations but does not believe that the
expiration or loss of any of its patents would have a material adverse effect on
the Company.
The Company owns a number of trademarks, including Ladder Power(R),
Certified Werner Ladder Sales Expert(R) and Pro-Master Fiberglass Ladders(R).
The Company believes that its trademarks and its licenses are important to its
business operations, but does not believe that the expiration or loss of any
trademark or license would have a material adverse effect on the Company.
RAW MATERIALS AND SUPPLIERS
The Company is a major consumer of aluminum and has implemented various
hedging strategies to mitigate the impact of raw material price fluctuations.
The Company has contracts to provide most of its estimated aluminum requirements
with six principal suppliers. These contracts include stipulated prices with
provisions for price adjustments based on market prices. Five of these contracts
will be renegotiable in 1998 and one will be renegotiable in 1999.
To hedge the risk associated with price fluctuations for a certain
percentage of its forecasted aluminum raw material requirements, the Company
utilizes futures contracts. The Company's practice is not to hold derivative
commodity instruments, including aluminum futures contracts, for trading pur-
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poses. These futures contracts are placed with established metal brokers and are
typically of three to 27 months in duration. The Company has several alternative
brokers and does not believe that any one of these contracts is material to the
operations of the Company.
The Company has contracts to purchase the basic materials required for
fiberglass pultrusion with its principal suppliers, which contracts are
typically one to three years in length. The Company has several alternative
sources for these basic materials and does not believe that any one of these
contracts is material to the operations of the Company.
BACKLOG
Due to the Company's ability to quickly meet production orders and its
production forecasting systems, the Company has no significant backlog in
climbing products. Most extruded products are produced on a make-to-order basis.
EMPLOYEES
The Company had approximately 2,700 employees as of December 31, 1997.
Approximately 1,400 hourly employees are covered by six collective bargaining
agreements, five which expire in 2000 and one of which expires in 2002. The
Company will renegotiate and renew union contracts as they expire. Management
does not anticipate any material labor disruptions as a result of the renewal of
any union contracts. The Company believes that its labor relations are good at
all of its facilities.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws and
regulations governing, among other things, emissions to air, discharge to
waters, the generation, handling, storage, transportation, treatment and
disposal of hazardous substances and other materials and employee health and
safety matters. The primary environmental, health and safety laws affecting the
Company are the Federal Clean Air Act, the Water Pollution Control Act, the
Resource Conservation and Recovery Act and the Occupational, Safety and Health
Act, and their respective state counterparts. The Company believes that its
business, operations and facilities have been and are being operated in
compliance in all material respects with applicable environmental and health and
safety laws and regulations, many of which provide for substantial fines and
criminal sanctions for violations. See "Risk Factors -- Environmental
Regulation."
PROPERTIES
The Company believes its manufacturing, warehouse and office facilities are
suitable, adequate and have sufficient manufacturing capacity for its current
requirements. The Company also believes that
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its facilities are being utilized consistent with the Company's plans and do not
have substantial excess capacity. The Company's principal facilities consist of
the following:
<TABLE>
<CAPTION>
OWNED/ APPROX.
LOCATION PRINCIPAL USE LEASE EXPIRATION SQUARE FOOTAGE
-------- ------------- ---------------- --------------
<S> <C> <C> <C>
Greenville, PA.............. Office, Manufacturing, Distribution Owned 640,000
Franklin Park, IL........... Manufacturing, Distribution Owned 672,000
Anniston, AL................ Manufacturing, Distribution Owned 410,000
Carrolton, KY............... Wood Manufacturing, Distribution Owned(1) 200,000
Union City, CA.............. Warehouse 10/31/00 38,600
Bell, CA.................... Warehouse 4/30/01 39,100
Phoenix, AZ................. Warehouse 9/30/00 18,500
Dallas, TX.................. Warehouse 6/30/99 16,480
Houston, TX................. Warehouse 2/28/01 40,000
Jefferson, LA............... Warehouse 4/30/00 7,800
Greensboro, NC.............. Warehouse 4/30/98(2) 20,800
Maryland Hgts., MO.......... Warehouse 9/30/00 8,700
Bensenville, IL............. Warehouse 10/31/98(3) 95,000
Minneapolis, MN............. Warehouse 8/31/00 11,900
</TABLE>
- ---------------
(1) Subject to Variable Rate Industrial Building Revenue Bonds due 2015 issued
by the County of Carroll, Kentucky.
(2) A renewal option of two three-year terms exists for the Greensboro lease.
(3) Extension of the Bensenville lease is currently being negotiated.
LEGAL PROCEEDINGS
The Company is involved from time to time in various legal proceedings and
claims incident to the normal conduct of its business. Although it is impossible
to predict the outcome of any pending legal proceeding, the Company believes
that such legal proceedings and claims, individually and in the aggregate, are
either without merit, covered by insurance or adequately reserved for, and will
not have a material adverse effect on its financial condition or results of
operations. See "Risk Factors -- Legal Proceedings."
In addition, on March 31, 1998, an action was filed in the United States
District Court for the Western District of Pennsylvania entitled Elizabeth
Werner, et al v. Richard L. Werner, et al (Case No. GD 98-4020). The action
purports in part to be brought derivatively on behalf of the Company. The aspect
of the case purportedly brought on behalf of the Company alleges breaches of
fiduciary duty by various members of the Company's management arising out of,
among other things, the issuance of restricted stock to management of the
Company in 1992 and 1993. The Company's board of directors has referred the
matter to a special committee of disinterested directors to investigate the
merits of the claims and to take appropriate actions on behalf of the Company
with respect to them. The action also purports to be brought on behalf of the
plaintiffs individually against the Company, certain affiliated entities, and
certain current and former officers and directors of the Company. The claims
that are asserted against the Company appear to arise out of the 1992 and 1993
restricted stock issuances as well as alleged misrepresentations by
representatives of the Company. The plaintiffs seek money damages in an
unspecified amount. Management believes that the ultimate resolution of this
lawsuit will not have a material adverse effect on the Company's financial
condition.
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OPERATION THROUGH SUBSIDIARIES
The Company conducts substantially all its operations through the Issuer's
direct and indirect subsidiaries. The Company is currently undertaking a review
of the desirability of operating through all of the Issuer's subsidiaries,
including the Subsidiary Guarantors. In the event certain of the Issuer's
subsidiaries are deemed no longer necessary, it is expected that such
subsidiaries will be consolidated into the Issuer or one of its remaining
subsidiaries. Such consolidation will have no impact however upon the holders of
the Notes or the consolidated results of operations of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and principal position of each
of the directors of Holding and the executive officers of the Company.
Each director of Holding will hold office until the next annual meeting of
shareholders of Holding or until his successor has been elected and qualified.
Officers of the Company are appointed by the Board of Directors of Holding and
serve at the discretion of the Board of Directors, subject to any applicable
employment agreements.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Donald M. Werner.......................... 64 Chairman, President, Chief Executive
Officer, and Director
Howard L. Solot........................... 60 Vice Chairman, Chief Operating Officer,
Executive Vice President and Director
Donald W. Resnick......................... 56 Chief Financial Officer and Treasurer
Michael E. Werner......................... 38 President, Werner Ladder Co.
Michael D. Isacco......................... 60 Vice President, Manufacturing
Eric J. Werner............................ 35 Chief Administrative Officer, Secretary
and General Counsel
Savio W. Tung............................. 46 Director
Charles J. Philippin...................... 47 Director
Christopher J. Stadler.................... 33 Director
</TABLE>
Donald M. Werner has served as President and Chief Executive Officer of
Holding since May, 1997. From 1995 to 1997, Mr. Werner was President of Werner
Ladder Co. Prior to 1995, Mr. Werner served in various positions with the
Company including Sales Manager, Vice President -- Marketing and Senior Vice
President -- Corporate Sales and Marketing. Mr. Werner also holds various
director and officerships at subsidiaries of Holding. Prior to commencing his 39
year career with the Company, Mr. Werner was an aircraft structural design
engineer for Grumman Aircraft Co. Mr. Werner is Chairman of the American
Hardware Manufacturers Association and served on the boards of directors of the
Scaffolding Industry Association and the Hardware Group Association. Mr. Werner
is the father of Eric J. Werner, the uncle of Michael E. Werner and the cousin
of Howard L. Solot.
Howard L. Solot has served as Executive Vice President and Chief Operating
Officer of Holding since 1995. He joined the Company in 1959 and has held
various planning, systems, engineering and manufacturing related positions,
including Plant Manager, Division General Manager, Vice President -- Engineering
and Corporate Planning and Senior Vice President -- Manufacturing. Mr. Solot
also holds various director and officerships at subsidiaries of Holding. Mr.
Solot is a member of the board of directors of the Aluminum Extruders Council.
Mr. Solot is the cousin of Donald M. Werner.
Donald W. Resnick joined the Company as Chief Financial Officer of Holding
in 1996. He has also served as President of Werner Financial Inc. and of MIICA
since December 1996. Mr. Resnick also holds various officerships at subsidiaries
of Holding. Prior to joining the Company, Mr. Resnick served as President and
Chief Operating Officer of Ameriquest Technologies, Inc. Prior to that, he was
with Digital Equipment Corporation for twelve years, where he served as
International Chief Financial Officer for eight years.
Michael E. Werner has served as President of the Company's Werner Ladder
Co. business unit since 1997. Mr. Werner joined the Company in 1988 and has held
several positions including Vice President -- National Accounts and Vice
President -- Sales & Marketing. Mr. Werner also holds various officerships at
subsidiaries of Holding. Prior to joining the Company, Mr. Werner served as Vice
President for Mergers, Acquisitions and Investments at Pacific Holding Co. and,
prior to that, as an
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associate in the Mergers & Acquisitions Department of Goldman, Sachs & Co. Mr.
Werner is the nephew of Donald M. Werner and the cousin of Eric J. Werner.
Michael D. Isacco has served as Vice President, Manufacturing of the
Company since April 1995. Mr. Isacco joined the Company in 1981 as Engineering
Administrator and has held a variety of positions with the Company, including
Manager of Engineering Administration and Greenville Division Plant Manager.
Prior to joining the Company, Mr. Isacco spent twenty years in various positions
with the United States Army, retiring in 1979 with the rank of Lieutenant
Colonel.
Eric J. Werner joined the Company in 1988 as Secretary and Corporate
Counsel. He has served as Chief Administrative Officer of the Company since 1995
and General Counsel of the Company since 1993. Prior to joining the Company, Mr.
Werner was an associate at the law firm of O'Connor, Broude, Snyder and Aronson.
Mr. Werner also holds various officerships at subsidiaries of Holding. Mr.
Werner also serves as a director of FNB Corporation. Mr. Werner is the son of
Donald M. Werner and the cousin of Michael E. Werner.
Savio W. Tung has served as a director of Holding since November 1997. He
has been an executive of Investcorp, its predecessor or one or more of its
wholly-owned subsidiaries since September 1984. Mr. Tung is a director of CSK
Auto Corporation, Saks Holdings, Inc. and Star Markets Holdings, Inc.
Charles J. Philippin has served as a director of Holding since November,
1997. He has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since July 1994. Prior to joining Investcorp, Mr. Philippin was a
partner of Coopers & Lybrand L.L.P. Mr. Philippin is a director of Saks
Holdings, Inc., CSK Auto Corporation, The William Carter Company and Falcon
Building Products, Inc.
Christopher J. Stadler has served as a director of Holding since November
1997. He has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since April 1, 1996. Prior to joining Investcorp, Mr. Stadler was a
Director with CS First Boston Corporation. Mr. Stadler is a director of CSK
Corporation, The William Carter Company and Falcon Building Products, Inc.
DIRECTOR COMPENSATION
Holding does not pay any additional remuneration to its employees or to
executives of Investcorp for serving as directors. The Company does reimburse
directors for any expenses incurred in attending meetings. See " -- Executive
Compensation."
SHAREHOLDER RIGHTS AGREEMENT
Pursuant to the Shareholder Rights Agreement entered into on the
Recapitalization Closing Date, Class D Investors have a right to designate at
least a majority of Holding's Board, the Chief Executive Officer of Holding
shall be a director, and, under certain circumstances, the Management
Shareholders are entitled to designate up to that number of directors equal to
one third of the authorized number of directors minus one. See "Certain
Transactions -- Agreements with Certain Shareholders -- Shareholder Rights
Agreement."
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all cash compensation earned in fiscal 1997
by the Company's Chief Executive Officer, each of the other four most highly
compensated executive officers whose remuneration exceeded $100,000 and two
other individuals who served as executive officers during 1997 (collectively,
the "Named Executive Officers"). The current compensation arrangements for each
of these officers are described in " -- Employment Arrangements" below.
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<PAGE> 65
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ($)
------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION COMPENSATION(A)
---------------------------- ---- ------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Donald M. Werner(1).................. 1997 414,923 297,920 97,533 2,000,000
President, Chief Executive Officer
Howard L. Solot(2)................... 1997 413,058 297,920 59,755 2,000,000
Chief Operating Officer,
Executive Vice President
Donald W. Resnick(3)................. 1997 243,654 95,264 65,680 857,500
Chief Financial Officer, Treasurer
Michael E. Werner(4)................. 1997 222,942 134,952 176,349 --
President of Werner Ladder Co.
Eric J. Werner(5).................... 1997 214,961 84,448 23,938 --
Chief Administrative Officer,
Secretary,
General Counsel
Richard L. Werner(6)................. 1997 159,231 171,139 366,174 2,000,000
Chairman, President and Chief
Executive Officer
Robert I. Werner(7).................. 1997 170,769 80,660 434,375 2,000,000
Vice Chairman, Senior Vice
President,
Technology and Quality
</TABLE>
- ---------------
(a) See the following section "Compensation Relating to the Recapitalization"
for a detailed explanation of amounts in this column.
(1) Prior to April 1997, Donald M. Werner was the President of Werner Ladder Co.
The amount shown for Mr. Werner under Other Annual Compensation reflects
payments of $67,972 in respect of life insurance premiums paid by the
Company, $4,750 in respect of matching contributions made under the 401(k)
Plan, $9,302 in respect of accruals under the Retiree Health Plan, $2,625 of
imputed income arising from the personal use of a Company provided
automobile, $6,798 for financial planning services, and $6,086 of imputed
interest. The amount shown for Mr. Werner under All Other Compensation
reflects payments of $2,000,000 relating to the acceleration of additional
supplemental pension and consulting payments as a result of the
Recapitalization.
(2) The amount shown for Mr. Solot under Other Annual Compensation reflects
payments of $32,795 in respect of life insurance premiums paid by the
Company, $4,750 in respect of matching contributions made under the 401(k)
Plan, $5,850 in respect of accruals under the Retiree Health Plan, $7,030 of
imputed income arising from the personal use of a Company provided
automobile, and $9,330 for financial planning services. The amount shown for
Mr. Solot under All Other Compensation reflects payments of $2,000,000
relating to the acceleration of additional supplemental pension and
consulting payments as a result of the Recapitalization.
(3) The amount shown for Mr. Resnick under Other Annual Compensation reflects
payments of $45,505 in respect of life insurance premiums paid by the
Company, $4,750 in respect of matching contributions made under the 401(k)
Plan, $4,050 in respect of accruals under the Retiree Health Plan, $1,115 of
imputed income arising from the personal use of a Company provided
automobile, and $10,260 of moving expense. The amount shown for Mr. Resnick
under All Other Compensation reflects incentive payments relating to the
Recapitalization.
(4) The amount shown for Michael E. Werner under Other Annual Compensation
reflects payments of $8,044 in respect of life insurance premiums paid by
the Company, $3,062 in respect of matching contributions made under the
401(k) Plan, $594 in respect of accruals under the Retiree Health Plan,
$3,889 of imputed income arising from the personal use of a Company provided
automobile, $50,391 of moving expense, $107,119 of special pay and $3,250 of
financial planning services.
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<PAGE> 66
(5) The amount shown for Eric J. Werner under Other Annual Compensation reflects
payments of $6,935 in respect of life insurance premiums paid by the
Company, $4,750 in respect of matching contributions made under the 401(k)
Plan, $594 in respect of accruals under the Retiree Health Plan, $4,766 of
imputed income arising from the personal use of a Company provided
automobile, and $6,893 of financial planning services.
(6) Richard L. Werner retired as the Company's Chairman and Chief Executive
Officer in May 1997. The amount shown for Mr. Werner under Other Annual
Compensation reflects payments of $49,065 in respect of life insurance
premiums paid by the Company, $4,750 in respect of matching contributions
made under the Company's Employee Savings Plan (the "401(k) Plan"), $6,615
in respect of accruals by the Company under its Officers'/Directors' Health
and Dental Insurance Continuation Plan (the "Retiree Health Plan"), and
$3,834 of interest income, $23,759 of financial planning services and
$278,151 of pension payment. The amount shown for Mr. Werner under All Other
Compensation reflects payments of $2,000,000 relating to additional
supplemental pension and consulting payments including amounts which were
accelerated as a result of the Recapitalization.
(7) Robert I. Werner retired as the Company's Senior Vice President, Technology
and Quality in May 1997. The amount shown for Mr. Werner under Other Annual
Compensation reflects payments of $46,655 in respect of life insurance
premiums paid by the Company, $4,750 in respect of matching contributions
made under the 401(k) Plan, $5,355 in respect of accruals under the Retiree
Health Plan, and $13,723 of imputed interest, $6,838 of financial planning
services and $357,054 of pension payment. The amount shown for Mr. Werner
under All Other Compensation reflects payments of $2,000,000 relating to
additional supplemental pension and consulting payments including amounts
which were accelerated as a result of the Recapitalization.
COMPENSATION RELATED TO THE RECAPITALIZATION
Consulting Agreements
As part of the Company's succession plan, the Company Board determined in
December 1996 to provide each of Richard L. Werner, Robert I. Werner, Donald M.
Werner and Howard L. Solot a Consulting Agreement and an additional supplemental
pension to be entered into or paid (as the case may be) at the time that each of
the foregoing retires from the Company subject to certain acceleration
provisions. Accordingly, in April 1997, each of Richard L. Werner and Robert I.
Werner entered into a four-year Consulting Agreement providing for consulting
fees of $250,000 per annum and received an additional supplemental pension of $1
million. Pursuant to the December 1996 awards, a change of control of Holding
results in the acceleration of such payments. The Recapitalization constituted a
change of control for purposes of the Consulting Agreements, and, as a result,
all remaining amounts under the Consulting Agreements were accelerated and paid
to each of Richard L. Werner and Robert I. Werner on the Recapitalization
Closing Date. In addition, pursuant to the December 1996 awards, each of Donald
M. Werner and Howard L. Solot became entitled to receive, at the time of the
Transactions, all amounts that they would have received had they retired as of
such time, pursuant to the terms of additional supplemental pensions and the
acceleration of their Consulting Agreements. Such amounts totaling $2 million
each were paid by Holding on the Recapitalization Closing Date. See "-- Pension
Plans." After all such payments were made pursuant to the acceleration, the
Consulting Agreements terminated pursuant to their terms.
Employee Protection Agreements
In connection with the Transactions, Holding entered into Employee
Protection Agreements with approximately 50 employees, including the Named
Executive Officers and the Company's other senior management. The Employee
Protection Agreements provide for payments ranging from 50% to 150% of a year's
salary to be paid to each covered employee (i) who remains employed on the first
anniversary of a change in control of Holding or (ii) prior to such anniversary
(A) whose employment is terminated by Holding other than for cause or (B) who
suffers a "material employment change" (as defined in the Employee Protection
Agreements). It is estimated that payments to be made under the
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<PAGE> 67
Employment Protection Agreements will total approximately $6.6 million. In
addition, certain employees who are not Werner family members, including Mr.
Resnick, have been provided incentive bonuses in their Employee Protection
Agreements relating to a change of control of Holding. The Recapitalization
constituted a change of control for purposes of the Employee Protection
Agreements. The Company paid such incentive payments on the Recapitalization
Closing Date in the amount of $1,133,500.
Restricted Stock Plan
In 1992 and 1993, pursuant to the terms of the Company's Restricted Stock
Plan, the Company awarded the following shares of restricted
pre-Recapitalization Class B Stock, (the "Restricted Shares") to the following
persons and in the following amounts: Richard L. Werner (5,600 shares), Robert
I. Werner (5,600 shares), Donald M. Werner (5,600 shares), Howard L. Solot
(5,600 shares), Marc L. Werner (1,750 shares), Craig R. Werner (1,750 shares),
Michael E. Werner (1,750 shares), Eric J. Werner (1,750 shares), Bruce D. Werner
(1,750 shares), and Michael J. Solot (1,750 shares). The Restricted Shares were
awarded in consideration of each executive's continued employment by the Company
and therefore would have vested on a delayed basis following the date of grant.
In the absence of a change of control, the Restricted Shares held by Michael J.
Solot would have vested on December 17, 2000, and the Restricted Shares held by
the other executives (other than Robert Werner and Richard L. Werner, whose
shares automatically vested upon their retirement in May 1997) would have vested
on March 14, 1999 or, if earlier, upon the occurrence of a change of control of
Holding. The Recapitalization constituted a change of control for purposes of
the Restricted Stock Plan and, accordingly, all outstanding Restricted Shares
became fully vested upon the Recapitalization Closing Date. Consequently, a
non-cash compensation charge of $78.5 million was taken by the Company in 1997.
Employment Arrangements
Pursuant to the Recapitalization Agreement, Holding entered into employment
agreements with each of Donald M. Werner, Howard L. Solot, Michael E. Werner,
Eric J. Werner and three other senior managers of the Company (the "Employment
Agreements"). Each of the Employment Agreements is for a term of three years,
commencing on the Recapitalization Closing Date. The Employment Agreements for
Named Executive Officers provide for a base annual salary, effective as of
January 1, 1998, in the following amounts: $406,000 for Donald M. Werner,
$385,000 for Howard L. Solot, $183,000 for Eric J. Werner and $234,000 for
Michael E. Werner. In addition to such executive's salary, the Employment
Agreements also provide for an annual bonus payment up to a maximum of 90% of
annual salary for Donald M. Werner and Howard L. Solot, 60% of annual salary for
Eric J. Werner and 70% of annual salary for Michael E. Werner. This bonus is
reduced, within a range of board discretion, to the extent that the Company
falls short of EBITDA targets specified in the Employment Agreements. The
Employment Agreements further provide for an additional cash bonus payable at
the discretion of the Company Board. Under the Employment Agreements, Holding
may only terminate such executives' employment, without obligation for
severance, for cause. If an executive's employment is terminated without cause
or if an executive terminates his employment for good reason, the Company must
(i) pay such executive a lump sum equal to 12 months' base salary, and the most
recent annual bonus paid (or earned but not yet paid) prior to termination of
employment, and (ii) continue such executive's employee benefits for 12 months.
The Employment Agreements define "cause" as conviction of embezzlement or other
felony involving fraud with respect to performance of duties and, subject to
notice and opportunity to cure, willful engagement in gross misconduct
concerning duties. "Good reason" is defined as a reduction in salary, bonus
opportunities or employee benefits from the level in effect as of the
Recapitalization, adverse changes in duties and forced relocation.
Management Stock Incentive Plan
Pursuant to the Recapitalization Agreement, Holding adopted a stock
incentive plan, pursuant to which options to purchase Class C Common Stock may
be granted to employees and directors of the Company. While no options have yet
been issued pursuant to such plan, the Company anticipates that
66
<PAGE> 68
options representing approximately 7% of the outstanding post-Recapitalization
common stock will be issued in the near future. Certain members of senior
management, including the Named Executive Officers, are expected to be granted a
significant portion of these options. The exercise price for options that are to
be granted will be equal to the Cash Redemption Price. An award granted under
the plan to an employee may include a provision terminating the award upon
termination of employment under certain circumstances or accelerating the
receipt of benefits upon the occurrence of specified events, including, at the
discretion of the Compensation Committee, any change of control of Holding. Each
option will be subject to certain vesting provisions. To the extent not earlier
vested or terminated, all options will vest on the seventh anniversary of the
date of grant and will expire 30 days thereafter if not exercised. Upon the
termination of an optionee's employment with the Company, Holding will have
certain rights to repurchase, and the optionee shall have certain rights to
require an affiliate of Investcorp to repurchase (subject to the right, granted
to Holding, to repurchase such shares instead of the Investcorp affiliate), the
Class C Common Stock purchased by the optionee pursuant to the exercise of his
option(s).
Stock Loan Plan
Pursuant to the Recapitalization Agreement, Holding adopted, as of the
consummation of the Transactions, a Stock Loan Plan in order to make loans to
certain members of management entering into certain stock purchase agreements
between management participants and the Investors (the "Loan Participants") in
amounts that do not exceed the sum of (i) 50% of the purchase price of the
shares of Class C Common Stock purchased by the Loan Participant and (ii) the
amount of the retention bonus to be paid by Holding to the Loan Participant
pursuant to the respective Employee Protection Agreement. Loans made pursuant to
the Stock Loan Plan will mature in seven years, and will bear interest at the
same rate as the Revolving Facility of the Senior Credit Facility. Holding will
negotiate with each Loan Participant the amount of principal to be paid from
such Loan Participant's annual bonus. The Stock Loan Plan will require each Loan
Participant to enter into a pledge agreement and to execute a secured promissory
note. Shares with an aggregate fair market value of at least $2 million will be
made available for purchase pursuant to the Stock Loan Plan and management stock
purchase agreements.
Pension Plans
The Company's salaried employees receive an annual lifetime pension (up to
$160,000, as adjusted) benefit based on years of service and salary under the
Werner Holding Co. (DE), Inc. Salaried Employees' Pension Plan, a funded,
tax-qualified defined benefit plan covering all salaried employees (the
"Retirement Plan"). Certain Named Executive Officers also receive pension
benefits under the Werner Holding Co. (DE), Inc. Supplemental Pension Plan A
and/or the Werner Holding Co. (DE), Inc. Supplemental Pension Plan B. The
following tables show the estimated aggregate annual benefits payable at age 65
to Named Executive Officers retiring at age 65 with the indicated average
compensation and years of credited service from both the Retirement Plan and the
applicable Supplemental Pension Plans. These benefits are in addition to the $1
million supplemental pensions paid in May 1997 to Richard L. Werner and Robert
I. Werner, and paid on the Recapitalization Closing Date to Donald M. Werner and
Howard L. Solot. See "-- Compensation Related to the
Recapitalization -- Consulting Agreements."
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<PAGE> 69
A. PENSION PLAN TABLE: ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40 45
- ------------ ------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 6,416 $12,832 $ 19,248 $ 25,664 $ 32,080 $ 38,496 $ 45,645 $ 52,792 $ 59,941
200,000 13,564 27,129 40,693 54,258 67,822 81,387 95,684 109,980 124,278
300,000 20,713 41,426 62,139 82,852 103,565 124,278 145,724 167,169 188,615
400,000 27,862 55,723 83,585 111,446 139,308 167,169 195,764 224,357 252,951
500,000 35,010 70,020 105,030 140,040 175,050 210,060 245,803 281,545 317,288
</TABLE>
B. PENSION PLAN TABLE: ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40 45
- ------------ ------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$300,000 $ 0 $14,297 $ 21,446 $ 28,594 $ 35,743 $ 42,891 $ 50,040 $ 57,188 $ 64,337
400,000 0 19,063 28,594 38,126 47,657 57,188 66,720 76,251 85,782
500,000 0 23,828 35,743 47,657 59,571 71,485 83,399 95,314 107,228
600,000 0 28,594 42,891 57,188 71,485 85,782 100,079 114,376 128,673
700,000 0 33,360 50,040 66,720 83,400 100,079 116,759 133,439 150,119
800,000 0 38,125 57,188 76,251 95,314 114,376 133,439 152,502 171,565
900,000 0 42,891 64,337 85,782 107,228 128,673 150,119 171,565 193,010
</TABLE>
The benefits listed in the tables are not subject to any deduction for
Social Security. The benefits listed in Table A are computed on the basis of the
average salary of the employee (excluding bonuses) for the three consecutive
full calendar years out of the last 10 years prior to retirement that provide
the highest average. The benefits listed in Table B are computed on the basis of
the average salary of the employee (including bonuses) for the three consecutive
full calendar years out of the last 10 years prior to retirement that provide
the highest average.
Supplemental Pension Plans A and B are unfunded, non-qualified plans which
provide lifetime annual pension benefits to certain stated executives in excess
of benefits payable under the Retirement Plan, due to Retirement Plan
limitations imposed by Employee Retirement Income Saving Act (ERISA), plus
additional other benefits. Supplemental Pension Plan A covers all members of the
Company's Management Committee and Supplemental Pension Plan B covers all the
elected corporate officers. Supplemental Pension Plan benefits are a function of
service and final average compensation. Executives must have spent at least ten
years as either an elected salaried corporate officer or a member of the
Management Committee of the Company which includes all of the named executive
officers to be eligible. Eligibility for supplemental plans is conditioned upon
participants' compliance with a non-competition agreement.
The compensation used for pension formula purposes is annual base pay alone
for the qualified Retirement Plan (subject to IRS limits, currently at $160,000
per year) and both base pay and annual bonus (without regard to any limits) for
the nonqualified Supplemental Plans. The base salaries and bonuses of each of
the named executive officers for 1997 are set forth in the Summary Compensation
Table.
An amendment to Supplemental Pension Plan B provides to Richard L. Werner,
Robert I. Werner, Donald M. Werner and Howard L. Solot a minimum of supplemental
pension equal to the amount necessary to bring the total Retirement Plan pension
and the pension otherwise payable under the Supplemental Pension Plans, up to a
combined minimum pension of 1.25% of average annual compensation for all years
of service, up to a lump sum equivalent maximum for this additional benefit
(based on a 7.5% discount rate) of $1 million. Richard L. Werner and Robert I.
Werner were paid this $1 million lump sum additional benefit upon their
retirement in May 1997. The obligations of the Company to
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<PAGE> 70
Donald M. Werner and Howard L. Solot under this amendment were accelerated at
the Recapitalization Closing Date, and Donald M. Werner and Howard L. Solot each
received $1 million from the Company. See "-- Compensation Related to the
Recapitalization -- Consulting Agreements."
The respective years of credited service for the Named Executive Officers
as of December 31, 1997 are: Richard L. Werner, 44; Robert I. Werner, 44; Donald
M. Werner, 39; Howard L. Solot, 38; Michael E. Werner, 9; Eric J. Werner, 9; and
Donald W. Resnick, 2.
COMMITTEES OF THE BOARD OF DIRECTORS;
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the consummation of the Transactions, the Salary Administration
Committee of Werner Co., a subsidiary of the Issuer, determined the annual
salary budget for each department, which was then allocated by the department
head. The full board of directors of Werner Co. determined the compensation for
senior non-Werner family management. During 1997, this board consisted of
Richard L. Werner, Robert I. Werner, Donald M. Werner, Howard L. Solot, Craig R.
Werner, Michael E. Werner, Eric J. Werner, Bruce D. Werner and Michael J. Solot.
The full board of directors of Werner Management Co. determined the compensation
for Werner family executive officers. During 1997, the board consisted of
Richard L. Werner, Robert I. Werner, Donald M. Werner and Howard L. Solot.
None of the executive officers of the Company served on the board of
directors or on the compensation committee of any other entity, any of whose
officers served either on any of the boards of directors or the Salary
Administration Committee of the Company.
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<PAGE> 71
PRINCIPAL SHAREHOLDERS
The Class A Stock, Class B Stock and Class D Common Stock are the only
classes of Holding's capital stock that have the power to vote. The Class A
Stock and Class B Stock each possesses the right to one vote per share. The
Class D Common Stock possesses the right to 50.6818 votes per share.
The following table sets forth certain information regarding the beneficial
ownership of the capital stock of Holding. The table sets forth for such periods
(i) each person known by the Company to be the beneficial owner of more than 5%
of each class of voting stock of Holding, (ii) each person who is a director of
Holding or Named Executive Officer of the Company who is expected to
beneficially own shares of voting stock of Holding and (iii) all directors of
Holding and executive officers of the Company as a group. Unless otherwise
indicated, each of the shareholders shown in the table below has sole voting and
investment power with respect to the shares beneficially owned.
Investcorp and its affiliates beneficially own approximately 67% of the
outstanding voting stock of Holding and the pre-Recapitalization existing
shareholders, including certain members of management, now own approximately 33%
of the outstanding voting stock of Holding. In addition, the Investors own 4,682
shares of Class C Common Stock and 45,000 shares of Class E Common Stock. See
"Certain Transactions -- Agreements with Certain Shareholders" and "The
Transactions."
<TABLE>
<CAPTION>
NUMBER %
OF SHARES(1) OF CLASS
------------ --------
<S> <C> <C>
CLASS A VOTING STOCK
Noel Berk-Rauch............................................. 142 6.9
Shirley W. Rauch Trust(2)................................... 130 6.4
Stanley S. Rauch Trust(3)................................... 130 6.4
Howard L. Solot(4).......................................... 361 17.5
Donald M. Werner............................................ 388 18.8
Richard L. Werner Revocable Trust(5)........................ 331 16.1
Ronald E. Werner(6)......................................... 240 11.7
All directors and executive officers as a group, including
certain of the above named persons........................ 884 42.9
CLASS B VOTING STOCK
Howard L. Solot(7).......................................... 1,415 6.3
Bruce D. Werner Trust(8).................................... 1,399 6.2
Craig R. Werner Trust(9).................................... 1,508 6.7
Michael E. Werner Revocable Trust(10)....................... 1,496 6.7
Donald M. Werner(11)........................................ 769 3.5
Eric J. Werner(12).......................................... 1,384 6.2
Ronald E. Werner(13)........................................ 1,746 7.8
All directors and executive officers as a group, including
certain of the above named persons........................ 5,064 22.6
CLASS D VOTING STOCK
INVESTCORP S.A.(14)(15)..................................... 1,000 100.0
SIPCO Limited(16)........................................... 1,000 100.0
CIP Limited(17)(18)......................................... 920 92.0
Ballet Limited(17)(18)...................................... 92 9.2
Denary Limited(17)(18)...................................... 92 9.2
Gleam Limited(17)(18)....................................... 92 9.2
Highlands Limited(17)(18)................................... 92 9.2
Noble Limited(17)(18)....................................... 92 9.2
Outrigger Limited(17)(18)................................... 92 9.2
Quill Limited(17)(18)....................................... 92 9.2
Radial Limited(17)(18)...................................... 92 9.2
Shoreline Limited(17)(18)................................... 92 9.2
Zinnia Limited(17)(18)...................................... 92 9.2
INVESTCORP Investment Equity Limited(15).................... 80 8.0
</TABLE>
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<PAGE> 72
- ---------------
(1) As used in the table above, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship, or otherwise has or shares (i) the power to
vote, or direct the voting of, such security or (ii) investment power which
includes the power to dispose, or to direct the disposition of, such
security. In addition, a person is deemed to be the beneficial owner of a
security if that person has the right to acquire beneficial ownership of
such security within 60 days.
(2) Includes 64.87 shares of Class A Stock held in the name of Stanley S. Rauch
Trust.
(3) Includes 64.87 shares of Class A Stock held in the name of Shirley W. Rauch
Trust.
(4) Includes 36.47 shares of Class A Stock held in the name of Mr. Solot's
spouse, Janet F. Solot.
(5) Includes 27.93 shares of Class A Stock held in the name of the Lois S.
Werner Revocable Trust. Lois S. Werner is the spouse of Mr. Werner.
(6) Includes 238.85 shares of Class A Stock held in the name of the Florence J.
Werner Irrevocable Trust of which Ronald E. Werner is the trustee. Mr.
Werner disclaims the beneficial ownership of such shares.
(7) Includes 212.17 shares of Class B Stock held in the name of Mr. Solot's
spouse, Janet F. Solot.
(8) Includes 17.30 shares of Class B Stock held as joint tenant with Tammy H.
Werner and 391.01 shares of Class B Stock held in the name of the Bruce D.
Werner Family Limited Partnership.
(9) Includes 532.16 shares of Class B Stock owned by the Craig R. Werner Family
Limited Partnership.
(10) Includes 179.98 shares of Class B Stock held in the name of the Laura W.
Werner Revocable Trust, 102.92 shares of Class B Stock held in the name of
the Jonathan C. Werner Gift Trust, 57.65 shares of Class B Stock held in
the name of the Margot A. Werner Gift Trust and 102.92 shares of Class B
Stock held in the name of the Stephanie N. Werner Gift Trust.
(11) Includes 22 shares of Class B Stock owned with Barbara Werner as joint
tenants and 88 shares of Class B Stock held in the name of Barbara Werner.
(12) Includes 29.48 shares of Class B Stock owned with Melanie R. Werner as
joint tenants, 274.56 shares of Class B Stock held in the name of Melanie
R. Werner, Custodian for Isabelle N. Werner and 274.56 shares of Class B
Stock held in the name of Melanie R. Werner, Custodian for Sophia K.
Werner.
(13) Includes 1,035.74 shares of Class B Stock held in the name of the Robert I.
Werner Irrevocable Trust and 200.17 shares of Class B Stock held in the
name of the Florence J. Werner Irrevocable Trust. Mr. Werner disclaims the
beneficial ownership of all of these shares.
(14) Investcorp does not directly own any stock in Holding. The number of shares
shown as owned by Investcorp includes all of the shares owned by INVESTCORP
Investment Equity Limited (see (15) below). Investcorp owns no stock in
Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble
Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline
Limited, Zinnia Limited, or in the beneficial owners of these entities (see
(18) below). Investcorp may be deemed to share beneficial ownership of the
shares of voting stock held by these entities because the entities have
entered into revocable management services or similar agreements with an
affiliate of Investcorp, pursuant to which each such entities has granted
such affiliate the authority to direct the voting and disposition of the
Holding voting stock owned by such entity for so long as such agreement is
in effect. Investcorp is a Luxembourg corporation with its address at 37
rue Notre-Dame, Luxembourg.
(15) INVESTCORP Investment Equity Limited is a Cayman Islands corporation, and a
wholly-owned subsidiary of Investcorp, with its address at P.O. Box 1111,
West Wind Building, George Town, Grand Cayman, Cayman Islands.
(16) SIPCO Limited may be deemed to control Investcorp through its ownership of
a majority of a company's stock that indirectly owns a majority of
Investcorp's shares. SIPCO Limited's address is P.O. Box 1111, West Wind
Building, George Town, Grand Cayman, Cayman Islands.
(17) CIP Limited ("CIP") owns no stock in Holding. CIP indirectly owns less than
0.1% of the stock in each of Ballet Limited, Denary Limited, Gleam Limited,
Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited (see (18) below). CIP may be
deemed to share beneficial ownership of the shares of voting stock of
Holding held by
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<PAGE> 73
such entities because CIP acts as a director of such entities and the
ultimate beneficial shareholders of each of those entities have granted to
CIP revocable proxies in companies that own those entities' stock. None of
the ultimate beneficial owners of such entities beneficially owns
individually more than 5% of Holding's voting stock.
(18) Each of CIP Limited, Ballet Limited, Denary Limited, Gleam Limited,
Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited is a Cayman Islands
corporation with its address at P.O. Box 2197, West Wind Building, George
Town, Grand Cayman, Cayman Islands.
Right of First Offer; Tag-Along Rights
Pursuant to the Restated Articles, prior to an initial public offering of
the capital stock of Holding, any holder of Class A Stock or Class B Stock that
intends to sell any shares of such stock will be required to furnish notice to
Holding of such holder's intent to sell such shares. Following the receipt of
such notice, Holding will have the option to purchase such stock on the same
terms as the proposed sale. In addition, if any holder of Class D Common Stock
proposes to transfer shares of such stock, holders of the other classes of
Holding capital stock will have certain tag-along rights with respect thereto.
Any shares for which any holders elect to exercise such tag-along rights but
whose shares are not sold in connection therewith will have such shares redeemed
by Holding, to the extent it is legally permitted to do so.
CERTAIN TRANSACTIONS
AGREEMENTS WITH CERTAIN SHAREHOLDERS
Consulting and Financial Services Agreements
Financing for the Recapitalization was provided in part by a $122.7 million
equity investment by the Investors.
In connection with the Transactions, the Company paid Investcorp
International, Inc. ("III"), an affiliate of Investcorp, advisory fees
aggregating $6.0 million, and Invifin S.A., an affiliate of Investcorp, fees
aggregating $6.0 million for providing a standby commitment to fund the amount
of the Notes and the Senior Credit Facility. In connection with the closing of
the Transactions, the Company entered into an agreement for management advisory
and consulting services for a five-year term with III, pursuant to which the
Company prepaid III $5.0 million upon closing.
Separation Agreement
In connection with Marc L. Werner's separation from the Company in
September 1997, Mr. Werner entered into a Separation Agreement which contained,
among other things, certain confidentiality, non-competition, release and
full-cooperation provisions. The agreement also provided that Mr. Werner would
vote all of his shares of Holding's capital stock in accordance with the vote of
the majority of Class A Stock. Pursuant to the agreement, Mr. Werner was, among
other things, permitted to retain his Restricted Shares and granted a lump-sum
severance payment of approximately $274,000.
Shareholder Rights Agreement
On the Recapitalization Closing Date, Holding executed the Shareholder
Rights Agreement with each of the Management Shareholders and each holder of
Class D Common Stock ("Class D Investors"). The Shareholder Rights Agreement
contains the following provisions: (i) the right, following an initial public
offering of Holding's capital stock, in favor of the Class D Investors to
require the Management Shareholders to sell their remaining equity interests in
Holding if the Class D Investors decide to sell as a group 85% or more of their
remaining equity interests in the Company and the Class D Investors hold at that
time (prior to giving effect to the proposed sale) more than 80% of the shares
of Class D Common Stock purchased by the Investors in the Recapitalization, (ii)
the right in favor of all
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holders of Holding's capital stock, during the period beginning immediately
after the Closing Date and continuing until, but ending prior to, an initial
public offering, to participate on a pro rata basis in equity financings by the
Company (other than issuances of equity securities in connection with stock
incentive or compensation plans approved by Holding's Board of Directors or in
connection with business acquisitions by Holding) if the securities to be issued
by the Company are not being issued at fair market value as determined in good
faith by Holding's Board of Directors, (iii) certain demand and piggy-back
registration rights in favor of the Class D Investors and certain piggy-back
registration rights in favor of all other shareholders of Holding, (iv) the
obligation of the Management Shareholders to enter into certain customary
"lock-up" agreements with underwriters in future public offerings, and (v) an
agreement by the Class D Investors and the Management Shareholders to vote their
respective shares such that (a) at least a majority of Holding's Board will
consist of persons designated by the Class D Investors, (b) the Chief Executive
Officer of Holding shall be a director and (c) depending on the size of the
board, the Management Shareholders shall be entitled to designate a minimum of
one director and up to that number of directors equal to one third of the
authorized number of directors (rounded to the nearest whole number) minus one.
LOANS TO CERTAIN OFFICERS
Prior to the Recapitalization, the Company periodically extended loans to
certain officers and directors, pursuant to the Werner Relocation Policy, in
connection with moving expenses incurred as a result of relocation or new hires.
All such loans were repaid on or prior to the Recapitalization Closing Date.
THE SENIOR CREDIT FACILITY
General. As part of the Transactions, the Issuer entered into the Senior
Credit Facility with BT, as administrative agent and co-arranger, Merrill Lynch
Capital Corporation, as syndication agent and co-arranger, The Chase Manhattan
Bank, as documentation agent, Goldman Sachs Credit Partners L.P., as co-agent,
and the several lenders parties thereto. The Senior Credit Facility consists of
Term Loan Facilities in an aggregate principal amount of $145.0 million, the
Revolving Facility in an aggregate principal amount of up to $100.0 million and
the Receivables Facility in an aggregate principal amount of up to $75.0 million
(together with the Term Loan Facilities and the Revolving Facility, the
"Loans"). The following is a summary description of the principal terms of the
Senior Credit Facility and is subject to, and qualified in its entirety by
reference to the definitive agreement.
All obligations of the Issuer are unconditionally and irrevocably
guaranteed jointly and severally by Holding and each of the Issuer's present
subsidiaries other than MIICA and its subsidiaries and certain other nonmaterial
subsidiaries ("Loan Guarantors"). Indebtedness under the Senior Credit Facility
is secured by a first priority security interest in (i) all of the capital stock
of the Issuer and certain of its subsidiaries, (ii) substantially all of the
inventory and equipment, and certain real property of the Issuer and the Loan
Guarantors and (iii) substantially all other tangible and intangible assets of
the Issuer and the Loan Guarantors.
Term Loan Facilities. The Term Loan Facilities consist of two tranches of
term loans in an aggregate principal amount of $145.0 million. The Tranche B
term loans are in an aggregate principal amount of $90.0 million, and the
Tranche C term loans are in an aggregate principal amount of $55.0 million. The
loans under the Term Loan Facilities were made in a single drawing on the
Recapitalization Closing Date. The Tranche B term loans will mature on the
seventh anniversary of the Recapitalization Closing Date, and the Tranche C term
loans will mature on the eighth anniversary of the Recapitalization Closing
Date. Installments of the Tranche B term loans will be due in aggregate
principal amounts of $0.9 million per annum for the first five years after the
Recapitalization Closing Date, $30.0 million for the sixth year after the
Recapitalization Closing Date, and $55.5 million for the seventh year after the
Recapitalization Closing Date. Installments of the Tranche C term loans will be
due in aggregate principal amounts of $0.55 million for the first seven years
after the Recapitalization Closing Date and $51.15 million for the eighth year
after the Recapitalization Closing Date.
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Revolving Credit Facility. The Revolving Facility consists of a revolving
credit facility in an aggregate principal amount of $100.0 million. The Issuer
is entitled to draw amounts under the Revolving Facility for general corporate
purposes and working capital requirements. The Revolving Facility includes
sub-limits for letters of credit and swing line loans ("Swing Line Loans")
available on same-day notice. The Revolving Facility will mature on the sixth
anniversary of the Recapitalization Closing Date.
Receivables Facility. The Receivables Facility consists of a revolving
credit facility in an aggregate principal amount of $75.0 million, which is
subject to a borrowing base limit not to exceed 80% of eligible accounts
receivable. The Issuer will be entitled to draw amounts under the Receivables
Facility for general corporate purposes and to meet working capital
requirements. The Receivables Facility will mature on the sixth anniversary of
the Recapitalization Closing Date. The Company is currently evaluating a
refinancing of the Receivables Facility with an accounts receivable
securitization facility. Although the Company does not yet have a commitment for
such accounts receivables securitization facility, the Company believes that the
refinancing of the Receivables Facility will be consummated during 1998,
although there can be no assurance that such a refinancing will occur on terms
favorable to the Company or at all.
Availability. The availability of the Senior Credit Facility is subject to
various conditions precedent typical of bank facilities of this type including,
among other things, the absence of any material adverse condition or material
adverse change in or affecting the business, property, assets, nature of assets,
liabilities or condition of the Company. The full amount of the Term Loan
Facilities was drawn in a single drawing on the Recapitalization Closing Date.
The Revolving Credit Facility and the Receivables Facility may be borrowed,
repaid and reborrowed on and after the Recapitalization Closing Date.
Utilization under the Receivables Facility will be limited to a borrowing base
equal to 80% of eligible accounts receivables.
Interest Rates. Interest will accrue quarterly on the Loans with reference
to the base rate (the "Base Rate") plus the applicable interest margin. The
Issuer may elect that all or a portion of the Loans other than the Swing Line
Loans bear interest at the eurodollar rate (the "Eurodollar Rate") plus the
applicable interest margin. The Base Rate is defined as the higher of (i) the
certificate of deposit rate as published by the Federal Reserve Bank of New
York, plus 1/2% and (ii) the prime commercial lending rate of BT. The
Eurodollar Rate is defined as the rate at which eurodollar deposits for one,
two, three or six months or (if and when available to all of the relevant
lenders) nine or 12 months are offered to BT in the interbank eurodollar market.
The applicable interest margin for Tranche B term loans is 1.50% for Base Rate
loans and 2.50% for Eurodollar Rate loans. The applicable interest margin for
Tranche C term loans is 1.75% for Base Rate loans and 2.75% for Eurodollar Rate
loans. The applicable interest margin for the Revolving Facility is 1.25% for
Base Rate loans and 2.25% for Eurodollar Rate loans. The applicable interest
margin for Receivables Facility loans is 0.50% for Base Rate loans and 1.50% for
Eurodollar Rate loans. If the Receivables Facility has not been replaced within
six months of the consummation of the Transactions, the applicable margin under
the Receivables Facility will be increased to 1.25% for Base Rate Loans and to
2.25% for Eurodollar Rate Loans. The Company believes that the Receivables
Facility will be refinanced with an accounts receivables securitization facility
shortly after the consummation of the Transactions. The interest margins for the
Loans are subject to reduction based on the Company's ability to meet certain
financial tests.
Mandatory and Optional Prepayment. The Term Loan Facilities shall be
prepaid, subject to certain conditions and exceptions, with (i) 100% of the net
proceeds of any incurrence of indebtedness, subject to certain exceptions, by
Holding or its subsidiaries, (ii) after the repayment of the Notes in connection
with the exercise by the Issuer of certain redemption options available to it in
connection with a public offering described under "Description of the New
Notes," 50% of the net proceeds of issuances of equity after the
Recapitalization Closing Date by Holding or any of its subsidiaries, (iii) 100%
of the net proceeds of certain asset dispositions, (iv) 50% of the excess cash
flow (as such term will be defined in the Senior Credit Facility) of Holding and
its subsidiaries on a consolidated basis and (v) 100% of net proceeds from any
insurance recovery events, subject to certain re-investment rights.
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The foregoing mandatory prepayments will first be applied pro rata to reduce
outstanding Tranche B and Tranche C term loans. Prepayments in excess of the
amount of outstanding term loans will be applied to reduce commitments under the
Revolving Facility, and subsequently to reduce any commitments under the
Receivables Facility. The Senior Credit Facility provides that the Issuer may
prepay loans in whole or in part without penalty, subject to minimum prepayments
and reimbursement of the lenders' breakage and redeployment costs in the case of
prepayment of Eurodollar Rate Loans.
Fees. The Issuer is required to pay the lenders, on a quarterly basis, a
commitment fee of 0.50% per annum on the unutilized commitments on the Term Loan
Facilities, the Revolving Facility and the Receivables Facility. The Issuer is
also required to pay (a) a per annum letter of credit fee, on a quarterly basis,
equal to the applicable interest margin for Revolving Facility maintained as
Eurodollar Rate loans; (b) a fronting bank fee, on a quarterly basis, equal to
0.25% per annum of the aggregate face amount of outstanding letters of credit
under the Revolving Facility; and (c) agent, arrangement and other similar fees.
These fees are subject to reduction based on the Company's ability to meet
certain financial tests.
Covenants. The Senior Credit Facility contains certain covenants and other
requirements of the Issuer and its subsidiaries. The affirmative covenants
provide for, among other things, mandatory reporting by the Company of financial
and other information to the agent and notice by the Issuer to the agent upon
the occurrence of certain events. The affirmative covenants also include
standard covenants requiring the Company to operate its business in an orderly
manner and consistent with past practice.
The Senior Credit Facility also contains certain negative covenants and
restrictions on actions by the Company including, without limitation,
restrictions on indebtedness, liens, guarantee obligations, mergers, asset
dispositions not in the ordinary course of business, investments, loans,
advances and acquisitions, dividends and other restricted junior payments
transactions with affiliates, change in business conducted and prepayment and
amendments of subordinated indebtedness. Generally, the Company may not incur
additional debt except as specifically permitted, including the following
permitted debt: debt among the Issuer and the Loan Guarantors, up to $25 million
of debt to certain foreign subsidiaries, debt under certain receivables
facilities, letters of credit of up to $25 million, up to $25 million of debt
incurred in connection with permitted acquisitions and up to $25 million of
additional debt. The Company is also restricted from paying dividends, except
that the Issuer's subsidiaries may pay dividends to the Issuer or the Issuer's
wholly owned domestic subsidiaries, and the Issuer may pay dividends to Holding
to enable Holding to pay its taxes, to pay certain operating expenses and to
repurchase up to $3 million per year or $10 million aggregate of Holding capital
stock from employees. The Senior Credit Facility requires the Company to meet
certain financial covenants including interest coverage ratios and maximum
leverage ratios, including a four-quarter debt to EBITDA ratio (currently
required to be 6.75 to 1.00) and an interest coverage ratio (currently required
to be at least 1.60 to 1.00).
Events of Default. The Senior Credit Facility specifies certain customary
events of default including, without limitation, non-payment of principal,
interest or fees, violation of covenants, inaccuracy of representations and
warranties in any material respect, cross default to certain other indebtedness
and agreements, bankruptcy and insolvency events, material judgments and
liabilities, ERISA violations and change of control transactions.
DESCRIPTION OF THE NEW NOTES
GENERAL
The New Notes will be issued pursuant to an indenture (the "Indenture") by
and among the Issuer, the Guarantors and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"). The terms of the New Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The New Notes are
subject to all such terms, and Holders of New Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to
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be complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
Indenture and Registration Rights Agreement are available as set forth below
under "-- Additional Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions."
The Indenture provides for the issuance of up to $135.0 million aggregate
principal amount of additional Notes having identical terms and conditions to
the New Notes offered hereby (the "Additional Notes"), subject to compliance
with the covenants contained in the Indenture. Any Additional Notes will be part
of the same issue as the New Notes offered hereby and will vote on all matters
with the New Notes offered hereby. For purposes of this "Description of the New
Notes," reference to the New Notes does not include Additional Notes.
All of the Issuer's Subsidiaries are Restricted Subsidiaries. However,
under the terms of the Indenture, a current or future Restricted Subsidiary
(including a Note Guarantor) may be designated as an Unrestricted Subsidiary if
the Investments of the Company in such Subsidiary (calculated as the fair market
value of the net assets of such Subsidiary at the time of such designation), to
the extent that they do not constitute Permitted Investments, comply with the
restrictions described in "--Certain Covenants--Restricted Payments."
Unrestricted Subsidiaries and Holding are not subject to many of the restrictive
covenants set forth in the Indenture, including the covenants described under
"Asset Sales" and "Certain Covenants".
PRINCIPAL AND MATURITY OF AND INTEREST ON THE NEW NOTES
The New Notes will be general unsecured senior subordinated obligations of
the Issuer, in an aggregate principal amount of $135.0 million and will mature
on November 15, 2007. Interest on the New Notes will accrue at the rate of 10%
per annum and will be payable, in cash, semi-annually in arrears on May 15 and
November 15, commencing on May 15, 1998, to Holders of record on the immediately
preceding May 1 and November 1. Interest on the New Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
interest and Liquidated Damages (as defined under "-- Registration Rights;
Liquidated Damages"), if any, on the New Notes will be payable at the office or
agency of the Issuer maintained for such purpose within the City and State of
New York or, at the option of the Issuer, payment of interest and Liquidated
Damages, if any, may be made by check mailed to the Holders of the New Notes at
their respective addresses set forth in the register of Holders of New Notes;
provided that all payments of principal, premium, if any, interest and
Liquidated Damages, if any, with respect to any New Notes the Holders of which
have given wire transfer instructions to the Issuer will be required to be made
by wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Issuer, the Issuer's office
or agency in New York is the office of the Trustee maintained for such purpose.
The New Notes will be issued in denominations of $1,000 and integral multiples
thereof.
SUBORDINATION
The indebtedness evidenced by the New Notes will be unsecured, will be
subordinated in right of payment, as set forth in the Indenture, to all existing
and future Senior Debt of the Issuer, will rank pari passu in right of payment
with all existing and future Pari Passu Indebtedness of the Issuer and will be
senior in right of payment to all existing and future Subordinated Debt of the
Issuer. The New Notes will also be effectively subordinated to any Secured Debt
of the Issuer and its subsidiaries to the extent of the value of the assets
securing such Indebtedness. However, payment from the money or the proceeds of
Government Notes held in any defeasance trust described under "-- Legal
Defeasance and Covenant Defeasance" below is not subordinated to any Senior Debt
or subject to the restrictions described herein, so long as the payments into
the defeasance trust were not prohibited pursuant to the subordination
provisions hereinafter described at the time when so paid.
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The indebtedness evidenced by a Note Guarantee will be unsecured debt of
the Guarantor issuing such Note Guarantee. The payment of a Note Guarantee will
be subordinate in right of payment, as set forth in the Indenture, to all
existing and future Senior Debt of such Guarantor, will rank pari passu in right
of payment with the existing and future Pari Passu Indebtedness of such
Guarantor and will be senior in right of payment to all existing and future
Subordinated Debt of such Guarantor. Each Note Guarantee will also be
effectively subordinated to any Secured Debt of the applicable Guarantor to the
extent of the value of the assets securing such indebtedness.
The New Notes will be general unsecured obligations of the Issuer that will
be subordinated to all Senior Debt of the Issuer. The Note Guarantees will be
general unsecured obligations of the Guarantors that will be subordinated to all
Senior Debt of the Guarantors. At December 31, 1997, (i) the outstanding Senior
Debt of the Issuer was $186.5 million, all of which was Secured Debt, (ii) the
Issuer had no Pari Passu Indebtedness outstanding and no indebtedness that would
be subordinate or junior in right of payment to the New Notes, (iii) the
outstanding Senior Debt of the Subsidiary Guarantors was $191.5 million, all of
which was Secured Debt, and (iv) the Subsidiary Guarantors had no Pari Passu
Indebtedness and no indebtedness that would be subordinate or junior in right of
payment to the Subsidiary Guarantees. Although the Indenture contains
limitations on the amount of additional indebtedness which the Issuer and the
Subsidiary Guarantors may incur, under certain circumstances the amount of such
Indebtedness could be substantial and such Indebtedness may be Senior Debt. The
Indenture provides that the Issuer and the Restricted Subsidiaries may not incur
or otherwise become liable for any indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the New Notes.
Only Indebtedness of the Issuer or a Guarantor that is Senior Debt will
rank senior to the New Notes or the relevant Note Guarantee in accordance with
the provisions of the Indenture. The New Notes and each New Note Guarantee in
all respects rank pari passu with all other Pari Passu Indebtedness of the
Issuer or the relevant Guarantor, respectively. The Issuer and each Guarantor
have agreed in the Indenture that they will not incur, directly or indirectly,
any Indebtedness which is subordinate or junior in ranking in any respect to
Senior Debt unless such Indebtedness is pari passu with or is expressly
subordinated in right of payment to the Notes or the Note Guarantees. Unsecured
Indebtedness is not deemed to be subordinate or junior to secured indebtedness
merely because it is unsecured.
Upon any payment or distribution to creditors of the Issuer in a
liquidation or dissolution of the Issuer or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Issuer or its
property, an assignment for the benefit of creditors or any marshaling of the
Issuer's assets and liabilities, the holders of Senior Debt will be entitled to
receive payment in full, in cash or Cash Equivalents, of all Obligations due in
respect of such Senior Debt (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior Debt, whether or
not allowed or allowable in such proceeding) before the Holders of New Notes
will be entitled to receive any payment with respect to the New Notes, and until
all Obligations with respect to Senior Debt are paid in full, in cash or Cash
Equivalents, any payment or distribution to which the Holders of New Notes would
be entitled shall be made to the holders of Senior Debt (except that Holders of
New Notes may receive and retain (i) Permitted Junior Securities and (ii)
payments made from the trust described under "-- Legal Defeasance and Covenant
Defeasance" so long as, on the date or dates the respective amounts were paid
into the trust, such payments were made with respect to the New Notes without
violating the subordination provisions described herein). The term "payment"
means, with respect to the New Notes, any payment, whether in cash or other
assets or property, of interest, principal (including redemption price and
purchase price), premium, Liquidated Damages or any other amount on, of or in
respect of the New Notes, any other acquisition of New Notes and any deposit
into the trust described under "-- Legal Defeasance and Covenant Defeasance"
below. The verb "pay" has a correlative meaning.
The Issuer also may not make any payment or distribution upon or in respect
of the New Notes (except from the trust described under "-- Legal Defeasance and
Covenant Defeasance") if (i) a default
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in the payment of any Obligations with respect to Designated Senior Debt occurs
and is continuing (a "payment default") or any other default on Designated
Senior Debt occurs and the maturity of such Designated Senior Debt is
accelerated in accordance with its terms or (ii) a default, other than a payment
default, occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity (a "non-payment default") and, in the case of this
clause (ii) only, the Trustee receives a notice of such default (a "Payment
Blockage Notice") from a Representative for, or the holders of a majority of the
outstanding principal amount of, any issue of Designated Senior Debt. Payments
on the New Notes may and shall be resumed (a) in the case of a payment default,
upon the date on which such default is cured or waived and, in the case of
Designated Senior Debt that has been accelerated, such acceleration has been
rescinded, and (b) in case of a non-payment default, the earlier of the date on
which such non-payment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity of
any Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced on account of any non-payment default unless and until
360 days have elapsed since the initial effectiveness of the immediately prior
Payment Blockage Notice. No non-payment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee (it being
acknowledged that (x) any action of the Issuer or any of its Subsidiaries
occurring subsequent to delivery of a Payment Blockage Notice that would give
rise to any event of default pursuant to any provision under which an event of
default previously existed (or was continuing at the time of delivery of such
Payment Blockage Notice) shall constitute a new event of default for this
purpose and (y) any breach of a financial covenant giving rise to a non-payment
default for a period ending subsequent to the date of delivery of respective
Payment Blockage Notice shall constitute a new event of default for this
purpose) shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of not
less than 90 days.
The Indenture further requires the Issuer to promptly notify holders of
Designated Senior Debt if payment of the New Notes, once issued, is accelerated
because of an Event of Default. The Issuer may not pay any such accelerated New
Notes until five Business Days after such holders receive notice of such
acceleration and, thereafter, may make such payment only if otherwise
permissible under the subordination provisions of the Indenture.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of New Notes may recover less ratably
than other creditors of the Issuer including holders of Senior Debt and trade
creditors. The Indenture limits, subject to certain financial tests and
exceptions, the amount of additional Indebtedness, including Senior Debt, that
the Issuer and its Subsidiaries can incur. See "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
NOTE GUARANTEES
The Issuer's payment obligations under each of the Notes will be jointly
and severally, fully and unconditionally guaranteed by the Guarantors. The Note
Guarantees of each Guarantor will be subordinated to the prior payment in full
of all Senior Debt of such Guarantor on substantially the same terms as the
Notes are subordinated to Senior Debt of the Issuer. The obligations of each
Guarantor under its Note Guarantees will be limited so as not to constitute a
fraudulent conveyance under applicable law.
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another Person
(other than the Issuer or another Guarantor) unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) the Issuer will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, either (x) be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
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Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under the caption " -- Incurrence of Indebtedness and
Issuance of Preferred Stock" or (y) have a Fixed Charge Coverage Ratio at least
equal to the actual Fixed Charge Coverage Ratio for such four-quarter reference
period. Notwithstanding the foregoing clauses (ii) and (iii), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to any Subsidiary Guarantor and (b) any Guarantor may
merge with an Affiliate incorporated solely for the purpose of reincorporating
such Guarantor in another jurisdiction.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor then held by the Issuer and its Restricted Subsidiaries,
then such Subsidiary Guarantor will be released and relieved of any obligations
under its Note Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See " -- Repurchase at Option of Holders -- Asset Sales." In
addition, the Indenture provides that any Subsidiary Guarantor that is
designated as an Unrestricted Subsidiary in accordance with the provisions of
the Indenture will be released from its Note Guarantee upon effectiveness of
such designation.
OPTIONAL REDEMPTION
Except as described in the following paragraphs, the New Notes will not be
redeemable at the Issuer's option prior to November 15, 2002. Thereafter, the
New Notes will be subject to redemption at any time at the option of the Issuer,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, (subject to the right of Holders on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the twelve-month period beginning on November 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 105.000%
2003........................................................ 103.333%
2004........................................................ 101.667%
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time and from time to time, prior to November 15, 2000,
the Issuer may redeem up to 35% of the sum of (i) the original aggregate
principal amount of New Notes and (ii) the original aggregate principal amount
of any Additional Notes at a redemption price of 110% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, (subject to the right of Holders on the relevant
record date to receive interest due on the relevant interest payment date), with
the net cash proceeds of a public offering of common stock of the Issuer or
Holding; provided that at least 65% of the sum of (i) the original aggregate
principal amount of New Notes and (ii) the original aggregate principal amount
of any Additional Notes remains outstanding immediately after the occurrence of
such redemption; and provided, further, that such redemption shall occur within
60 days of the date of the closing of such public offering.
At any time on or prior to November 15, 2002, the New Notes may be redeemed
as a whole but not in part at the option of the Issuer upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued but
unpaid interest and Liquidated Damages, if any, to, the redemption date, subject
to the right of Holders on the relevant record date to receive interest due on
the relevant interest payment date.
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"Applicable Premium" means, with respect to a New Note at any redemption
date, the greater of (i) 1.0% of the principal amount of such New Note or (ii)
the excess of (A) the present value at such time of (1) the redemption price of
such New Note at November 15, 2002 (such redemption price being set forth in the
tables above) plus (2) all required interest payments due on such New Note
through November 15, 2002 (excluding accrued but unpaid interest), computed
using a discount rate equal to the Treasury Rate plus 75 basis points, over (B)
the principal amount of such New Note, if greater.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to November 15, 2002, provided, however, that if
the period from the redemption date to November 15, 2002 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the redemption date to November 15, 2002
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
SELECTION AND NOTICE
If less than all of the New Notes are to be redeemed at any time, selection
of New Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
New Notes are listed, or, if the New Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no New Notes of $1,000 or less shall be redeemed in part. Notices
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 New Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any New
Note is to be redeemed in part only, the notice of redemption that relates to
such New Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original New Note. New Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
New Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders"
the Issuer is not required to make mandatory redemption or sinking fund payments
with respect to the New Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, unless all New Notes have been
called for redemption pursuant to the provisions described above under the
caption "-- Optional Redemption," each Holder of New Notes will have the right
to require the Issuer to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's New Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash (the
"Change of Control Payment") equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase. Within 30 days following any Change of Control, unless
notice of redemption of all New Notes has then been given pursuant to the
provisions described under the caption "-- Optional Redemption" above, the
Issuer will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
New Notes on the date specified in such notice, which date shall be no earlier
than 30 days and no later than
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60 days from the date such notice is mailed (the "Change of Control Payment
Date"), pursuant to the procedures required by the Indenture and described in
such notice. The Issuer will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations to the extent
such laws and regulations are applicable in connection with the repurchase of
the New Notes as a result of a Change of Control. To the extent that the
provisions of any applicable securities laws or regulations conflict with
provisions of this covenant, the Issuer will comply with such securities laws
and regulations and will not be deemed to have breached its obligations under
this paragraph by virtue thereof.
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (1) accept for payment all New Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all New
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the New Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of New Notes or portions thereof being
purchased by the Issuer. The Paying Agent will promptly mail to each Holder of
New Notes so tendered the Change of Control Payment for such New Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the New Note surrendered, if any; provided that each such new Note
will be in a principal amount of $1,000 or an integral multiple thereof. The
Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, the
Issuer will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of New Notes required by this covenant, unless notice of
redemption of all Notes has then been given pursuant to the provisions described
under the caption "-- Optional Redemption" above and such redemption is
permitted by the terms of outstanding Senior Debt. The Issuer will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the New Notes to require that the Issuer
repurchase or redeem the New Notes in the event of a takeover, recapitalization
or similar transaction. The Change of Control purchase feature is a result of
negotiations between the Issuer and the Initial Purchasers. Management has no
present intention to engage in a transaction involving a Change of Control,
although it is possible that the Issuer would decide to do so in the future.
Subject to the limitations discussed below, the Issuer could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect the Issuer's capital structure or credit ratings.
The Senior Credit Facility currently prohibits the Issuer from purchasing
any New Notes, and also provides that certain change of control events with
respect to the Issuer would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which the Issuer
becomes a party may contain similar restrictions and provisions. In the event a
Change of Control occurs at a time when the Issuer is prohibited from purchasing
New Notes, the Issuer could seek the consent of its lenders to the purchase of
New Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Issuer does not obtain such a consent or repay such
borrowings, the Issuer will remain prohibited from purchasing New Notes. In such
case, the Issuer's failure to purchase tendered New Notes would constitute an
Event of Default under the Indenture which would, in turn, constitute as default
under the Senior Credit Facility. In such circumstances, the subordination
provisions in the Indenture would restrict payments to the Holders of New Notes.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the
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Issuer and purchases all New Notes validly tendered and not withdrawn under such
Change of Control Offer.
"Change of Control" means such time as:
(i) prior to the earlier to occur of (A) the first public offering of
Voting Stock of the Issuer or (B) the first public offering of Voting Stock
of Holding, the Initial Control Group ceases to be the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the total voting power of the Voting Stock
of the Issuer or Holding, whether as a result of the issuance of securities
of the Issuer or Holding, as the case may be, any merger, consolidation,
liquidation or dissolution of the Issuer or Holding, as the case may be,
any direct or indirect transfer of securities by the Initial Control Group
or otherwise (for purposes of this clause (i) and clause (ii) below, the
Initial Control Group shall be deemed to beneficially own any Voting Stock
of an entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Initial Control Group beneficially owns (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent entity;
(ii) following the first public offering of Voting Stock of the
Issuer or Holdings, as the case may be, (A) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more members of the Initial Control Group, is or becomes the beneficial
owner (as defined in clause (i) above, except that such person shall be
deemed to have "beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 40%
of the total voting power of the Voting Stock of the Issuer or Holding, as
the case may be, and (B) the Initial Control Group "beneficially owns" (as
defined in clause (i) above), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting Stock of the
Issuer or Holding, as the case may be, than such other person and does not
have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the board of directors of the
Issuer or Holding, as the case may be, (for purposes of this clause (ii),
such other person shall be deemed to beneficially own any Voting Stock of a
specified entity held by a parent entity, if such other person
"beneficially owns" (as defined in clause (i) above), directly or
indirectly, in the aggregate more than 40% of the voting power of the
Voting Stock of such parent entity and the Initial Control Group
"beneficially owns" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent entity and does not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent entity); or
(iii) any person other than the Initial Control Group, (A) (I)
nominates one or more individuals for election to the Board of Directors of
the Issuer or Holding, as the case may be and (II) solicits proxies,
authorization or consents in connection therewith and (B) such number of
nominees elected to serve on the Board of Directors in such election and
all previous elections after the Closing Date represents a majority of the
Board of Directors of the Issuer or Holding, as the case may be, following
such election.
"Initial Control Group" means Investcorp, its Affiliates, members of the
Management Group, the investors who are the initial holders of the Capital Stock
of Holding, any Person acting in the capacity of an underwriter or initial
purchaser in connection with a public or private offering of the Issuer's or
Holding's Capital Stock, any employee benefit plan of Holding, the Issuer or any
of its Subsidiaries or any participant therein, a trustee or other fiduciary
holding securities under any such employee benefit plan or any Permitted
Transferee of any of the foregoing Persons.
"Permitted Transferee" means, with respect to any Person, (i) any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) the spouse, former
spouse, lineal descendants, heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of any such Person, (iii) a trust, the
beneficiaries of which, or a corporation or partnership or limited liability
company, the stockholders, general or limited partners or members
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of which, include only such Person or his or her spouse, lineal descendants or
heirs, in each case to whom such Person has transferred the beneficial ownership
of any securities of the Issuer or Holding and (iv) any investment fund or
investment entity that is a subsidiary of such Person or a Permitted Transferee
of such Person.
ASSET SALES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Issuer
(or the 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 or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Issuer or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Issuer's or such Restricted Subsidiary's
most recent balance sheet), of the Issuer or any Restricted Subsidiary (other
than liabilities that are by their terms subordinated to the Notes or, in the
case of liabilities of a Restricted Subsidiary, the Note Guarantee of such
Subsidiary) that are assumed by the transferee of any such assets and (y) any
securities, notes or other obligations received by the Issuer or any such
Restricted Subsidiary from such transferee that are converted by the Issuer or
such Restricted Subsidiary into cash (to the extent of the cash received) within
180 days after receipt, shall be deemed to be cash for purposes of this
provision; provided, further, however, that this clause (ii) shall not apply to
any sale of Equity Interests of or other Investments in Unrestricted
Subsidiaries.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuer may apply such Net Proceeds, at its option, (a) to repay Senior Debt
or Pari Passu Indebtedness (other than Indebtedness owed to Holding, the Issuer
or a Subsidiary of the Issuer, and provided that if the Issuer shall so reduce
Pari Passu Indebtedness, it will equally and ratably make an Asset Sale Offer
(in accordance with the procedures set forth below for an Asset Sale Offer) to
all Holders), (b) to invest in properties and assets that will be used or useful
in the business of the Issuer or any of its Subsidiaries or (c) to the
acquisition of a controlling interest in another business, the making of a
capital expenditure or the acquisition of other assets, in each case, in the
same or a similar line of business as the Issuer was engaged in on the Closing
Date. Pending the final application of any such Net Proceeds, the Issuer may
temporarily reduce borrowings under a Credit Facility or otherwise invest such
Net Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Indenture
provides that the Issuer will (i) make an offer to all Holders of Notes, and
(ii) prepay, purchase or redeem (or make an offer to do so) any other Pari Passu
Indebtedness of the Issuer in accordance with provisions requiring the Issuer to
prepay, purchase or redeem such Indebtedness with the proceeds from any Asset
Sales (or offer to do so), pro rata in proportion to the respective principal
amounts of the Notes and such other Indebtedness required to be prepaid,
purchased or redeemed or tendered for, in the case of the Notes pursuant to such
offer (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
that may be purchased out of such pro rata portion of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any to the
date of purchase, in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate principal amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
The Issuer 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 or regulations are applicable in connection with the repurchase
of the Notes pursuant to an Asset Sale Offer. To the extent that the
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provisions of any applicable securities laws or regulations conflict with the
provisions of the Indenture, the Issuer will comply with such securities laws
and regulations and shall not be deemed to have breached its obligations
described in the Indenture by virtue thereof.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution (including any payment in
connection with any merger or consolidation) on account of the Issuer's or any
of its Restricted Subsidiaries' Equity Interests (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock)); (ii)
purchase, redeem or otherwise acquire or retire for value (including in
connection with any merger or consolidation) any Equity Interests of the Issuer
or Holding (or any Restricted Subsidiary held by Persons other than the Issuer
or another Restricted Subsidiary); (iii) make any payment on or with respect to,
or purchase, redeem, defease or otherwise acquire or retire for value any
Subordinated Debt, except (A) a payment of interest or principal at Stated
Maturity and (B) the purchase, repurchase or other acquisition or retirement of
Indebtedness in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
purchase, repurchase or other acquisition or retirement; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Issuer would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with (without duplication) the
aggregate amount of all other Restricted Payments made by the Issuer and
its Restricted Subsidiaries after the Recapitalization Closing Date
(excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v)
(other than clauses (i) and (v)(A) of the definition of "Specified
Affiliate Payments") and (vi) of the next succeeding paragraph, but
including all other Restricted Payments permitted by the next succeeding
paragraph), is less than the sum (without duplication) of (i) 50% of the
Consolidated Net Income of the Issuer for the period (taken as one
accounting period) from the beginning of the fiscal quarter during which
the Recapitalization Closing Date occurs to the end of the Issuer's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Issuer from
the issue or sale (other than to a Subsidiary) of, or from capital
contributions with respect to, Equity Interests of the Issuer (other than
Disqualified Stock), in either case after the Recapitalization Closing
Date, plus (iii) the aggregate principal amount (or accreted value, if
less) of Indebtedness of the Issuer or any Restricted Subsidiary issued
since the Recapitalization Closing Date (other than to a Restricted
Subsidiary) that has been converted into Equity Interests (other than
Disqualified Stock) of the Issuer, plus (iv) 100% of the aggregate net cash
received by the Issuer or a Restricted Subsidiary of the Issuer since the
Recapitalization Closing Date from (A) Restricted Investments, whether
through interest payments, principal payments, dividends or other
distributions and payments, or the sale or other disposition (other than to
the Issuer or a Restricted Subsidiary) thereof made by the Issuer and its
Restricted Subsidiaries or (B) a cash dividend from, or the sale (other
than to the Issuer or a Restricted Subsidiary) of the stock of, an
Unrestricted Subsidiary, plus
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(v) upon the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the fair market value of the Investments of the Issuer and its
Restricted Subsidiaries (other than such Subsidiary) in such Subsidiary.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests or Subordinated Debt of the Issuer
in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary of the Issuer)
of, other Equity Interests of, or a capital contribution to, the Issuer
(other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c) (ii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase, retirement or other
acquisition of Subordinated Debt made by an exchange for, or with the
net cash proceeds from an incurrence of, Permitted Refinancing
Indebtedness;
(iv) the payment of any dividend by a Restricted Subsidiary of the
Issuer to the holders of its common Equity Interests on a pro rata
basis;
(v) to the extent constituting Restricted Payments, the Specified
Affiliate Payments;
(vi) the payment of dividends, other distributions or other
amounts by the Issuer to Holding in amounts equal to amounts required
for Holding to pay Federal, state and local income taxes to the extent
such income taxes are attributable to the income of the Issuer and its
Subsidiaries; and
(vii) Restricted Payments in an aggregate amount not to exceed
$10.0 million.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the Issuer
and its Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated, to the extent they do not constitute Permitted
Investments at the time such Subsidiary became an Unrestricted Subsidiary, will
be deemed to be Restricted Payments made at the time of such designation and
will reduce the amount available for Restricted Payments under the first
paragraph of this covenant. The amount of such outstanding Investments will be
equal to the portion of the fair market value of the net assets of any
Subsidiary of the Issuer at the time that such Subsidiary is designated an
Unrestricted Subsidiary that is represented by the interest of the Issuer and
its Restricted Subsidiaries in such Subsidiary, in each case as determined in
good faith by the Board of Directors of the Issuer. Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Issuer or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined in good
faith by the Board of Directors of the Issuer.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Issuer will not issue any
Disqualified Stock and will not permit any
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of its Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Issuer and its Restricted Subsidiaries may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock and the Issuer's
Restricted Subsidiaries may issue preferred stock, if the Fixed Charge Coverage
Ratio for the Issuer's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued would have been at least 1.75 to 1, if such
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
on or prior to November 30, 1999, and 2.00 to 1, if such Indebtedness is
incurred or such Disqualified Stock or preferred stock is issued thereafter, in
each case, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Issuer or any of its Restricted
Subsidiaries of term and revolving Indebtedness and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
undrawn face amount thereof) under Credit Facilities; provided that the
aggregate principal amount of all Indebtedness outstanding pursuant to this
clause (i) after giving effect to such incurrence does not exceed an amount
equal to $250.0 million;
(ii) the incurrence by the Issuer and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Issuer of Indebtedness represented by the
New Notes and by the Subsidiary Guarantors of Indebtedness represented by
the Note Guarantees;
(iv) the incurrence by the Issuer or any of its Restricted
Subsidiaries of (A) Acquired Debt or (B) Indebtedness (including Capital
Lease Obligations) for the purpose of financing or refinancing all or any
part of the lease, purchase price or cost of construction or improvement of
any property (real or personal) or other assets that are used or useful in
the business of the Issuer or such Restricted Subsidiary (whether through
the direct purchase of assets or the Capital Stock of any Person owning
such assets and whether such Indebtedness is owed to the seller or Person
carrying out such construction or improvement or to any third party), in an
aggregate principal amount for all Indebtedness incurred pursuant to this
clause (iv), at the date of such incurrence (including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (iv)) not to exceed an amount
equal to 10.0% of Total Assets; provided that, in the case of Indebtedness
exceeding $2.0 million incurred pursuant to this clause (iv), such
Indebtedness exists at the date of such purchase or transaction or is
created within 180 days thereafter;
(v) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the Indenture
to be incurred;
(vi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Issuer and
any of its Restricted Subsidiaries, including any Indebtedness arising in
connection with a Receivables Facility; provided, however, that (A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Issuer or a
Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Issuer or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Issuer or such Restricted Subsidiary, as the case
may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred (A) for the purpose
of fixing or hedging interest rate risk with respect to any
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floating rate Indebtedness that is permitted by the terms of the Indenture
to be outstanding or (B) for the purpose of fixing or hedging currency
exchange rate risk or commodity price risk incurred in the ordinary course
of business;
(viii) the guarantee by the Issuer or any of the Subsidiary Guarantors
of Indebtedness of the Issuer or a Restricted Subsidiary of the Issuer that
was permitted to be incurred by another provision of this covenant;
(ix) the incurrence of Indebtedness secured by or financing
Receivables (including any such Indebtedness under the Credit Facilities),
provided that the aggregate principal amount of such Indebtedness incurred
pursuant to this clause (ix) does not, at any time, exceed an amount equal
to $75.0 million less the aggregate Receivable Financing Amount of all
Receivables Facilities of the Issuer and its Restricted Subsidiaries;
(x) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Indebtedness under (or constituting reimbursement
obligations with respect to) letters of credit, surety bonds or similar
instruments issued in connection with the ordinary course of a Permitted
Business, including letters of credit in respect of workers' compensation
claims, self-insurance, and insurance written by MIICA in connection with a
Permitted Business; provided, however, that upon the drawing of such
letters of credit or other instrument, such obligations are reimbursed
within 30 days following such drawing;
(xi) the incurrence by Foreign Subsidiaries of Indebtedness for
working capital purposes, and by the Issuer or any of its Restricted
Subsidiaries of Guaranties of Indebtedness of Foreign Subsidiaries or
foreign joint ventures, provided that the aggregate principal amount of
such Indebtedness and of the Indebtedness so Guaranteed at any time
outstanding does not exceed 5% of Total Assets; and
(xii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of additional Indebtedness (which may comprise Indebtedness
under the Senior Credit Facility) in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding pursuant to this
clause (xii) not to exceed an amount equal to $35.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Issuer shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof; provided that all outstanding Indebtedness under
the Senior Credit Facility immediately following the Recapitalization shall be
deemed to have been incurred pursuant to clauses (i) and/or (ix) of the
definition of Permitted Debt. Accrual of interest and the accretion of accreted
value will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant.
Liens
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind securing Indebtedness
or trade payables (other than Permitted Liens) upon any of their property or
assets, now owned or hereafter acquired, unless all payments due under the
Indenture and the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien.
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Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Issuer or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Issuer or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Issuer or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Issuer or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness, (b) the Indenture, the New Notes and the
Note Guarantees, (c) any agreement or other instrument of a Person acquired by
the Issuer or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (but not created in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, (d) purchase money obligations
(including Capital Lease Obligations) for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (e) restrictions created in connection
with any Receivables Facility that, in the good faith determination of the Board
of Directors or senior management of the Issuer, are necessary or advisable to
effect such Receivables Facility, (f) in the case of clause (iii), any
encumbrance or restriction (1) that restricts in a customary manner the
subletting, assignment, or transfer of any property or asset that is subject to
a lease, license or similar contract, (2) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any property
or assets of the Issuer or any Restricted Subsidiary not otherwise prohibited by
the Indenture or (3) contained in security agreements or mortgages securing
Indebtedness to the extent such encumbrance or restrictions restrict the
transfer of the property subject to such security agreements or mortgages, (g)
contracts for the sale of assets, including any restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement entered into for the sale
or disposition of all or substantially all of the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or disposition, (h)
contractual encumbrances or restrictions in effect on the Recapitalization
Closing Date, including pursuant to the Senior Credit Facility and its related
documentation, (i) restrictions on cash or other deposits or net worth imposed
by leases, credit agreements or other agreements entered into in the ordinary
course of business, (j) customary provisions in joint venture agreements and
other similar agreements, (k) any encumbrances or restrictions created with
respect to Senior Debt of the Issuer or its Restricted Subsidiaries or
Indebtedness of Foreign Subsidiaries or Insurance Subsidiaries permitted to be
incurred subsequent to the Recapitalization Closing Date pursuant to the
provision of the covenant described under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock" and (l) any encumbrances or
restrictions of the type referred to in clauses (i), (ii) and (iii) imposed by
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (a) through (l), provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of the
Issuer, no more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment restrictions
prior to such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing.
MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS
The Indenture provides that the Issuer may not consolidate or merge with or
into (whether or not the Issuer is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Issuer is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
Person formed by or
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surviving any such consolidation or merger (if other than the Issuer) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Issuer under
the Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such transaction
no Default or Event of Default exists; and (iv) except in the case of a merger
of the Issuer with or into a Wholly Owned Restricted Subsidiary of the Issuer,
the Issuer or the Person formed by or surviving any such consolidation or merger
(if other than the Issuer), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, either (x) be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption " -- Incurrence of Indebtedness and
Issuance of Preferred Stock" or (y) have a Fixed Charge Coverage Ratio at least
equal to the Fixed Charge Coverage Ratio of the Issuer for such four-quarter
reference period. Notwithstanding the foregoing clauses (iii) and (iv), (a) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Issuer, and (b) the Issuer may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Issuer in
another jurisdiction.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Issuer or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Issuer or such Restricted Subsidiary
with an unrelated Person and (ii) the Issuer delivers to the Trustee (a) with
respect to any Affiliate Transaction entered into after the Recapitalization
Closing Date involving aggregate consideration in excess of $3.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the members
of the Board of Directors and (b) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $10.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an investment banking, appraisal or accounting firm of
national standing. In addition, the following will not be deemed to be Affiliate
Transactions: (1) the provision of administrative or management services by the
Issuer or any of its officers to any of its Restricted Subsidiaries in the
ordinary course of business, (2) any employment agreement, collective bargaining
agreement, employee benefit plan, related trust agreement or any similar
arrangement heretofore or hereafter entered into in the ordinary course of
business, (3) transactions between or among the Issuer and/or its Restricted
Subsidiaries, (4) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "--Restricted Payments", (5)
payment of compensation to employees, officers, directors or consultants in the
ordinary course of business, (6) maintenance in the ordinary course of business
(and payments required thereby) of benefit programs, or arrangements for
employees, officers or directors, including vacation plans, health and life
insurance plans, deferred compensation plans, directors' and officers'
indemnification agreements and retirement or savings plans and similar plans,
(7) loans or advances to employees (or guarantees of third party loans to
employees) in the ordinary course of business, (8) sales of Receivables to a
Receivables Subsidiary, (9) the payment of annual management, consulting and
advisory fees and related expenses to Investcorp and its Affiliates (whether or
not such Persons are Affiliates of the Issuer), (10) payments by the Issuer or
any of its Restricted Subsidiaries to Investcorp and its Affiliates (whether or
not such Persons are Affiliates of the Issuer) made for any financial advisory,
financing, underwriting or placement services or in respect of other investment
banking activities, including in connection with acquisitions or divestitures,
which payments are approved by the Board of Directors of the Issuer in good
faith,
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(11) any tax sharing agreement as in effect on the Recapitalization Closing Date
and any other agreement as in effect on the Recapitalization Closing Date
(including the Recapitalization Agreement) or any amendment thereto (so long as
any such amendment is not disadvantageous to the Holders in any material
respect) or any transaction contemplated thereby (including distributions by the
Issuer to Holding to effect the Recapitalization), (12) the payment of all fees
and expenses related to the Recapitalization, (13) transactions with customers,
clients, suppliers, or purchasers or sellers of goods or services, in each case
in the ordinary course of business and otherwise in compliance with the terms of
the Indenture which are fair to the Issuer or its Restricted Subsidiaries, or
are on terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party, in each case in the reasonable
determination of the Board of Directors of the Issuer or the senior management
thereof, and (14) Indebtedness permitted by paragraph (vi) or to the extent such
Indebtedness is on terms that are no less favorable to the Issuer or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction with an unrelated Person, paragraph (xii) of the covenant
described under the caption " -- Incurrence of Indebtedness and Issuance of
Preferred Stock".
ADDITIONAL NOTE GUARANTEES
The Indenture provides that all current and future Subsidiaries of the
Issuer other than Foreign Subsidiaries, Insurance Subsidiaries and Subsidiaries
that have been properly designated as Unrestricted Subsidiaries in accordance
with the Indenture for so long as they continue to constitute Unrestricted
Subsidiaries, will be Guarantors in accordance with the terms of the Indenture.
Notwithstanding the foregoing, if any Foreign Subsidiary or Insurance Subsidiary
that is a Restricted Subsidiary shall Guarantee any Indebtedness of the Issuer,
Holding or any Domestic Subsidiary while the New Notes are outstanding, then
such Foreign Subsidiary or Insurance Subsidiary, as the case may be, shall
become a Guarantor under the Indenture and will execute a Note Guarantee in
accordance with the provisions of the Indenture.
Each Note Guarantee is limited to an amount not to exceed the maximum
amount that can be Guaranteed by that Subsidiary (after giving effect to all its
guarantees of Indebtedness under the Senior Credit Facility) without rendering
the Note Guarantee, as it relates to such Subsidiary, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
Each such Note Guarantee is subordinated to Senior Debt of the respective
Guarantor on the same basis and to the same extent as the New Notes are
subordinated to Senior Debt of the Issuer. See " -- Subordination." Each
Guarantor may consolidate with or merge into or sell its assets, and may be
released from its obligations under its Guarantee, upon the terms and conditions
set forth in the Indenture.
NO SENIOR SUBORDINATED DEBT
The Indenture provides that (i) the Issuer will not incur any Indebtedness
that is expressly subordinate in right of payment to any Senior Debt and senior
in any respect in right of payment to the New Notes, once issued and (ii) no
Guarantor will incur any Indebtedness that is expressly subordinate in right of
payment to any Senior Debt and senior in any respect in right of payment to the
Note Guarantees.
BUSINESS ACTIVITIES
The Issuer will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
is not material to the Issuer and its Restricted Subsidiaries taken as a whole.
Holding will not engage in any business other than managing its investment in
the Issuer and any business incidental or reasonably related thereto.
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REPORTS
Notwithstanding that the Issuer may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, to the
extent permitted by the Exchange Act, the Issuer will file with the Securities
and Exchange Commission (the "Commission"), and provide, within 15 days after
the Issuer is required to file the same with the Commission, the Trustee and the
Holders with the annual reports and the information, documents and other reports
that are specified in Sections 13 and 15(d) of the Exchange Act. In the event
the Issuer is not permitted to file such reports, documents and information with
the Commission, the Issuer will provide substantially similar information to the
Trustee and the Holders, as if the Issuer were subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default with respect to the New Notes, once issued: (i) default for 30 days in
the payment when due of interest on, or Liquidated Damages with respect to, the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Issuer (A) to comply with the provisions
described under the caption " -- Certain Covenants -- Merger, Consolidation, or
Sale of all or Substantially all Assets" or (B) for a period of 30 days after
receipt of written notice specifying such a failure, stating that such notice is
a "Notice of Default" under the Indenture and demanding that the Issuer remedy
the same, shall have been given by registered or certified mail, return receipt
requested, to the Issuer by the Trustee, or to the Issuer and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes at the time
outstanding, to comply with the provisions described under the captions
" -- Repurchase at the Option of Holders Change of Control," " -- Repurchase at
the Option of Holders -- Asset Sales," " -- Certain Covenants -- Restricted
Payments," " -- Certain Covenants -- Liens", " -- Certain Covenants -- Dividend
and Other Payment Restrictions Affecting Restricted Subsidiaries," " -- Certain
Covenants -- Transactions with Affiliates," " -- Certain Covenants -- Additional
Note Guarantees," " -- Certain Covenants -- No Senior Subordinated Debt,"
" -- Certain Covenants -- Business Activities" or " -- Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred Stock," (iv) failure by the
Issuer for 60 days after receipt of a Notice of Default to comply with any of
its other agreements in the Indenture or the Notes; (v) the failure by the
Issuer or any Restricted Subsidiary that is a Significant Subsidiary to pay any
Indebtedness within any applicable grace period after final maturity or
acceleration by the holders thereof because of a default if the total amount of
such Indebtedness unpaid or accelerated exceeds $20.0 million; (vi) any judgment
or decree for the payment of money in excess of $20.0 million is entered against
the Issuer or any Significant Subsidiary that is a Restricted Subsidiary and is
not discharged, waived or stayed and either (A) an enforcement proceeding has
been commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during which
such judgment or decree is not discharged, waived or the execution thereof
stayed; (vii) except as permitted by the Indenture, any Note Guarantee by
Holding or a Guarantor that is a Significant Subsidiary shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor, or any Person acting on behalf
of any Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to
the Issuer or any of its Restricted Subsidiaries that is a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable. Upon such a declaration, such
amounts shall be due and payable immediately; provided, however, that if upon
such declaration there are any amounts outstanding under the Senior Credit
Facility and the amounts thereunder have not been accelerated, such amounts
shall be due and payable upon the earlier of the time such amounts are
accelerated or five Business Days after receipt by the Issuer and the
Representative of the lenders under the Senior Credit Facility of such
declaration. Notwithstanding the foregoing,
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in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Issuer or any of its Restricted Subsidiaries that
is a Significant Subsidiary, all outstanding New Notes will become due and
payable without further action or notice. Holders of the New Notes may not
enforce the Indenture or the New Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any), interest or Liquidated Damages when due, no Holder
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
Holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such Holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity, and (v)
the Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee.
The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within the earlier of 90 days after it occurs or 30 days after it is known to a
trust officer or written notice of it is received by the Trustee. Except in the
case of a Default in the payment of principal of, premium (if any), interest or
Liquidated Damages on any Note, the Trustee may withhold notice if and so long
as a committee of its trust officers in good faith determines that withholding
notice is in the interests of Noteholders. In addition, the Issuer is required
to deliver to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. The Issuer also is required to deliver to the
Trustee, forthwith upon any officer of the Issuer becoming aware of any such
Default, written notice of any event which would constitute certain Defaults,
their status and what action the Issuer is taking or proposes to take in respect
thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder or Affiliate of
the Issuer, as such, shall have any liability for any obligations of the Issuer
under the New Notes, the Indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. No director, officer,
employee, incorporator or stockholder or Affiliate of any of the Guarantors, as
such, shall have any liability for any obligations of the Guarantors under the
Note Guarantees, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of New Notes and Note
Guarantees by accepting a New Note and a Note Guarantee waives and releases all
such
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liabilities. The waiver and release are part of the consideration for issuance
of the New Notes and the Note Guarantees. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have all of its and
any Guarantor's obligations discharged with respect to the outstanding Notes and
any Note Guarantees, as the case may be ("Legal Defeasance") and cure all then
existing Events of Default, except for (i) the rights of Holders of outstanding
Notes to receive payments in respect of the principal of, premium, if any, and
interest and Liquidated Damages on such Notes when such payments are due from
the trust referred to below, (ii) the Issuer'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
payment and money for Note payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Issuer's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time, elect to have the
obligations of the Issuer and the Guarantors released with respect to certain
covenants that are described in the Indenture and the Note Guarantees ("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 and the
Note Guarantees. In the event Covenant Defeasance occurs, certain events (not
including non-payment, and, solely with respect to the Issuer, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the Notes
and the Note Guarantees.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuer or the Guarantors must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Notes cash in U.S. dollars,
non-callable Government Notes, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Issuer and the
Guarantors must specify whether the Notes are being defeased to maturity or to a
particular redemption date; (ii) in the case of Legal Defeasance, the Issuer or
the Guarantors shall have delivered to the appropriate Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that, subject to customary assumptions and exclusions, (A) the Issuer and the
Guarantors have received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the Closing Date, 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, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance 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 Issuer or the Guarantors shall have delivered to the appropriate
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that, subject to customary assumptions and exclusions, the
Holders of the outstanding Notes 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; (iv) 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 borrowing of funds to be applied to such deposit and the
grant of any Lien securing such borrowing) 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 will not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the Indenture, except for
the subordination provisions thereof) to which the Issuer or any of its
Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is
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bound; (vi) the Issuer or the Guarantors must have delivered to the appropriate
Trustee an opinion of counsel, subject to customary assumptions and exclusions,
to the effect that after the 91st day following the deposit, the trust funds
will not be part of any "estate" formed by the bankruptcy or reorganization of
the Issuer or subject to the "automatic stay" under the Bankruptcy Code or in
the case of covenant defeasance, will be subject to a first priority lien in
favor of the Trustee for the benefit of the holders of the Notes; (vii) the
Issuer or the Guarantors must deliver to the appropriate Trustee an Officers'
Certificate stating that the deposit was not made by the Issuer with the intent
of preferring the Holders of Notes over the other creditors of the Issuer or the
Guarantors, as applicable, with the intent of defeating, hindering, delaying or
defrauding creditors of the Issuer or the Guarantors, as applicable, or others;
and (viii) the Issuer must deliver to the appropriate Trustee an Officers'
Certificate and an opinion of counsel (which opinion of counsel may be subject
to customary assumptions and exclusions), each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
SATISFACTION AND DISCHARGE OF INDENTURE
Upon the request of the Issuer, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Securities, as expressly provided for herein or pursuant hereto), the Issuer
and the Guarantors will be discharged from their obligations under the New Notes
and the Note Guarantees, and the Trustee, at the expense of the Issuer, will
execute proper instruments acknowledging satisfaction and discharge of the
Indenture when:
(a) either (i) all the Notes theretofore authenticated and delivered
(other than mutilated or destroyed, lost or stolen Notes that have been
replaced or paid and Securities that have been subject to defeasance under
the Indenture) have been delivered to the Trustee for cancellation or (ii)
all Notes not theretofore delivered to the Trustee for cancellation (A)
have become due and payable, (B) will become due and payable at maturity
within one year or (C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Issuer,
and the Issuer has irrevocably deposited or caused to be deposited with the
Trustee funds in trust for such purpose in an amount sufficient to pay and
discharge, without the need to reinvest any proceeds thereof, the entire
Indebtedness on such Notes not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any, on) and interest on the
Securities to the date of such deposit (in the case of Securities that have
become due and payable) or to the Stated Maturity or redemption date, as
the case may be;
(b) the Issuer has paid or caused to be paid all sums payable under
the Indenture by the Issuer; and
(c) the Issuer has delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided in the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of the Indenture, certain
obligations of the Issuer shall survive.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange New Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer is not required to transfer or exchange
any New Note selected for redemption or repurchase. Also, the Issuer is not
required to transfer or exchange any New Note for a period of 15 days before a
selection of Notes to be redeemed or before any repurchase offer.
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The New Notes will be issued in registered form and the registered Holder
of a New Note will be treated as the owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the New Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes), and any existing default or compliance with any provision of
the Indenture or the New Notes may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of, change the fixed maturity of any Note,
reduce any premium payable upon optional redemption of the Notes or otherwise
alter the provisions with respect to the redemption or repurchase of the Notes
(other than provisions relating to the covenants described above under the
caption " -- Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) impair the rights of
Holders of Notes to receive payments of principal of or premium, if any, or
interest or Liquidated Damages on the Notes, (vii) make any change in the
foregoing amendment and waiver provisions, (viii) except for releases of
Guarantors as permitted by the Indenture, make any change to the Note Guarantees
in any manner that adversely affects the rights of the Holders or (ix) make any
change to the subordination provisions of the Indenture that adversely affects
the rights of the Holders.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuer and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to provide for the assumption of
the Issuer's or any Guarantor's obligations to Holders of Notes in the case of a
merger, consolidation or sale of assets, to release any Note Guarantee in
accordance with the provisions of the Indenture to provide for additional
Guarantors, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, or, subject to certain exceptions, to make any
change to certain provisions of the Indenture and the exhibits thereto that
applies only to Additional Notes.
Notwithstanding anything to the contrary contained above, no amendment,
waiver or supplement to the Indenture shall be made so as to adversely affect
the rights of any holder of Senior Debt without the consent of such holder.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Issuer, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as Note or otherwise. The Trustee will be permitted to engage in
other transactions; however, if the Trustee acquires any conflicting interest
the Trustee must eliminate such conflict within 90 days, apply to the Commission
for permission to continue or resign.
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The Indenture provides that in case an Event of Default shall occur (which
shall not be cured), the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to the Issuer at the
following address: Werner Holding Co. (DE), Inc., 1105 North Market Street,
Suite 1300, Wilmington, Delaware 19899.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of, such
other Person's merging with or into or becoming a Restricted Subsidiary of such
specified Person (provided such Person is not formed for the purpose of
incurring such Indebtedness and is engaged in a bona fide business prior to
incurring such Indebtedness or has material assets other than cash), and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person, (ii) any other Person that owns, directly or
indirectly, 5% or more of such specified Person's Voting Stock or (iii) any
Person who is a director or officer (a) of such Person, (b) of any Subsidiary of
such Person or (c) of any Person described in clause (i) or (ii) above. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including by way of a sale and leaseback) (provided that
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Issuer and its Restricted Subsidiaries taken as a whole will
be governed by the provisions of the Indenture described above under the caption
" -- Certain Covenants - Merger, Consolidation or Sale of all or Substantially
all Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Issuer or any of its Restricted Subsidiaries of Equity
Interests of any of the Issuer's Subsidiaries (other than director's qualifying
shares), in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, (1) the following will not be Asset
Sales: (i) a transfer of assets by the Issuer to a Restricted Subsidiary or by a
Restricted Subsidiary to the Issuer or to another Restricted Subsidiary, (ii) an
issuance of Equity Interests by a Restricted Subsidiary to the Issuer or to
another Restricted Subsidiary, (iii) a contribution, transfer or other
disposition of Receivables in connection with a Receivables Facility provided
consideration in an amount at least equal to the fair market value of such
Receivables is received, directly or indirectly, by the Issuer or any of its
Restricted Subsidiaries, provided further that all the net cash proceeds of any
Receivables Facility are remitted to the Issuer or any Restricted Subsidiary,
(iv) a Restricted Payment or Permitted Investment that is permitted by the
covenant described above under the caption " -- Certain Covenants -- Restricted
Payments" (including any formation of or contribution of assets to a joint
venture), (v) leases or subleases, in the ordinary course of business, to third
parties of real property owned in fee or leased by the Issuer or its
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Subsidiaries, (vi) a disposition, in the ordinary course of business, of a lease
of real property, (vii) any disposition of property of the Issuer or any of its
Subsidiaries that, in the reasonable judgment of the Issuer, has become
uneconomic, obsolete or worn out, (viii) any disposition of property or assets
(including any disposition of inventory and any licensing agreements) in the
ordinary course of business, other than in connection with a Receivables
Facility, (ix) the sale of Cash Equivalents, Permitted Insurance Company
Investments and Investment Grade Securities, (x) any exchange of like property
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, and
(xi) any sale of life insurance policies to certain management personnel
pursuant to the Recapitalization Agreement in an approximate amount not to
exceed $2.0 million and (2) subject to clause (1)(iii), the term "Asset Sale"
shall include a contribution or other transfer of Receivables to, or a
disposition of Receivables by, an Unrestricted Subsidiary in connection with a
Receivables Facility of the Issuer and its Restricted Subsidiaries.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person, or any authorized committee of the Board of Directors
of such Person.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any similar participation in profits and losses or equity of a Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any commercial bank or trust company having capital
and surplus in excess of $300 million, (iv) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution meeting
the qualifications specified in clause (iii) above, (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc. ("S&P") and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95% of their assets in securities
of the types described in clauses (ii)-(v) above, (vii) readily marketable
direct obligations issued by any state of the United States of America or any
political subdivision thereof having one of the two highest rating categories
obtainable from either Moody's or S&P and (viii) Indebtedness with a rating of
"A" or higher from S&P or "A2" or higher from Moody's.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Hedging Agreements" means any futures contract or other similar
agreement or arrangement designed to protect the Issuer or any Subsidiary
against fluctuations in commodities prices.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period (A) plus, to the
extent deducted in computing such Consolidated Net Income, (i) Fixed Charges and
the amortization of debt issuance costs, commissions, fees and expenses of such
Person and its Restricted Subsidiaries for such period, (ii) provision for taxes
based on income or profits (including franchise taxes) of such Person and its
Restricted Subsidiaries for such
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period, (iii) depreciation and amortization expense, including amortization of
inventory write-up under APB 16, amortization of intangibles (including goodwill
and the non-cash costs of Interest Rate Agreements, Commodity Hedging Agreements
or Currency Agreements, license agreements and non-competition agreements),
non-cash amortization of Capital Lease Obligations, and organization costs, (iv)
non-cash expenses related to the amortization of management fees paid on or
prior to the Closing Date, (v) expenses and charges related to any equity
offering or incurrence of Indebtedness permitted to be incurred by the Indenture
(including any such expenses or charges relating to the Recapitalization), (vi)
the amount of any restructuring charge or reserve, (vii) unrealized gains and
losses from hedging, foreign currency or commodities translations and
transactions, (viii) expenses consisting of internal software development costs
that are expensed during the period but could have been capitalized in
accordance with GAAP, (ix) any write-downs, write-offs, and other non-cash
charges and expenses (excluding insurance reserves), (x) the amount of any
minority interest expense of Restricted Subsidiaries, and (xi) costs of surety
bonds in connection with financing activities, and (B) minus (x) non-cash items
increasing such Consolidated Net Income for such period and (y) any cash payment
or expense (excluding cash payments on account of insurance claims) for which a
reserve or charge of the kind described in the clause (vi), (ix) or (x) above
was taken previously during such period.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Restricted Subsidiary of such Person, (ii) the
Net Income of any Restricted Subsidiary (other than an Insurance Subsidiary)
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, prohibited by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders unless such restriction with respect to the
payment of dividends has been permanently waived, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iv) the cumulative effect of a
change in accounting principles shall be excluded (effected either through
cumulative effect adjustment or a retroactive application, in each case, in
accordance with GAAP), (v) to the extent deducted in determining Net Income, the
fees, expenses and other costs incurred in connection with the Recapitalization,
including payments to management contemplated by the Recapitalization Agreement,
in each case, to the extent that such fee, expense or cost was disclosed in the
Prospectus, shall be excluded, (vi) any unrealized gains or losses with respect
to Investments held in the insurance business of any Restricted Subsidiary shall
be excluded and (vii) with respect to periods prior to the Recapitalization
Closing Date, Consolidated Net Income shall include (without duplication) (A)
all adjustments relating to MIICA investment income (loss) reflected in the
calculation of EBITDA set forth in note (d) in the Notes to Unaudited Pro Forma
Condensed Consolidated Statements of Operations set forth in "Unaudited Pro
Forma Condensed Consolidated Financial Statements" and (B) all adjustments
relating to reductions in management compensation, non-recurring expenses, MIICA
investment income, non-recurring employee separation charges and non-recurring
private company expenses, in each case reflected in the calculation of Adjusted
EBITDA set forth in footnote (a) to the "Summary Historical and Pro Forma
Financial Information."
"Credit Facilities" means, with respect to the Issuer, one or more debt
facilities (including the Senior Credit Facility) or commercial paper facilities
with banks, insurance companies or other institutional lenders providing for
revolving credit loans, term loans, notes, receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from or issue securities to such lenders against such
receivables) or letters of credit or other credit facilities, in each
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case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement to which the Issuer or any
Subsidiary is a party or of which it is a beneficiary.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Senior Credit Facility and (ii) any other Senior Debt permitted under the
Indenture the principal amount of which is $10.0 million or more and that has
been designated by the Issuer or any Guarantor as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than as a result of a
Change of Control), matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that if such Capital Stock is issued
to any plan for the benefit of employees of the Issuer or its Subsidiaries or by
any such plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Issuer in order to satisfy applicable statutory or regulatory obligations.
"Domestic Subsidiary" means any Restricted Subsidiary of the Issuer other
than a Foreign Subsidiary.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Issuer and its Restricted
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the Recapitalization Closing Date, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings or any Receivables Facility, and net payments (if
any) pursuant to Hedging Obligations relating to Interest Rate Agreements or
Currency Agreements with respect to Indebtedness, excluding, however, (A)
amortization of debt issuance costs, commissions, fees and expenses, (B)
customary commitment, administrative and transaction fees and charges) and (C)
expenses attributable to letters of credit or similar arrangements supporting
insurance certificates issued to customers in the ordinary course of business,
(ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, (iii) any interest expense
on Indebtedness of another Person that is Guaranteed by such Person or one of
its Restricted Subsidiaries or secured by a Lien on assets of such Person or one
of its Restricted Subsidiaries (whether or not or, in the case of Indebtedness
of a Foreign Subsidiary, at any time after such, Guarantee or Lien is called
upon), (iv) all dividend payments, whether or not in cash, on any series of
preferred stock of any Restricted Subsidiary of such Person, (v) all dividend
payments, whether or not in cash, on any series of preferred stock of such
person other than dividend payments or accruals payable solely in Equity
Interests (other than Disqualified Stock) of such Person, in each case, on a
consolidated basis and in accordance with GAAP and (vi) commissions, discounts
and other fees and charges incurred in connection with a Receivables Facility of
the Issuer or any Restricted Subsidiary.
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"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Issuer or any
of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. For purposes of
making the computation referred to above, Investments in Restricted
Subsidiaries, acquisitions, dispositions, mergers and consolidations that have
been made by the Issuer or any of its Restricted Subsidiaries during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date, and discontinued operations determined in
accordance with GAAP on or prior to the Calculation Date, shall be given effect
on a pro forma basis assuming that all such Investments in Restricted
Subsidiaries, acquisitions, dispositions, mergers and consolidations or
discontinued operations (and the reduction or increase of any associated fixed
charge obligations and the change in Consolidated Cash Flow resulting therefrom)
had occurred on the first day of the four-quarter reference period. If since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary
since the beginning of such period) shall have made any Investment in a
Restricted Subsidiary, acquisition, disposition, merger or consolidation or
determined a discontinued operation, that would have required adjustment
pursuant to this definition, then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect thereto for such period as if such
Investment, acquisition, disposition, merger or consolidation or discontinued
operations had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to a
transaction, the pro forma calculations shall be made in good faith by a
responsible financial or accounting officer of the Issuer. If any Indebtedness
to which pro forma effect is given bears interest at a floating rate, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the Calculation Date had been the applicable interest rate for the
entire period (taking into account any Interest Rate Agreement in effect on the
Calculation Date). Interest on a Capital Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined by a responsible financial or
accounting officer of the Issuer to be the rate of interest implicit in such
Capital Lease Obligation in accordance with GAAP. Interest on Indebtedness that
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 rate, shall be
deemed to have been based upon the rate actually chosen, or, if none, then based
upon such optional rate chosen as the Issuer may designate.
"Foreign Subsidiary" means any Subsidiary of the Issuer formed under the
laws of any jurisdiction other than the United States or any political
subdivision thereof substantially all of the assets of which are located outside
of the United States or that conducts substantially all of its business outside
of the United States.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those 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 have been approved by a significant segment of the accounting
profession. All ratios and computations based on GAAP contained in the Indenture
shall be computed in conformity with GAAP as in effect as of the
Recapitalization Closing Date.
"Government Notes" means direct obligations of, or obligations guaranteed
by, the United States of America for the payment of which guarantee or
obligations the full faith and credit of the United States is pledged.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Indebtedness.
"Guarantors" means each of (i) Holding, (ii) the Issuer's Restricted
Subsidiaries on the Recapitalization Closing Date other than any (A) Foreign
Subsidiary or (B) Insurance Subsidiary and (iii) any other Restricted Subsidiary
of the Issuer that executes a Note Guarantee in accordance with the provisions
of the Indenture, and their respective successors and assigns, in each case
until released from its Note Guarantee in accordance with the terms of the
Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under Interest Rate Agreements, Currency Agreements or Commodity
Hedging Agreements.
"Holding" means Werner Holding Co. (PA), Inc.
"Indebtedness" means, with respect to any Person (without duplication), (i)
any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
banker's acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property, which purchase price
is due more than six months after the date of placing such property in service
or taking delivery thereof, or representing any Hedging Obligations, except any
such balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, (ii) all indebtedness under clause (i)
of other Persons secured by a Lien on any asset of such Person (whether or not
such indebtedness is assumed by such Person) and (iii) to the extent not
otherwise included, the Guarantee by such Person of any indebtedness under
clause (i) of any other Person; provided, however, that Indebtedness shall not
include (a) any servicing or guarantee of servicing obligations with respect to
Receivables, (b) obligations of the Issuer or any of its Restricted Subsidiaries
arising from agreements of the Issuer or a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or a Subsidiary, other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or a Subsidiary for
the purpose of financing such acquisition; provided, however, that (x) such
obligations are not reflected on the balance sheet of the Issuer or any
Restricted Subsidiary (contingent obligations referred to in a footnote to
financial statements and not otherwise reflected on the balance sheet will not
be deemed to be reflected on such balance sheet for purposes of this clause (x))
and (y) the maximum assumable liability in respect of all such obligations shall
at no time exceed the gross proceeds including noncash proceeds (the fair market
value of such noncash proceeds being measured at the time received and without
giving effect to any subsequent changes in value) actually received by the
Issuer and its Restricted Subsidiaries in connection with such disposition; or
(c) obligations in respect of performance and surety bonds and completion
guarantees provided by the Issuer or any Restricted Subsidiary in the ordinary
course of business. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest, and (ii) the principal amount
thereof in the case of any other Indebtedness.
"Insurance Subsidiary" means MIICA and its Subsidiaries that are engaged in
the insurance business or any business incidental thereto.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, repurchase agreement, futures contract or other financial
agreement or arrangement designed to protect the Issuer or any Subsidiary
against fluctuations in interest rates.
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"Investment Grade Securities" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Issuer and
its Subsidiaries, and (iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii) which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations, but
excluding advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person), advances
or capital contributions (excluding commission, travel, payroll, entertainment,
relocation and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Issuer or any Subsidiary of the Issuer sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Issuer such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Issuer, the Issuer 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 Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption " -- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement or any lease
in the nature thereof); provided that in no event shall an operating lease be
deemed to constitute a Lien.
"Management Group" means the senior management of the Issuer or the
Restricted Subsidiaries of the Issuer.
"MIICA" means Manufacturers Indemnity and Insurance Company of America or
any successor thereto.
"Net Income" means, with respect to any Person and any period, the net
income (or loss) of such Person for such period, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however, (i) any extraordinary or non-recurring gains or losses or
charges and gains or losses or charges from the sale of assets outside the
ordinary course of business, together with any related provision for taxes on
such gain or loss or charges and (ii) deferred financing costs written off in
connection with the early extinguishment of Indebtedness; provided, however,
that Net Income shall be deemed to include any increases during such period to
shareholder's equity of such Person attributable to tax benefits from net
operating losses and the exercise of stock options that are not otherwise
included in Net Income for such period.
"Net Proceeds" means the aggregate cash proceeds received by the Issuer or
any of its Restricted Subsidiaries in respect of any Asset Sale (including any
cash received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale), net of the direct costs relating to such Asset Sale
(including legal, accounting and investment banking fees, and brokerage and
sales commissions) and any relocation expenses incurred as a result thereof,
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
applied to the repayment of principal, premium (if any) and interest on
Indebtedness that is not subordinated to the Notes required (other than required
by clause (a) of the second para-
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graph of " -- Repurchase at the Option of Holders -- Asset Sales") to be paid as
a result of such transaction, all distributions and other payments required to
be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Sale, and any deduction of appropriate amounts to be
provided by the Issuer as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by the Issuer after such sale or other disposition thereof, including
pension and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuer
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness) or (b) is directly or indirectly liable (as a guarantor or
otherwise); and (ii) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness (other than the Notes being offered hereby) of the Issuer or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Issuer or any of its Restricted Subsidiaries; provided that, notwithstanding the
foregoing, the Issuer and any of its other Subsidiaries that sell Receivables to
the Person incurring such Indebtedness shall be allowed to provide such
representations, warranties, covenants and indemnities as are customarily
required in such transactions so long as no such representations, warranties,
covenants or indemnities constitute a Guarantee of payment or recourse against
credit losses.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages, guarantees and other liabilities
payable under the documentation governing any Indebtedness, in each case whether
now or hereafter existing, renewed or restructured, whether or not from time to
time decreased or extinguished and later increased, created or incurred, whether
or not arising on or after the commencement of a proceeding under Title 11, U.S.
Code or any similar federal or state law for the relief of debtors (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.
"Pari Passu Indebtedness" means any Indebtedness of the Issuer or any
Guarantor that ranks pari passu with the New Notes or the Note Guarantee of such
Guarantor, as applicable.
"Permitted Business" means the climbing equipment, extruded products and
fabricated products businesses and any other business reasonably related,
complementary or incidental to any of those businesses (including any related
insurance business).
"Permitted Insurance Company Investments" means Investments in (a) Cash
Equivalents; (b) Investment Grade Securities; and (c) other types of debt and
equity securities, real estate or other Investments; provided, however, that (i)
the aggregate amount of all Permitted Insurance Company Investments referred to
in clause (c) shall not, at the time any such Investment is made, exceed 40% of
all outstanding Permitted Insurance Company Investments, and (ii) MIICA shall at
all times have an investment policy approved from time to time by the Board of
Directors of the Issuer or MIICA pursuant to which all Permitted Insurance
Company Investments shall be required to be made.
"Permitted Investments" means (a) any Investment in the Issuer or in a
Restricted Subsidiary (including in any Equity Interests of a Restricted
Subsidiary); (b) any Investment in Cash Equivalents or Investment Grade
Securities; (c) any Investment by the Issuer or any Restricted Subsidiary of the
Issuer in a Person, if as a result of such Investment (i) such Person becomes a
Restricted Subsidiary or (ii) such Person, in one transaction or a series of
substantially concurrent related transactions, is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Issuer or a Restricted Subsidiary; (d) any
securities received or other Investments made as a result of the receipt of
non-cash consideration from an Asset Sale that was
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made pursuant to and in compliance with the covenant described above under the
caption " -- Repurchase at the Option of Holders - Asset Sales" or in connection
with any other disposition of assets not constituting an Asset Sale; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Issuer or Holding; (f) any Investments
relating to a Receivables Subsidiary; (g) loans or advances to employees (or
guarantees of third party loans to employees) in the ordinary course of
business; (h) stock, obligations or securities received in satisfaction of
judgments or settlement of debts; (i) receivables owing to the Issuer or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms (including
such concessionary terms as the Issuer or such Restricted Subsidiary deems
reasonable); (j) any Investment existing on the Recapitalization Closing Date;
(k) Investments in Interest Rate Agreements, Currency Agreements and Commodity
Hedging Agreements otherwise permitted under the Indenture; (l) any transaction
to the extent it constitutes an Investment that is permitted and made in
accordance with the provisions of clause (13) of the last sentence of the
covenant described under the caption " -- Certain Covenants -- Transactions with
Affiliates"; (m) any Investment in a Permitted Business having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (m) that are at that time outstanding, not to exceed 15.0% of Total
Assets at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); (n) Permitted Insurance Company Investments; and
(o) additional Investments having an aggregate fair market value, taken together
with all other Investments made pursuant to this clause (o) that are at that
time outstanding, not to exceed 10.0% of Total Assets at the time of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value).
"Permitted Junior Securities" shall mean debt or equity securities of the
Issuer any Guarantor or any successor corporation to the Issuer or such
Guarantor issued pursuant to a plan of reorganization or readjustment of the
Issuer or such Guarantor that are subordinated to the payment of all then
outstanding Senior Debt of the Issuer or such Guarantor, as applicable at least
to the same extent that (i) in the case of the Issuer, the New Notes are
subordinated to the payment of all Senior Debt of the Issuer on the
Recapitalization Closing Date, and (ii) in the case of such Guarantor, that the
Note Guarantee of such Guarantor is subordinated to the payment of Senior Debt
of such Guarantor on the Recapitalization Closing Date, so long as (i) the
effect of the use of this defined term in the subordination provisions described
under the caption "Subordination" is not to cause the New Notes or the Note
Guarantees, as applicable to be treated as part of (a) the same class of claims
as the Senior Debt of the Issuer or such Guarantor, as applicable or (b) any
class of claims pari passu with, or senior to, the Senior Debt for any payment
or distribution in any case or proceeding or similar event relating to the
liquidation, insolvency, bankruptcy, dissolution, winding up or reorganization
of the Issuer and (ii) to the extent that any Senior Debt of the Issuer or such
Guarantor, as applicable outstanding on the date of consummation of any such
plan of reorganization or readjustment are not paid in full in cash on such
date, either (a) the holders of any such Senior Debt not so paid in full in cash
have consented to the terms of such plan of reorganization or readjustment or
(b) such holders receive securities which constitute Senior Debt of the Issuer
or such Guarantor, as applicable and which have been determined by the relevant
court to constitute satisfaction in full in money or money's worth of any Senior
Debt not paid in full in cash.
"Permitted Liens" means (i) Liens securing Senior Debt of the Issuer or a
Restricted Subsidiary that was permitted by the terms of the Indenture to be
incurred; (ii) Liens in favor of the Issuer or any Restricted Subsidiary; (iii)
Liens on property of a Person existing at the time such Person is merged into or
consolidated with the Issuer or any Restricted Subsidiary of the Issuer;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Issuer or a Restricted Subsidiary,
as the case may be; (iv) Liens on property existing at the time of acquisition
thereof by the Issuer or any Restricted Subsidiary of the Issuer, provided that
such Liens were in existence prior to the contempla-
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tion of such acquisition and do not extend to any assets other than those
acquired; (v) Liens to secure the performance of bids, tenders, trade or
government contracts (other than for borrowed money), leases, licenses,
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
without limitation of clause (i), Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (iv) of the second paragraph of
the covenant entitled " -- Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with such Indebtedness; (vii) Liens
existing on the Recapitalization Closing Date; (viii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings, provided that
any reserve or other appropriate provision as shall be required in conformity
with GAAP shall have been made therefor; (ix) Liens on Receivables to reflect
sales of Receivables to and by a Receivables Subsidiary pursuant to a
Receivables Facility or securing Indebtedness permitted by paragraph (ix) of the
covenant described under the caption " -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock;" (x) Liens incurred in the
ordinary course of business of the Issuer or any Restricted Subsidiary of the
Issuer with respect to obligations that do not exceed $5.0 million 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 Issuer or such Restricted Subsidiary; (xi)
carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business in respect of
obligations that are not yet due or that are bonded or that are being contested
in good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Issuer or such Restricted Subsidiary,
as the case may be, in accordance with GAAP; (xii) pledges or deposits in
connection with workmen's compensation, unemployment insurance and other social
security legislation; (xiii) easements (including reciprocal easement
agreements), rights-of-way, building, zoning and similar restrictions, utility
agreements, covenants, reservations, restrictions, encroachments, changes, and
other similar encumbrances or title defects incurred, or leases or subleases
granted to others, in the ordinary course of business, that do not in the
aggregate materially detract from the aggregate value of the properties of the
Issuer and its Subsidiaries, taken as a whole, or in the aggregate materially
interfere with or adversely affect in any material respect the ordinary conduct
of the business of the Issuer and its Subsidiaries on the properties subject
thereto, taken as a whole; (xiv) Liens on goods (and the proceeds thereof) and
documents of title and the property covered thereby securing Indebtedness in
respect of commercial letters of credit; (xv) (A) mortgages, liens, security
interests, restrictions, encumbrances or any other matters of record that have
been placed by any developer, landlord or other third party on property over
which the Issuer or any Restricted Subsidiary of the Issuer has easement rights
or on any real property leased by the Issuer on the Recapitalization Closing
Date and subordination or similar agreements relating thereto and (B) any
condemnation or eminent domain proceedings affecting any real property; (xvi)
leases or subleases to third parties; (xvii) Liens in connection with workmen's
compensation obligations and general liability exposure of the Issuer and its
Restricted Subsidiaries; (xviii) Liens arising by reason of a judgment, decree
or court order, to the extent not otherwise resulting in an Event of Default;
(xix) Liens securing Hedging Obligations entered into in the ordinary course of
business; (xx) without limitation of clause (i), Liens securing Refinancing
Indebtedness permitted to be incurred under the Indenture or amendments or
renewals of Liens that were permitted to be incurred, provided, in each case,
that such Liens do not extend to an additional property or asset; and (xxi)
Liens that secure Indebtedness of a Person existing at the time such Person
becomes a Restricted Subsidiary of the Issuer, provided that such Liens do not
extend to any assets other than those of the Person that became a Restricted
Subsidiary of the Issuer.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuer
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Issuer or any of its Restricted Subsidiaries
incurred in compliance with the Indenture; provided that: (i) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or
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accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable premium and fees and expenses incurred in connection therewith);
(ii) in the case of term Indebtedness, principal payments required under such
Permitted Refinancing Indebtedness have a Stated Maturity no earlier than the
Stated Maturity of those under the Indebtedness being refinanced and such
Permitted Refinancing Indebtedness has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the New Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and is subordinated in right of payment to, the New Notes on terms at
least as favorable to the Holders of New Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Issuer or by its Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Receivables" means, collectively, (a) the Indebtedness and other
obligations owed to the Issuer or any of its Subsidiaries (before giving effect
to any sale or transfer thereof pursuant to a Receivables Facility), whether
constituting an account, chattel paper, an instrument, a document or general
intangible, arising in connection with the sale of goods, insurance and/or
services by the Issuer or such Subsidiary, including the obligation to pay any
late fees, interest or other finance charges with respect thereto (each of the
foregoing, collectively, an "Account Receivable" ), (b) all of the Issuer's or
such Subsidiary's interest in the goods (including returned goods), if any, the
sale of which gave rise to any Account Receivable, and all insurance contracts
with respect thereto, (c) all other security interests or Liens and property
subject thereto from time to time, if any, purporting to secure payment of any
Account Receivable, together with all financing statements and security
agreements describing any collateral securing such Account Receivable, (d) all
Guarantees, insurance and other agreements or arrangements of whatever character
from time to time supporting or securing payment of any Account Receivable, (e)
all contracts, invoices, books and records of any kind related to any Account
Receivable, (f) all cash collections in respect of, and cash proceeds of, any of
the foregoing and any and all lockboxes, lockbox accounts, collection accounts,
concentration accounts and similar accounts in or into which such collections
and cash proceeds are now or hereafter deposited, collected or concentrated, and
(g) all proceeds of any of the foregoing.
"Receivables Facility" means, with respect to any Person, any Receivables
securitization or factoring program pursuant to which such Person receives
proceeds pursuant to a sale, pledge or other encumbrance of its Receivables. A
Receivables Facility involving the sale, pledge or other encumbrance of
Receivables of, and the direct or indirect receipt of the proceeds thereof by,
the Issuer or any Restricted Subsidiary thereof shall constitute a Receivables
Facility of the "Issuer" and/or its "Restricted Subsidiaries" whether or not as
part of such securitization or factoring program such Receivables are initially
contributed or otherwise transferred to an Unrestricted Subsidiary of the Issuer
(and then resold or encumbered by such Unrestricted Subsidiary).
"Receivables Financing Amount" means at any date, with respect to any
Receivables Facility of any Person that does not represent an incurrence of
Indebtedness, the sum on such date of (a) the aggregate uncollected balances of
Accounts Receivable (as defined in the definition of "Receivables") transferred
("Transferred Receivables") in such Receivables Facility plus (b) the aggregate
amount of all collections of Transferred Receivables theretofore received by
such Person but not yet remitted to the purchaser, net of all reserves and
holdbacks retained by or for the benefit of the purchaser and net of any
interest retained by such Person and reasonable costs and expenses (including
fees and commissions and taxes other than income taxes) incurred by such Person
in connection therewith and not payable to any Affiliate of such Person.
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"Receivables Subsidiary" means any Subsidiary created primarily to purchase
or finance the receivables of the Issuer and/or its Subsidiaries pursuant to a
Receivables Facility, so long as it: (a) has no Indebtedness other than
Non-Recourse Debt and (b) is a Person with respect to which neither the Issuer
nor any of its other Subsidiaries has any direct obligation to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results other than to act as servicer of
Receivables. If, at any time, such Receivables Subsidiary would fail to meet the
foregoing requirements as a Receivables Subsidiary, it shall thereafter cease to
be a Receivables Subsidiary for purposes of the Indenture and any Indebtedness
of such Receivables Subsidiary shall be deemed to be incurred by a Subsidiary of
the Issuer as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
" -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," the Issuer shall be in default of such covenant).
"Representative" means any 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.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Secured Debt" means any Indebtedness of the Issuer or any Guarantor
secured by a Lien.
"Senior Credit Facility" means the Credit Agreement expected to be dated as
of November 24,1997 among the Issuer and the financial institutions named
therein, and any related notes, collateral documents, letters of credit and
guarantees, including any appendices, exhibits or schedules to any of the
foregoing (as the same may be in effect from time to time), in each case, as
such agreements may be amended, modified, supplemented or restated from time to
time, or refunded, refinanced, restructured, replaced, renewed, repaid or
extended from time to time (whether with the original agents and lenders or
other agents or lenders or otherwise, and whether provided under the original
credit agreement or other credit agreements or otherwise).
"Senior Debt" means (i) all Indebtedness of the Issuer or any Guarantor
outstanding under the Senior Credit Facility and all Hedging Obligations with
respect thereto, (ii) any other Indebtedness (including Acquired Debt) permitted
to be incurred by the Issuer or any Guarantor under the terms of the Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to the
Notes or the relevant Note Guarantee and (iii) all Obligations with respect to
the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (v) any liability for federal, state, local or other taxes
owed or owing by the Issuer, (w) any Indebtedness of the Issuer or any Guarantor
to any of its Subsidiaries or other Affiliates (other than Indebtedness under
any Credit Facility to any such Affiliate), (x) any trade payables, (y) that
portion of Indebtedness incurred in violation of the covenant described above
under "Incurrence of Indebtedness and Preferred Stock" (but as to any such
Indebtedness under any Credit Facility, no such violation shall be deemed to
exist for purposes of this clause (y) if the lenders have obtained a
representation from a responsible financial officer of the Issuer to the effect
that the issuance of such Indebtedness does not violate such covenant) or (z)
any Indebtedness or obligation of the Issuer or any Guarantor which is expressly
subordinated in right of payment to any other Indebtedness or obligation of the
Issuer or such Guarantor, as applicable, including any Subordinated Debt.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such regulation is in effect on the Closing
Date.
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"Specified Affiliate Payments" means: (i) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Issuer
or any Restricted Subsidiary of the Issuer, or amounts paid to Holding on
account of any such acquisition or retirement for value of any Equity Interests
of Holding, held by any future, present or former employee, director, officer or
consultant of Holding or the Issuer (or any of its Restricted Subsidiaries)
pursuant to any management equity subscription agreement, stock option
agreement, put agreement, stockholder agreement or similar agreement that may be
in effect from time to time; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$3.0 million in any calendar year (with unused amounts in any calendar year
being carried over to succeeding calendar years subject to a maximum amount of
repurchases, redemptions or other acquisitions pursuant to this clause (i)
(without giving effect to the immediately following proviso) of $10.0 million in
any calendar year) and no payment default on Senior Debt or the Notes shall have
occurred and be continuing; provided further that such amount in any calendar
year may be increased by an amount not to exceed (A) the cash proceeds received
by the Issuer (including by way of capital contribution) since the
Recapitalization Closing Date from the sale of Equity Interests of Holding or
the Issuer to employees, directors, officers or consultants of Holding, the
Issuer or their respective Subsidiaries that occurs in such calendar year (it
being understood that such cash proceeds shall be included in clause (c)(ii) of
the first paragraph under the covenant described under the caption " -- Certain
Covenants -- Restricted Payments") plus (B) the cash proceeds from key man life
insurance policies received by the Issuer and its Restricted Subsidiaries in
such calendar year (including proceeds from the sale of such policies to the
person insured thereby); and provided further that cancellation of Indebtedness
owing to the Issuer from employees, directors, officers or consultants of the
Issuer or any of its Subsidiaries in connection with a repurchase of Equity
Interests of the Issuer will not be deemed to constitute a Restricted Payment
for purposes of the Indenture; (ii) repurchases of Equity Interests deemed to
occur upon exercise of stock options or warrants as a result of the payment of
all or a portion of the exercise price of such options or warrants with Equity
Interests; (iii) payments by the Issuer or Holding to members of management of
the Issuer and its Subsidiaries in connection with the Recapitalization to the
extent disclosed in this Prospectus; (iv) payments or other transactions
permitted under clauses (8) and (11) of the second sentence of the covenant
described under " -- Certain Covenants -- Transaction with Affiliates;" and (v)
dividends, other distributions or other amounts paid by the Issuer to Holding
(A) in amounts equal to amounts required for Holding to pay franchise taxes and
other expenses required to maintain its corporate existence and provide for
other operating costs of up to $750,000 per fiscal year or (B) to pay, or
reimburse Holding for, the costs, fees and expenses incident to a registration
of any of the Capital Stock of Holding for a primary offering under the
Securities Act, so long as the net proceeds (after payment of additional
contingent amounts then due and payable on account of Market Participation
Rights) of such offering (if it is completed) are contributed to, or otherwise
used for the benefit of, the Issuer.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness, and shall not include any contingent obligations to repay,
redeem or repurchase any such interest or principal prior to the date scheduled
for the payment thereof.
"Subordinated Debt" means any Indebtedness of the Issuer or any Guarantor
(whether outstanding on the Recapitalization Closing Date or thereafter
incurred) that is subordinate or junior in right of payment to the New Notes or
the applicable Note Guarantee pursuant to written agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
108
<PAGE> 110
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Total Assets" means, at any time, the total consolidated assets of the
Issuer and its Restricted Subsidiaries at such time. For the purposes of
paragraph (iv) of the covenant described under the caption " -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," Total
Assets shall be determined giving pro forma effect to the lease, acquisition,
construction or improvement of the assets being leased, acquired, constructed or
improved with the proceeds of the relevant Indebtedness.
"Unrestricted Subsidiary" means (i) any Receivables Subsidiary in existence
on the Recapitalization Closing Date, (ii) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, and (iii) any Subsidiary of an Unrestricted Subsidiary; but in the
case of any Subsidiary referred to in clause (ii) (or any Subsidiary of any such
Subsidiary) only to the extent that such Subsidiary: (a) except in the case of a
Foreign Subsidiary, has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Issuer
or any Restricted Subsidiary of the Issuer unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Issuer or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Issuer; (c) except in the case
of a Foreign Subsidiary, is a Person with respect to which neither the Issuer
nor any of its Restricted Subsidiaries has any direct or indirect obligation (x)
to subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Issuer or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
" -- Certain Covenants -- Restricted Payments." If, at any time, any
Unrestricted Subsidiary referred to in clause (ii) of the first sentence of this
definition (or any Subsidiary thereof) would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Issuer as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
" -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," the Issuer shall be in default of such covenant). The Board of Directors
of the Issuer may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Issuer of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the covenant
described under the caption " -- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
109
<PAGE> 111
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
110
<PAGE> 112
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Gibson, Dunn & Crutcher LLP, The following discussion of
the material United States federal income tax consequences of the Exchange Offer
is for general information only. It is based on the Internal Revenue Code of
1986, as amended to the date hereof (the "Code"), existing and proposed Treasury
regulations, and judicial and administrative determinations, all of which are
subject to change at any time, possibly on a retroactive basis. The following
relates only to Old Notes, and New Notes received therefor, that are held as
"capital assets" within the meaning of Section 1221 of the Code by persons who
are citizens or residents of the United States. It does not discuss state,
local, or foreign tax consequences, nor does it discuss tax consequences to
categories of holders that are subject to special rules, such as foreign
persons, tax-exempt organizations, insurance companies, banks, and dealers in
stocks and securities. Tax consequences may vary depending on the particular
status of an investor. No rulings will be sought from the Internal Revenue
Service ("IRS") with respect to the federal income tax consequences of the
Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO PURCHASE THE NOTES.
EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION
OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION
BEFORE DETERMINING WHETHER TO PURCHASE THE NOTES.
THE EXCHANGE OFFER
In the opinion of Gibson, Dunn & Crutcher LLP, counsel for the Company, the
exchange of Old Notes for New Notes pursuant to the Exchange Offer will not
constitute a material modification of the terms of the Notes and, accordingly,
such exchange will not constitute an exchange for federal income tax purposes.
Accordingly, such exchange will have no federal income tax consequences to
holders of Notes, either those who exchange or those who do not, and each holder
of Notes will continue to be required to include interest on the Notes in its
gross income in accordance with its method of accounting for federal income tax
purposes and the Company intends, to the extent required, to take such position.
BACKUP WITHHOLDING
Under the Code, a holder of a Note may be subject, under certain
circumstances, to "backup withholding" at a 31% rate with respect to payments in
respect of interest thereon or the gross proceeds from the disposition thereof.
This withholding generally applies only if the holder (i) fails to furnish his
or her social security or other taxpayer identification number ("TIN") within a
reasonable time after request therefor, (ii) furnishes an incorrect TIN, (iii)
is notified by the IRS that he or she has failed to report properly payments of
interest and dividends and the IRS has notified the Company that he or she is
subject to backup withholding, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's federal
income tax liability, provided that the required information is furnished to the
IRS. Corporations and certain other entities described in the Code and Treasury
regulations are exempt from such withholding if their exempt status is properly
established.
111
<PAGE> 113
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Issuer 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. In
addition, until , 1998 (90 days after the date of this Prospectus),
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
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 at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Issuer 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 Issuer has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the holders of the Old
Notes), other than commissions or concessions of any brokers or dealers, and
will indemnify the holders of the Old Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
BOOK-ENTRY, DELIVERY AND FORM
GLOBAL NOTE
Except as set forth below, the New Notes will initially be issued in the
form of one or more permanent global Notes in definitive, fully registered form
without interest coupons (each, a "Global Note"). Upon issuance, each Global
Note will be deposited with the Trustee as custodian for, and registered in the
name of, a nominee of The Depository Trust Company ("DTC").
If a holder tendering Old Notes so requests, such holder's New Notes will
be issued as described below under "-- Certificated Securities" in registered
form without coupons (the "Certificated Securities").
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
112
<PAGE> 114
So long as DTC, or its nominee, is the registered owner or Holder of a
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 and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, premium, if any, and interest, on a Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company, the Trustee nor any Paying Agent will have
any responsibility or liability for any aspects of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest in respect of a Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in the 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
in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken by
a Holder of a Note only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of a Note as to which such
participant or participants has or have given direction.
DTC has advised the Company that it is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. 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. 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.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED SECURITIES
If (i) the Issuer notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository and the Issuer is unable to locate a
qualified successor within 90 days or (ii) the Issuer, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by DTC of its Global
Note, Certificated Securities will be issued to each person that DTC identifies
as the beneficial owner of the New Notes represented by the Global Note. In
addition, any person having a beneficial interest in a Global Note ()r any
holder of Old Notes whose Old Notes have been accepted for exchange may, upon
request to the Trustee or the Exchange Agent, as the case may be, exchange such
beneficial interest or Old Notes for Certificated Securities.
113
<PAGE> 115
Upon any such issuance, the Trustee is required to register such Certificated
Securities in the name of such person or persons (or the nominee of any
thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any participant or indirect participant in identifying the beneficial owners of
the related New Notes and each such person may conclusively rely on, and shall
be protected in relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the respective principal
amounts, of the New Notes to be issued).
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Issuer
by Gibson, Dunn & Crutcher LLP, New York, New York. Gibson, Dunn & Crutcher LLP
has provided a tax opinion in connection with the Exchange Offer.
EXPERTS
The consolidated financial statements of Werner Holding Co. (PA), Inc. as
of December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997 appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
114
<PAGE> 116
Audited Consolidated Financial Statements
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
DECEMBER 31, 1996 AND 1997
<PAGE> 117
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-5
Consolidated Statements of Changes in Shareholders' Equity
(Deficit)................................................. F-6
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 118
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Werner Holding Co. (PA), Inc.
Greenville, Pennsylvania
We have audited the accompanying consolidated balance sheets of Werner
Holding Co. (PA), Inc. and subsidiaries as of December 31, 1996 and 1997, and
the related consolidated statements of operations, changes in shareholders'
equity (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 these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Werner Holding
Co. (PA), Inc. and subsidiaries at December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
February 10, 1998
F-2
<PAGE> 119
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 986 $ 3,107
Accounts receivable, less allowance for doubtful accounts
(1996 -- $1,930; 1997 -- $1,250)....................... 46,277 62,913
Refundable income taxes................................... 2,016 820
Inventories............................................... 44,407 44,670
Deferred income taxes..................................... 2,577 4,451
Other..................................................... 1,837 6,936
-------- --------
Total current assets........................................ 98,100 122,897
Investments and other assets:
Insurance fund investments................................ 80,949 58,579
Deferred income taxes..................................... 4,149 11,586
Deferred financing fees, net.............................. 174 15,098
Other..................................................... 15,249 14,196
-------- --------
100,521 99,459
Property, plant and equipment:
Land and improvements..................................... 5,740 7,369
Buildings................................................. 29,372 34,666
Machinery and equipment................................... 91,101 97,909
-------- --------
126,213 139,944
Less accumulated depreciation and amortization............ 69,085 77,284
-------- --------
57,128 62,660
Capital projects in progress.............................. 5,436 3,169
-------- --------
62,564 65,829
-------- --------
TOTAL ASSETS................................................ $261,185 $288,185
======== ========
</TABLE>
F-3
<PAGE> 120
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1997
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term bank debt...................................... $ $ 41,500
Accounts payable.......................................... 21,691 24,904
Accrued liabilities....................................... 19,614 24,896
Current maturities of long-term debt...................... 7,571 1,450
-------- --------
Total current liabilities................................... 48,876 92,750
Long-term obligations:
Long-term debt -- less current maturities (net of
unamortized original issue discount of $4,009 in
1997).................................................. 75,871 279,541
Reserve for losses and loss adjustment expenses........... 45,320 49,644
Other..................................................... 16,039 19,922
-------- --------
137,230 349,107
Shareholders' equity (deficit):
Common stock:
Pre-Recapitalization common stock:
Class A -- $1.00 par value; voting; 42,000 shares
authorized; 13,227 and 0 shares issued and
outstanding in 1996 and 1997, respectively.......... 13
Class B -- $1.00 par value; non-voting; 378,000
shares authorized; 148,473 and 0 shares issued and
outstanding in 1996, and 1997, respectively......... 148
Post-Recapitalization common stock:
Class A -- $.01 par value; voting; 5,000 shares
authorized; 2,059 shares issued and outstanding in
1997................................................ --
Class B -- $.01 par value; voting; 25,000 shares
authorized; 22,438 shares issued and outstanding in
1997................................................ --
Class C -- $.01 par value; non-voting; 45,000 shares
authorized; 4,682 shares issued and outstanding in
1997................................................ --
Class D -- $.01 par value; voting; 1,000 shares
authorized; 1,000 shares issued and outstanding in
1997................................................ --
Class E -- $.01 par value; non-voting; 50,000 shares
authorized; 45,000 shares issued and outstanding in
1997................................................ 1
Additional paid-in capital................................ 1,316 198,847
Retained earnings (deficit)............................... 70,402 (351,753)
Other..................................................... 3,200 (767)
-------- --------
Total shareholders' equity (deficit)........................ 75,079 (153,672)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)........ $261,185 $288,185
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 121
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................... $336,029 $366,864 $416,321
Cost of sales........................................... 248,937 264,977 300,095
-------- -------- --------
Gross profit............................................ 87,092 101,887 116,226
General and administrative expense...................... 25,007 27,027 31,186
Selling and distribution expense........................ 47,073 47,846 48,944
Recapitalization expense................................ 22,714
Non-cash compensation charge............................ 78,527
-------- -------- --------
Operating profit (loss)................................. 15,012 27,014 (65,145)
Other income (expense), net............................. 4,214 9,851 (15,669)
-------- -------- --------
Income (loss) before interest and taxes................. 19,226 36,865 (80,814)
Interest expense........................................ 7,206 7,517 8,979
-------- -------- --------
Income (loss) before provision for income taxes......... 12,020 29,348 (89,793)
Income taxes............................................ 5,141 9,988 714
-------- -------- --------
Income (loss) before extraordinary charge............... 6,879 19,360 (90,507)
Extraordinary charge-early extinguishment of debt....... 579
-------- -------- --------
NET INCOME (LOSS)....................................... $ 6,300 $ 19,360 $(90,507)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 122
WERNER HOLDING CO. (PA), INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRE-RECAPITALIZATION COMMON STOCK POST-RECAPITALIZATION COMMON STOCK
------------------------------------------- -------------------------------------
CLASS A CLASS B CLASS A CLASS B
------------------- --------------------- ----------------- -----------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995...... 13,282 $ 14 149,887 $ 149
Net income......................
Dividends declared ($10.20 per
share).........................
Amortization of deferred
compensation...................
Unrealized gains on investments
(net of tax)...................
--------- ------- ----------- ------- ------- ------- ------- -------
Balance at December 31, 1995.... 13,282 14 149,887 149
Net income......................
Dividends declared ($11.25 per
share).........................
Amortization of deferred
compensation...................
Repurchase of common stock...... (55) (1) (1,414) (1)
Adjustment to minimum pension
liability......................
Unrealized losses on investments
(net of tax)...................
--------- ------- ----------- ------- ------- ------- ------- -------
Balance December 31, 1996....... 13,227 13 148,473 148
Net (loss)......................
Dividends declared ($10.50 per
share).........................
Amortization of deferred
compensation...................
Repurchase of common stock...... (55) -- (574) --
Adjustment to minimum pension
liability......................
Unrealized losses on investments
(net of tax)...................
Redemption and reclassification
of common stock in connection
with recapitalization,......... (13,172) (13) (147,899) (148) 2,059 -- 22,438 --
Issuance of common stock in
connection with the
Recapitalization, net of
issuance costs of $2,196.......
Non-cash compensation charge....
--------- ------- ----------- ------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1997.... $ -- $ -- 2,059 $ -- 22,438 $ --
========= ======= =========== ======= ======= ======= ======= =======
<CAPTION>
POST-RECAPITALIZATION COMMON STOCK
----------------------------------------------------------
CLASS C CLASS D CLASS E ADDITIONAL
----------------- ----------------- ------------------ PAID-IN RETAINED
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS CAPITAL EARNINGS OTHER
------ ------- ------ ------- ------ ------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995...... $ 1,316 $ 49,652 $ (1,287)
Net income...................... 6,300
Dividends declared ($10.20 per
share)......................... (1,664)
Amortization of deferred
compensation................... 242
Unrealized gains on investments
(net of tax)................... 7,381
------- ------- ------- ------- -------- ------- --------- ---------- --------
Balance at December 31, 1995.... 1,316 54,288 6,336
Net income...................... 19,360
Dividends declared ($11.25 per
share)......................... (1,836)
Amortization of deferred
compensation................... 185
Repurchase of common stock...... (1,410)
Adjustment to minimum pension
liability...................... (275)
Unrealized losses on investments
(net of tax)................... (3,046)
------- ------- ------- ------- -------- ------- --------- ---------- --------
Balance December 31, 1996....... 1,316 70,402 3,200
Net (loss)...................... (90,507)
Dividends declared ($10.50 per
share)......................... (1,691)
Amortization of deferred
compensation................... 133
Repurchase of common stock...... (731)
Adjustment to minimum pension
liability...................... (1,946)
Unrealized losses on investments
(net of tax)................... (2,353)
Redemption and reclassification
of common stock in connection
with recapitalization,......... (1,515) (329,226) 199
Issuance of common stock in
connection with the
Recapitalization, net of
issuance costs of $2,196....... 4,682 -- 1,000 -- 45,000 1 120,519
Non-cash compensation charge.... 78,527
------- ------- ------- ------- -------- ------- --------- ---------- --------
BALANCE AT DECEMBER 31, 1997.... 4,682 $ -- 1,000 $ -- 45,000 $ 1 $ 198,847 $ (351,753) $ (767)
======= ======= ======= ======= ======== ======= ========= ========== ========
<CAPTION>
TOTAL
-----
<S> <C>
Balance at January 1, 1995...... $ 49,844
Net income...................... 6,300
Dividends declared ($10.20 per
share)......................... (1,664)
Amortization of deferred
compensation................... 242
Unrealized gains on investments
(net of tax)................... 7,381
----------
Balance at December 31, 1995.... 62,103
Net income...................... 19,360
Dividends declared ($11.25 per
share)......................... (1,836)
Amortization of deferred
compensation................... 185
Repurchase of common stock...... (1,412)
Adjustment to minimum pension
liability...................... (275)
Unrealized losses on investments
(net of tax)................... (3,046)
----------
Balance December 31, 1996....... 75,079
Net (loss)...................... (90,507)
Dividends declared ($10.50 per
share)......................... (1,691)
Amortization of deferred
compensation................... 133
Repurchase of common stock...... (731)
Adjustment to minimum pension
liability...................... (1,946)
Unrealized losses on investments
(net of tax)................... (2,353)
Redemption and reclassification
of common stock in connection
with recapitalization,......... (330,703)
Issuance of common stock in
connection with the
Recapitalization, net of
issuance costs of $2,196....... 120,520
Non-cash compensation charge.... 78,527
----------
BALANCE AT DECEMBER 31, 1997.... $ (153,672)
==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 123
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 6,300 $ 19,360 $(90,507)
Reconciliation of net income (loss) to net cash (used in)
provided by
operating activities:
Recapitalization expense................................ 22,714
Non-cash compensation charge............................ 78,527
Loss from early extinguishment of debt.................. 579
Depreciation and amortization........................... 8,018 9,201 11,500
Provision for losses on accounts receivable............. 405 700 (115)
Provision for insurance claims.......................... 14,715 17,126 15,841
Payment of insurance claims............................. (9,882) (13,347) (11,517)
Deferred income taxes................................... (1,745) (3,625) (8,044)
Realized net (gains) losses on disposition and
impairment of insurance fund investments.............. (1,671) (9,431) 16,407
Net purchases of trading securities..................... (2,660) (5,381) (1,975)
Changes in operating assets and liabilities:
Accounts receivable................................... 154 (4,326) (16,521)
Refundable income taxes............................... 393 (313) 1,196
Inventories........................................... (7,331) 3,644 (263)
Accounts payable...................................... (12,088) 5,130 3,213
Accrued liabilities................................... 601 3,414 (1,267)
Other, (net).......................................... 2,844 (2,634) (1,957)
-------- -------- --------
Net cash (used in) provided by operating activities......... (1,368) 19,518 17,232
INVESTING ACTIVITIES
Capital expenditures........................................ (12,517) (13,048) (11,710)
Insurance fund securities available-for-sale:
Purchases of debt and equity securities................... (74,362) (176,034) (79,484)
Sale of debt and equity securities........................ 72,358 178,623 59,497
Net (purchases) sales of other insurance fund investments... (4,147) 2,345 24,073
Other....................................................... (212) (7,718) 4,062
-------- -------- --------
Net cash (used in) investing activities..................... (18,880) (15,832) (3,562)
FINANCING ACTIVITIES
Redemption of common stock.................................. (332,899)
Issuance of common stock.................................... 122,716
Payment of recapitalization fees and expenses............... (37,952)
Refinancing of existing debt................................ (65,571)
Issuance of Senior Subordinated Notes, net.................. 130,950
Borrowings under Senior Credit Facility..................... 186,500
Net borrowings (repayments) under revolving credit
agreements................................................ 24,800 7,600 (6,300)
Borrowings of long-term debt................................ 6,000
Repayments of long-term debt................................ (7,676) (7,642) (6,571)
Repurchase of common stock.................................. (1,412) (731)
Dividends paid.............................................. (1,991) (1,836) (1,691)
Other....................................................... (345) (39)
-------- -------- --------
Net cash provided by (used in) financing activities......... 20,788 (3,329) (11,549)
-------- -------- --------
Net increase in cash and equivalents........................ 540 357 2,121
Cash and equivalents at beginning of year................... 89 629 986
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR......................... $ 629 $ 986 $ 3,107
======== ======== ========
CASH PAID DURING THE YEAR FOR
Interest.................................................... $ 6,980 $ 6,756 $ 7,752
======== ======== ========
Income taxes................................................ $ 6,493 $ 13,925 $ 9,955
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 124
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
A. DESCRIPTION OF BUSINESS
The Company operates predominantly in a single industry within the United
States: the manufacture of climbing equipment which includes aluminum,
fiberglass and wood ladders, scaffolding, stages and planks. In addition, the
Company manufactures and sells aluminum extruded products. The Company's
products are manufactured at common production facilities and use common
manufacturing processes.
The Company's export sales are less than 10% of total revenues. Sales to
one customer accounted for 10.5% and 18.0% of consolidated net sales for the
year ended December 31, 1996 and 1997, respectively. There were no other sales
to customers that exceeded 10% of consolidated net sales for each of the years
presented.
B. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The consolidated financial statements of Werner
Holding Co. (PA), Inc. include its accounts and the accounts of its wholly-owned
subsidiary Werner Holding Co. (DE), Inc. and its wholly owned subsidiaries
(collectively the "Company"). Werner Holding Co. (PA), Inc. has no substantial
operations or assets, other than its investment in Werner Holding Co. (DE), Inc.
The consolidated financial condition and results of operations of Werner Holding
Co. (PA), Inc. are substantially the same as those of Werner Holding Co. (DE),
Inc. Intercompany accounts and transactions have been eliminated.
Revenue Recognition -- Sales are recorded when products are shipped and
title passes to the customer.
Accounts Receivable -- The Company provides credit, in the normal course of
business, to its customers. The Company's customers are not concentrated in any
specific geographic region. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses which, when
realized, have been within the range of management's expectations. Write-offs of
uncollectible accounts receivable have totaled $341, $557 and $565 in 1995, 1996
and 1997, respectively.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
Inventories -- Inventories are stated at the lower of cost or market (net
realizable value). Cost is determined principally by the last-in, first-out
(LIFO) method. The Company utilizes futures contracts to hedge the price risk
associated with a certain percentage of its anticipated aluminum raw material
requirements. All gains and losses on qualifying hedging transactions are
deferred and reported as a component of the underlying transaction. The
Company's practice is not to hold derivative commodity instruments for trading
purposes.
At December 31, 1996 and 1997, the Company had futures contracts to
purchase aluminum of $44,486 and $47,194, respectively, which approximated their
fair value. In 1995 the Company revised its projections of aluminum raw material
requirements, reduced related purchase commitments and sold corresponding
futures contracts resulting in the recognition of a pre-tax gain of $1,688.
F-8
<PAGE> 125
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
B. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. Depreciation expense is calculated principally by using accelerated
methods over the estimated useful lives of the assets. The estimated useful
lives for buildings range from 40 to 45 years and for machinery and equipment
range from 3 to 14 years.
Long-lived assets are reviewed for impairment. Impairment is recognized
when events or changes in circumstances indicate that the carrying amount of the
asset, or related group of assets, may not be recoverable. Measurement of
impairment may be based upon appraisals, market values of similar assets or
discounted cash flows.
Insurance Fund Investments -- The Company's captive insurance subsidiary,
Manufacturers Indemnity and Insurance Company of America ("MIICA"), maintains an
investment fund which consists of debt securities, equity securities, real
estate, cash and equivalents, and other investments. MIICA's investments in debt
and equity securities are available for sale; therefore, these securities are
reported at market value. Investments in real estate are recorded at depreciated
value and short-term and other investments are stated primarily at cost which
approximates market. Investments in special expiration price options are
classified as trading securities and are reported at market value.
Realized gains and losses on the sale of investments are recognized in
operations. The cost of securities sold is based on the specific identification
method. Changes in market values of debt and equity securities are reflected as
unrealized gains or losses directly in shareholders' equity and accordingly,
have no effect on operations until sold unless such losses are other than
temporary, at which time such losses are recognized in operations. Changes in
market values of special expiration price options are reported directly in
operations.
Reserve for Losses and Loss Adjustment Expenses -- MIICA maintains reserves
for the product liability, workers' compensation and environmental liability
claims of the Company. The reserve for losses and loss adjustment expenses
includes an amount determined from loss reports and individual cases and an
amount, based on past experience, for losses incurred but not reported. Such
reserve is necessarily based on estimates and, while management believes that
the amount is adequate, the ultimate liability may be in excess of or less than
the amount provided. The methods for making such estimates and for establishing
the resulting reserve are continually reviewed, and any adjustments are
reflected in earnings currently. Payments of claims are made from MIICA's
investment funds.
Advertising -- The Company expenses all advertising as incurred. These
expenses for the years ended December 31, 1995, 1996 and 1997 totaled $6,546,
$7,586, and $8,001, respectively.
Stock-Based Compensation -- The Company accounts for stock-based
compensation in accordance with the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees.
Statement of Cash Flows -- Cash and equivalents include cash on hand,
demand deposits and short-term highly liquid debt instruments purchased with a
maturity of three months or less, exclusive of MIICA's investments.
Recently Issued Accounting Standards -- In June 1997, the Financial
Accounting Standards Board (FASB) issued Statements of Financial Accounting
Standards (SFAS) No. 130, Reporting Comprehensive Income, which requires that an
enterprise classify items of other comprehensive income (such as unrealized
gains and losses on investments in debt and equity securities) in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and
F-9
<PAGE> 126
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
B. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
additional paid-in-capital in the equity section of the balance sheet. The
Company will comply with the provisions of this Statement upon its required
adoption in 1998.
In June 1997, the FASB also issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, which establishes new standards for
the way public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Company
is currently studying the effects of adoption of this statement which will be
applicable for the Company effective December 31, 1998.
Fair Values of Financial Instruments -- The Company's disclosures for
financial instruments are as follows:
Cash and equivalents -- The carrying amounts reported in the balance
sheet for cash and equivalents bear interest at prevailing market rates and
therefore approximates fair value.
Insurance fund investments -- Debt and equity securities and other
invested assets are stated at fair value.
Long-term debt -- The carrying amounts of the Company's borrowings
under the Senior Subordinated Notes, its credit agreements and the Variable
Rate Demand Industrial Building Revenue Bonds, bear interest at prevailing
market rates and therefore approximate their fair value at December 31,
1996 and 1997. The fair value of the Company's fixed rate senior notes was
estimated using discounted cash flow analyses based on the Company's
current incremental borrowing rates for similar types of borrowing
arrangements. The fair value of the senior notes was $11,000 at December
31, 1996.
Reclassification -- Certain prior year amounts have been reclassified to
conform to the current year presentation in the consolidated financial
statements.
C. RECAPITALIZATION
On October 8, 1997, the Company entered into a recapitalization agreement,
which was amended and restated on October 27, 1997 (the "Recapitalization
Agreement"), with certain affiliates of INVESTCORP S.A. ("Investcorp") and
certain other international investors organized by Investcorp (collectively the
"Investors").
The Recapitalization
Pursuant to the Recapitalization Agreement, on November 24, 1997, the
Company took the following actions (all of which together constituted the
"Recapitalization"):
(A) the Company filed with the Secretary of the State of the Commonwealth
of Pennsylvania the Restated Articles of Incorporation pursuant to which the
Company's capital stock was reclassified as follows:
(i) Each share of Pre-Recapitalization Class A Stock held by
shareholders who were not active in the management of the Company
("Non-Management Shareholders") was reclassified into the right to retain
0.1376 of a fully paid and non-assessable share of Class A Stock and the
right to receive 0.8624 of a fully paid and non-assessable share of Class
A-1 Stock and each share of Pre-Recapitalization Class B Stock held by
Non-Management Shareholders was reclassified into
F-10
<PAGE> 127
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
C. RECAPITALIZATION -- CONTINUED
the right to retain 0.1376 of a fully paid and non-assessable share of
Class B Stock and the right to receive 0.8624 of a fully paid and
non-assessable share of Class B-1 Stock;
(ii) Each share of Class A Stock and Class B Stock held by
shareholders who were active in the management of the Company ("Management
Shareholders") was reclassified into the fractions of fully paid and
non-assessable shares of Class A Stock and Class A-1 Stock, and Class B
Stock and Class B-1 Stock, respectively, as set forth in the
Recapitalization Agreement; and
(iii) Class C Common Stock, Class D Common Stock, Class E Common Stock
and Common Stock were newly authorized for issuance.
(B) the Class A-1 Stock and the Class B-1 Stock was then redeemed by the
Company at a cash redemption price of approximately $2,421 per share (totaling
approximately $330,700, plus the right to receive, upon certain conditions, an
additional, one-time, lump sum payment (the "Market Participation Right"); and
(C) The Pre-Recapitalization shareholders retained the outstanding shares
of Class A Stock and Class B Stock, and the Investors purchased for
approximately $122,700 shares of the Company's Class C Common Stock, Class D
Common Stock and Class E Common Stock.
Following the Recapitalization, the Pre-Recapitalization shareholders
(including the Management Shareholders) continue to own approximately 33% of the
outstanding voting equity of the Company and the Management Shareholders, who
continue to manage and operate the business, continue to own approximately 13%
of the Company's voting capital stock. Immediately following the
Recapitalization, the Investors owned approximately 67% of the outstanding
voting equity of the Company. Common stock with a par value of $.01 per share
has been authorized (131,000 shares), but no shares are issued or outstanding at
December 31, 1997.
Market Participation Right -- If, prior to the tenth anniversary of
November 24, 1997 (the "Recapitalization Closing Date") (i) there is an initial
underwritten public offering of at least 10% of the common equity of the
Company, or the Investors sell a majority of their shares of the Company and
(ii) at the time of such initial public offering or sale of shares, the
Company's equity value equals or exceeds certain target values that imply
significant annual compound rates of return (between 20% and 40%) to the
Post-Recapitalization shareholders, then those persons who have the Market
Participation Right shall be entitled to receive an aggregate amount equal to up
to 5% of the Company's equity value (the "Payment"). The Payment will be payable
in cash, provided that the Company, in its discretion, may make up to half of
the Payment in notes or similar obligations with market terms which the
Company's Board of Directors in good faith believes are of equivalent value.
Such payment will be treated as an equity distribution to those persons who have
the Market Participation Right.
Voting Rights -- Holders of the Class A Common Stock and Class B Common
Stock are entitled to one vote per share and holders of the Class D Common Stock
are entitled to approximately 50.7 votes per share. Class C Common Stock and
Class E Common Stock have no voting rights. Upon the occurrence of a sale of
100% of the outstanding equity securities of the Company, a sale of
substantially all the assets of the Company or a public offering of any equity
securities of the Company, each outstanding share of Class A Common Stock, Class
B Common Stock, Class C Common Stock, Class D Common Stock and Class E Common
Stock will convert into one share of Common Stock of the Company. When issued,
this new class of Common Stock of the Company will have one vote per share.
F-11
<PAGE> 128
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
C. RECAPITALIZATION -- CONTINUED
Recapitalization Financing -- The Recapitalization was funded by (i)
$186,500 of borrowings under the Senior Credit Facility as discussed in Note F,
(ii) $135,000 from the offering of the Senior Subordinated Notes as discussed in
Note F, and (iii) an equity contribution by the Investors of approximately
$122,700. The proceeds from these financings funded: the payment of
approximately $330,700 to holders of Class A-1 and Class B-1 Stock who redeemed
their shares; the repayment of approximately $66,000 of outstanding indebtedness
under the then existing credit facility and notes; and the payment of
approximately $45,200 million of fees and expenses (including $5,000 in prepaid
management fees) associated with the Recapitalization.
Recapitalization Accounting -- The transaction was accounted for as a
recapitalization and as such, the historical basis of the Company's assets and
liabilities was not affected. Approximately $15,300 of Recapitalization related
costs primarily representing financing fees were capitalized and are being
amortized over the term of the related debt. Approximately $22,700 of
Recapitalization related costs were expensed and are reflected as a component of
operating income in the Company's Consolidated Statements of Operations. The
expensed costs represent investment banker fees, transaction fees, legal and
accounting fees, cash transaction bonuses totaling $1,134 paid to certain
Company employees upon the successful completion of the Recapitalization, and
other miscellaneous costs incurred in connection with the Recapitalization.
Additionally, approximately $2,200 of Recapitalization costs incurred related to
the issuance of common stock to the Investors has been netted against the
proceeds of approximately $122,700.
Other Arrangements -- The Company has also entered into employee protection
agreements whereby certain management employees will receive cash payments
aggregating approximately $6,600 upon completion of one year of service from the
Recapitalization Closing Date. This amount is included in other current assets
and liabilities at December 31, 1997, and is being amortized over the terms of
the agreements, not to exceed one year from the Recapitalization Closing Date.
Additionally, as a result of the Recapitalization, payments totaling $3,708
related to consulting agreements entered into in December 1996 with four senior
executive officers/shareholders were accelerated and paid on the
Recapitalization Closing Date. Such amounts were expensed and are included as
part of the Recapitalization costs above. Previous payments made under the
consulting agreements ($292) have been expensed as incurred and are included in
general and administrative expenses.
Included in the recapitalization related costs above is approximately
$17,000 of amounts paid to Investcorp, including $5,000 which was paid during
1997 under a five year management fee arrangement.
D. NON-CASH COMPENSATION CHARGE
In 1997, the Company recorded a non-cash compensation charge of $78,500,
with an offsetting credit to additional paid in capital. Such charge resulted
from changes made to the terms of the plan under which restricted
Pre-Recapitalization Class B common stock was issued to certain key employees of
the Company. Approximately $74,300 of this charge relates to the accelerated
vesting, as a result of the Recapitalization, of restricted Pre-Recapitalization
class B common stock previously granted to certain key employees of the Company
and $4,200 of the charge relates to the accelerated vesting, as a result of the
Recapitalization, of restricted Pre-Recapitalization class B common stock,
previously granted to a former key management employee upon his separation from
the Company. Such charges represent the fair value of the shares at the date of
the Recapitalization ($2421.29 per share) less the amount of the previously
recognized compensation under the plan.
F-12
<PAGE> 129
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
E. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
------- -------
<S> <C> <C>
Finished goods.............................................. $27,153 $26,512
Work in process............................................. 12,538 11,953
Raw materials and supplies.................................. 15,231 18,075
------- -------
Total inventories, which approximates replacement cost...... 54,922 56,540
Less excess of cost over LIFO stated values................. 10,515 11,870
------- -------
NET INVENTORIES............................................. $44,407 $44,670
======= =======
</TABLE>
F. DEBT AND CREDIT ARRANGEMENTS
Debt and credit arrangements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1997
------- --------
<S> <C> <C>
Variable Rate Demand Industrial Building Revenue Bonds, due
2015...................................................... $ 5,000 $ 5,000
Secured Credit Facility:
Term loan facility........................................ 145,000
Unsecured Credit Agreement:
Revolving credit.......................................... 57,300
Term loan................................................. 14,000
Senior notes, payable through 1998.......................... 7,142
Senior Subordinated Notes, due 2007, net of unamortized
discount.................................................. 130,991
------- --------
Total debt and credit arrangements.......................... 83,442 280,991
Less current maturities..................................... 7,571 1,450
------- --------
DEBT CLASSIFIED AS LONG-TERM................................ $75,871 $279,541
======= ========
</TABLE>
As part of the Recapitalization, the Company entered into a new senior
credit facility with a group of banks (the "Senior Credit Facility"), and
pursuant to the indenture dated November 24, 1997, issued $135,000 of 10% Senior
Subordinated Notes (the "Notes"). Each of the Company's subsidiaries (except
MIICA) have guaranteed the Senior Credit Facility and the Notes. Such guarantee
of the Notes is subordinate to the guarantee of the Senior Credit Facility.
The Notes:
The $135,000 of Notes mature on November 15, 2007. Interest on the Notes is
payable semi-annually in arrears on May 15 and November 15 commencing on May 15,
1998. The Notes are general unsecured obligations of the Company ranking
subordinate in right of payment to all existing and future senior indebtedness
of the Company. The Notes will rank pari passu in right of payment with all
other indebtedness of the Company that is subordinated to senior indebtedness of
the Company.
The Notes are not redeemable at the Company's option prior to November 15,
2002. The Notes are redeemable at the Company's option at 105.000% during the 12
months beginning November 15, 2002, 103.333% during the 12 months beginning
November 15, 2003, 101.667% during the 12 months beginning November 15, 2004 and
at 100% thereafter (expressed as a percentage of principal amount).
F-13
<PAGE> 130
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
F. DEBT AND CREDIT ARRANGEMENTS -- CONTINUED
In addition, prior to November 15, 2002, up to 35% of the Notes may be redeemed
at 110% of the principal amount out of the proceeds of certain equity offerings.
Senior Credit Facility:
The Senior Credit Facility entered into on November 24, 1997, consists of
$145,000 in term loan facilities; a $100,000 revolving credit facility; and a
$75,000 receivables credit facility.
Term Loan Facilities. The Term Loan Facilities consists of two tranches of
term loans in an aggregate principal amount of $145,000. The Tranche B term
loans are in an aggregate principal amount of $90,000, and the Tranche C term
loans are in an aggregate principal amount of $55,000. These loans were made in
a single drawing as part of the Recapitalization. The Tranche B and C term loans
will mature on November 30, 2004 and 2005, respectively. Installments of the
Tranche B term loans will be due in aggregate principal amounts of $900 per
annum for the first five years, $30,000 for the sixth year, and $55,500 for the
seventh year. Installments of the Tranche C term loans will be due in aggregate
principal amounts of $550 for the first seven years and $51,150 for the eighth
year.
Revolving Credit Facility. The Revolving Credit Facility consists of a
revolving credit facility in an aggregate principal amount of $100,000 under
which no amounts were borrowed at December 31, 1997 except for amounts of $5,108
issued under the letter of credit subfacility. The Company is entitled to draw
amounts under the Revolving Facility for general corporate purposes and working
capital requirements. The Revolving Facility includes sub-limits for letters of
credit and swing line loans ("Swing Line Loans") available on same-day notice.
The Revolving Facility matures on November 30, 2003.
Receivables Facility. The Receivables Facility consists of a revolving
credit facility in an aggregate principal amount of $75,000, which is subject to
a borrowing base limit not to exceed 80% of eligible accounts receivable. At
December 31, 1997 $41,500 was outstanding under the Receivables Facility and is
classified as short-term bank debt. The Company is entitled to draw amounts
under the Receivables Facility for general corporate purposes and to meet
working capital requirements. The Receivables Facility matures on November 30,
2003. At December 31, 1997, $2,200 was available for borrowing under this
facility.
Borrowings under the Senior Credit Facility bear interest at alternative
floating rate structures at management's option and are collateralized by all of
the capital stock of each of the Company's subsidiaries and substantially all of
the inventory and property, plant and equipment of the Company and its
subsidiaries other than MIICA. The Senior Credit Facility requires an annual
commitment fee of 0.5% on the average daily unused amount of the Term Loan
Facility, the Revolving Credit Facility and the Receivables Facility.
Variable Rate Demand Industrial Building Revenue Bonds were issued in order
to finance the Company's acquisition of land and equipment and the subsequent
construction of a climbing products manufacturing facility. Under a lease
agreement, the Company makes rental payments to the issuer in amounts sufficient
to meet the debt service payments on the bonds. The bonds bear interest at a
variable rate established weekly which may not exceed 15% per annum. The
interest rate on the bonds may be converted to a fixed rate upon the
satisfaction of certain conditions. Prior to a conversion to a fixed rate, the
bonds are subject to purchase from the holder upon demand at a price equal to
principal plus accrued interest. On or prior to the date of conversion to a
fixed rate, the bonds are subject to redemption, in whole or in part, at the
option of the Company. After conversion to a fixed rate, the bonds are subject
to redemption, as a whole or in part, at the Company's option, on or after the
tenth anniversary of the conversion, at annual redemption prices varying from
103% to 100% of the principal outstanding. Certain assets having an original
cost of $3,889 are pledged as collateral for the bonds.
F-14
<PAGE> 131
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
F. DEBT AND CREDIT ARRANGEMENTS -- CONTINUED
The Senior Credit Facility and the Notes contain various restrictive
covenants including restrictions on additional indebtedness, mergers, asset
dispositions, restricted payments, prepayment and amendments of subordinated
indebtedness. These covenants also prohibit, among other things, the payment of
dividends. The financial covenants of the Senior Credit Facility require the
Company to meet specific interest coverage, maximum leverage, minimum EBITDA,
and capital expenditure requirements.
The aggregate amount of principal payments is $1,450 in each of the years
1998 through 2002.
G. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Advertising, promotions and allowances......... $ 5,455 $ 5,668
Payroll........................................ 6,236 6,521
Deferred management transaction bonuses........ 6,634
Other.......................................... 7,923 6,073
------- -------
$19,614 $24,896
======= =======
</TABLE>
H. STOCK INCENTIVE PLANS
Management Stock Incentive Plan
In November 1997, the Company adopted the Stock Incentive Plan (the "Plan")
which is administered by the Compensation Committee of the Board of Directors.
Pursuant to the Plan, certain directors, employees and officers of the Company
will be given the opportunity to acquire shares of Class C Stock through the
grant of non-qualified and qualified stock options, stock appreciation rights
and restricted shares. Options granted pursuant to the Plan are exercisable at
no less than the fair market value of the Class C Stock at the time of grant.
Qualified stock options shall expire no more than ten years after the date of
grant. Non-qualified options shall expire no more than ten years and thirty days
after the date of grant. A total of 7,600 shares of Class C stock is reserved
for issuance under the Plan with a maximum of 2,500 shares to be issued to any
employee in any year. As of December 31, 1997 no options, stock appreciation
rights or restricted shares were issued under the Plan.
Stock Loan Plan
In connection with the Recapitaliztion, the Company established a stock
purchase plan for certain members of the Company's management. Such individuals
will have the opportunity to purchase shares of Class C Common Stock through a
Stock Loan Plan, which provides loans to the members of management entering into
stock purchase agreements. Shares with an aggregate fair market value of at
least $2,000 will be made available for purchase under the Stock Loan Plan and
stock purchase agreements.
Restricted Stock Plan
Until the date of the Recapitalization the Company maintained a restricted
stock plan. Amortization of unearned compensation was $242, $185 and $133 in
1995, 1996, and 1997, respectively. As discussed in Note D, in connection with
the Recapitalization the restricted stock awards which were outstanding at that
date became fully vested.
F-15
<PAGE> 132
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
I. INCOME TAXES
The components of income tax expense at December 31 are presented below:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal.......................................... $ 6,148 $12,797 $ 8,093
State and local.................................. 738 816 665
------- ------- -------
6,886 13,613 8,758
Deferred taxes:
Federal.......................................... (1,745) (3,094) (7,859)
State and local.................................. (531) (185)
------- ------- -------
(1,745) (3,625) (8,044)
------- ------- -------
TOTAL.............................................. $ 5,141 $ 9,988 $ 714
======= ======= =======
</TABLE>
The income tax rate for financial reporting purposes varied from the
federal statutory rate as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- -----
<S> <C> <C> <C>
Federal statutory rate.................................. 35.0% 35.0% 35.0%
Non-cash compensation charge............................ (30.6)
State income taxes, net of federal benefit.............. 6.7 1.0 (0.5)
Adjustments to estimated income tax accruals............ 1.1 (1.4) (3.6)
Other -- net............................................ (0.6) (1.1)
---- ---- -----
EFFECTIVE TAX RATE...................................... 42.8% 34.0% (0.8%)
==== ==== =====
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $ 4,568 $ 4,817
Investments in debt and equity securities................. 2,050 783
Accrued expenses.......................................... 2,275 3,596
------- -------
Total deferred tax liabilities.............................. 8,893 9,196
Deferred tax assets:
Provision for loss and loss adjustment expenses........... 5,793 5,460
Accrued vacation.......................................... 1,288 1,467
Pension obligation........................................ 2,438 2,821
Deferred compensation..................................... 2,349 3,040
Accrued expenses.......................................... 3,734 8,264
Capital losses............................................ 17 5,287
Capital loss valuation allowance.......................... (1,106)
------- -------
Total deferred tax assets................................... 15,619 25,233
------- -------
NET DEFERRED TAX ASSETS..................................... $ 6,726 $16,037
======= =======
</TABLE>
SFAS No. 109, Accounting for Income Taxes, requires that deferred tax
assets be reduced by a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. As
realization of deferred tax assets relating to certain capital losses is
considered uncer-
F-16
<PAGE> 133
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
I. INCOME TAXES -- CONTINUED
tain, a valuation allowance has been recorded. The Company believes that it has
taxable income in prior periods sufficient to fully recognize its remaining
deferred tax assets.
J. LEASES
The Company leases certain real estate and various equipment under
long-term operating leases. Total rent expense for all leases amounted to
$5,623, $5,606 and $4,970 for 1995, 1996 and 1997, respectively.
Future minimum rental commitments as of December 31, 1997 for all
noncancelable operating leases are as follows:
<TABLE>
<S> <C>
1998............................................ $ 3,362
1999............................................ 2,550
2000............................................ 1,878
2001............................................ 765
2002............................................ 302
Thereafter...................................... 2,240
-----------
TOTAL........................................... $ 11,097
===========
</TABLE>
K. COMMITMENTS
The Company has contracts to provide most of its estimated aluminum
requirements with six principal suppliers. These contracts include stipulated
prices, with provisions for price adjustments based on market. The six contracts
are renegotiable, five in 1998 and one in 1999. MIICA has a letter of credit
(expiring April 30, 1998) of which $11,938 and $12,529 was outstanding at
December 31, 1996 and 1997, respectively.
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS
The Company sponsors two non-contributory defined benefit pension plans to
provide retirement benefits for substantially all of its employees. The pension
plans provide benefits based on the participants' years of service and
compensation or stated amounts for each year of service. The Company's funding
policy is to contribute at least the amount that is sufficient to meet the
minimum funding requirements of applicable federal law.
A summary of the components of net periodic pension cost for these plans at
December 31 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the period... $ 1,097 $ 1,495 $ 1,483
Interest cost on projected benefit obligation....... 2,189 2,424 2,556
Actual return on plan assets........................ (3,707) (3,197) (671)
Net amortization and deferral....................... 891 166 (2,535)
------- ------- -------
TOTAL EXPENSE....................................... $ 470 $ 888 $ 833
======= ======= =======
</TABLE>
F-17
<PAGE> 134
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS -- CONTINUED
The following table sets forth the funded status of these plans and the
related amounts included in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation................................. $ 25,070 $ 28,935
======== ========
Accumulated benefit obligation............................ $ 27,539 $ 31,931
======== ========
Plan assets at fair value................................... $ 32,510 $ 32,238
Projected benefit obligation................................ (34,324) (40,512)
-------- --------
Plan assets less than projected benefit obligation.......... (1,814) (8,274)
Less:
Unrecognized net gain (loss).............................. 717 (5,155)
Unrecognized prior service cost........................... 1,273 1,163
Unrecognized net assets at January 1, 1987, net of
amortization........................................... 1,409 1,171
Adjustment for minimum liability.......................... 243 1,681
-------- --------
NET PENSION LIABILITY RECORDED AT DECEMBER 31............... $ 5,456 $ 7,134
======== ========
</TABLE>
Plan assets consist primarily of listed common stocks, corporate and
government bonds and short-term investments.
The Company also sponsors an unfunded, non-qualified supplemental
retirement plan to provide to certain officers a defined pension benefit in
excess of limits imposed by federal tax law. Pension expense for this plan was
$1,370 in 1995, $1,639 in 1996 and $4,862 (including special retirement benefits
paid to certain former key management employees of $3,336) in 1997. At December
31, 1997, the projected benefit obligation for this plan totaled $13,739 of
which $4,642 (comprised of unrecognized net losses of $2,740, unrecognized prior
service cost of $1,216 and an unrecognized net obligation at January 1, 1987, of
$686) is subject to later amortization. The remaining $9,097 is included in
other long-term liabilities in the accompanying consolidated balance sheets.
Assumptions used in accounting for the pension plans as of December 31
were:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Discount rate.......................................... 7.50% 7.75% 7.00%
Rate of increase in compensation levels................ 5.00% 5.00% 5.00%
Expected long-term rate of return on assets............ 9.00% 9.00% 9.00%
</TABLE>
The decrease in the discount rate in 1997 from 1996 increased the
accumulated benefit obligation of the two non-contributory defined benefit plans
and the non-qualified supplemental retirement plan by $2,804 and $795,
respectively, at December 31, 1997.
The Company also sponsors various defined contribution plans which cover
substantially all of its employees. For certain employees covered by contract,
contributions are based on negotiated rates and hours worked; for others,
contributions are a percentage of employees' contributions. The expense related
to these plans was $1,318, $1,386, and $1,515 in 1995, 1996 and 1997,
respectively.
The Company sponsors several unfunded postretirement life and health-care
benefits to certain of its key employees. Benefits are determined based on
varying formulas using age at retirement and years of active service.
F-18
<PAGE> 135
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
L. EMPLOYEE RETIREMENT AND BENEFIT PLANS -- CONTINUED
The following table sets forth postretirement benefits recognized in the
Company's consolidated balance sheet:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 599 $ 1,514
Other fully eligible participants......................... 2,710 1,987
Other active participants................................. 964 1,121
------- -------
Subtotal.................................................... 4,273 4,622
Unrecognized transition obligation.......................... (2,652) (2,505)
Unrecognized actuarial loss................................. (782) (741)
------- -------
POSTRETIREMENT BENEFIT LIABILITY RECORDED AT DECEMBER 31.... $ 839 $ 1,376
======= =======
</TABLE>
Net postretirement benefit cost for the plan at December 31 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service cost -- benefits earned during the period.......... $ 94 $131 $189
Interest cost on projected benefit obligation.............. 234 272 326
Net amortization and deferral.............................. 147 154 163
---- ---- ----
TOTAL EXPENSE.............................................. $475 $557 $678
==== ==== ====
</TABLE>
The accumulated postretirement benefit obligation was determined using an
assumed discount rate of 7.75% and 7.00% for the years ended December 31, 1996
and 1997, respectively, and health care cost trend rates of 7.5% in 1996 and
7.0% in 1997. The assumed health care cost trend rate for 1998 is 6.5%
decreasing ratably to 6.0% by the year 1999. The effect of a one percent
increase in the health care cost trend rate assumption would increase the
accumulated postretirement benefit obligation by $190 at December 31, 1997. The
increase to the post retirement benefit cost would not be material.
M. INSURANCE FUND INVESTMENTS
The following is a summary of the components of insurance fund investments:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
------- -------
<S> <C> <C>
Cash and equivalents........................................ $ 2,935 $14,821
Debt securities............................................. 2,895 17,851
Equity securities........................................... 25,721 20,422
Special expiration price options............................ 6,824
Other investments........................................... 12,104 5,485
Receivable from securities sold............................. 30,470
------- -------
TOTAL INSURANCE FUND INVESTMENTS............................ $80,949 $58,579
======= =======
</TABLE>
F-19
<PAGE> 136
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
M. INSURANCE FUND INVESTMENTS -- CONTINUED
AVAILABLE-FOR-SALE SECURITIES
The insurance fund investment portfolio of debt and marketable equity
securities, at December 31, 1997 and 1996, primarily consists of the following
investments classified as available-for-sale:
<TABLE>
<CAPTION>
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1996:
U.S. Treasury............................. $ 332 $ 2 $ 330
States and political subdivisions......... 1,090 $ 28 1,118
Foreign governments....................... 50 50
Corporate................................. 1,397 1,397
------- ------- ------- -------
Total debt securities..................... 2,869 28 2 2,895
Equity securities......................... 19,682 12,887 6,848 25,721
------- ------- ------- -------
$22,551 $12,915 $ 6,850 $28,616
======= ======= ======= =======
December 31, 1997:
U.S. Treasury............................. $13,272 $ 97 $ 20 $13,349
States and political subdivisions......... 1,075 41 1,116
Foreign governments....................... 401 1 400
Corporate................................. 2,981 6 1 2,986
------- ------- ------- -------
Total debt securities..................... 17,729 144 22 17,851
Equity securities......................... 18,536 4,893 3,007 20,422
------- ------- ------- -------
$36,265 $ 5,037 $ 3,029 $38,273
======= ======= ======= =======
</TABLE>
The gross realized gains and (losses) on sales of available-for-sale
securities totaled $4,251 and $(4,089) for 1995, $11,139 and $(3,893) for 1996,
and $4,118 and $(2,949) for 1997, respectively. During 1995, 1996, and 1997, the
change in net unrealized holding gain (loss) on available-for-sale securities
that has been included as a separate component of shareholders' equity totaled
$4,518 (net of deferred taxes of $2,424), $196 (net of deferred taxes of $106),
and $(2,636) (net of deferred taxes of $1,420), respectively.
In 1996 and 1997, MIICA recorded impairment losses of $656 and $9,884,
respectively, relating to available-for-sale equity securities deemed by
management to be other-than-temporarily impaired.
MIICA owns common stock shares and warrants that have restrictions and
cannot immediately be sold on the open market. These restricted securities have
a fair value of $14,983 and $7,950 at December 31, 1996 and 1997, respectively.
A substantial portion of the debt securities at December 31, 1997 mature in
the years 1999 through 2002, whereas others have contractual maturity dates of
the year 2003 or later.
TRADING SECURITIES
MIICA also owned special expiration price options which were classified as
trading securities. Those outstanding at December 31, 1996 were either sold,
exercised or allowed to expire in 1997. The fair value of these securities was
$6,824 at December 31, 1996. The average fair value of the options held during
the year ended December 31, 1996 and 1997 was $8,422 and $3,207, respectively.
Unrealized gains on these options were reported directly in net income and
totaled $2,935, $1,190, and
F-20
<PAGE> 137
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
M. INSURANCE FUND INVESTMENTS -- CONTINUED
$0 in 1995, 1996, and 1997, respectively. The net realized (losses) on sales of
these investments totaled $(1,037) in 1995, $(4,595) in 1996, and $(8,798) in
1997.
OTHER INVESTMENTS
MIICA has investments, which are not publicly traded and which are carried
on the equity method. During 1996, MIICA liquidated a substantial portion of
these investments realizing a net gain of $5,463. MIICA had a receivable of
$30,470 relating to the sale of these and other securities at December 31, 1996.
This receivable was collected in full during 1997. The net adjustment to
unrealized holding gains (losses) on these securities, included as a separate
component of shareholders' equity, totaled $2,863 in 1995 (net of deferred taxes
of $1,564); $(3,242) in 1996 (net of deferred tax benefits of $1,745); and $283
in 1997 (net of deferred taxes of $153). Equity income or losses from these
investments were not significant for any of the years presented. Other
investments at December 31, 1996 and 1997 also include real estate ventures of
$7,248 and $3,207, respectively.
N. OTHER INCOME (EXPENSE), NET
Other income (expense), net is comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
1995 1996 1997
------ ------ --------
<S> <C> <C> <C>
MIICA investment (loss) income:
Realized (losses) gains and impairment losses.......... $ (875) $7,458 $(17,513)
Unrealized gains on trading securities................. 2,935 1,190
Other investment (losses) earnings..................... (753) 803 2,952
------ ------ --------
Investment income (loss), net.......................... 1,307 9,451 (14,561)
Miscellaneous income (loss), net............................ 2,907 400 (1,108)
------ ------ --------
Total other income (expense), net........................... $4,214 $9,851 $(15,669)
====== ====== ========
</TABLE>
O. SUPPLEMENTAL GUARANTOR INFORMATION
As discussed in Note F, the Company in November 1997 completed refinancing
substantially all of its outstanding debt through borrowings under the Senior
Credit Facility and the Notes. The issuer of the refinanced debt is Werner
Holding Co. (DE), Inc. (the "Issuer"). The Issuer's wholly owned subsidiaries,
except for MIICA (the "Guarantor Subsidiaries"), along with Werner Holding Co.
(PA), Inc., its parent, have provided full, unconditional, joint and several
guarantees of the Senior Credit Facility and the Notes and will provide the same
guarantee for obligations of any registered notes exchanged for the Notes.
Following is condensed consolidated financial information for Werner
Holding Co. (PA), Inc. (the "Parent Company"), the Issuer, the Guarantor
Subsidiaries and MIICA (the "Non-Guarantor Subsidiary"). Separate financial
statements of the Guarantor Subsidiaries are not presented because management
has determined that they would not provide additional information that is
material to investors. Therefore, the Guarantor Subsidiaries are combined in the
presentation below. Further, separate financial statements of the Issuer have
not been provided as management has determined that they would not provide
information that is material to investors, as the Issuer has no substantial
operations or assets, other than its investment in its subsidiaries.
Investments in subsidiaries are accounted for by the Company on the equity
method of accounting. Earnings at subsidiaries are, therefore, reflected in the
Company's investment account. The elimination entries eliminate investment in
subsidiaries and intercompany balances and transactions.
F-21
<PAGE> 138
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents........ $ 344 $ 13 $ 629 $ $ $ 986
Accounts receivable......... 47,069 818 (1,610) 46,277
Refundable income taxes..... 1,989 27 2,016
Inventories................. 44,407 44,407
Deferred income taxes....... 2,057 520 2,577
Other....................... 4,840 127 (3,130) 1,837
------- ------- -------- ------- --------- --------
Total current assets.......... 344 13 100,991 1,465 (4,713) 98,100
Investments and other assets:
Insurance fund
investments.............. 80,949 80,949
Deferred income taxes....... 2,985 1,164 4,149
Deferred financing fees,
net...................... 174 174
Investment in
subsidiaries............. 74,735 74,722 (149,457)
Other....................... 19,572 677 (5,000) 15,249
------- ------- -------- ------- --------- --------
74,735 74,722 22,731 82,790 (154,457) 100,521
Property, plant and equipment:
Land and improvements....... 5,740 5,740
Buildings................... 29,372 29,372
Machinery and equipment..... 90,884 217 91,101
------- ------- -------- ------- --------- --------
125,996 217 126,213
Less accumulated
depreciation and
amortization............. 68,957 128 69,085
------- ------- -------- ------- --------- --------
57,039 89 57,128
Capital projects in
progress................. 5,436 5,436
------- ------- -------- ------- --------- --------
62,475 89 62,564
------- ------- -------- ------- --------- --------
Total assets.................. $75,079 $74,735 $186,197 $84,344 $(159,170) $261,185
======= ======= ======== ======= ========= ========
</TABLE>
F-22
<PAGE> 139
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable...... $ $ $ 20,830 $ 861 $ $ 21,691
Intercompany payable
(receivable)....... (1,508) 1,508
Accrued liabilities... 14,958 9,369 (4,713) 19,614
Current maturities of
long-term debt..... 7,571 7,571
------- ------- -------- ------- --------- --------
Total current
liabilities........... 41,851 11,738 (4,713) 48,876
Long-term obligations:
Long-term debt -- less
current
maturities......... 75,871 75,871
Intercompany payable
(receivable)....... 5,000 (5,000)
Reserve for losses and
loss adjustment
expenses........... 45,320 45,320
Other................. 16,039 16,039
------- ------- -------- ------- --------- --------
91,910 50,320 (5,000) 137,230
Total shareholders'
equity (deficit)...... 75,079 74,735 52,436 22,286 (149,457) 75,079
------- ------- -------- ------- --------- --------
Total liabilities and
shareholders' equity
(deficit)............. $75,079 $74,735 $186,197 $84,344 $(159,170) $261,185
======= ======= ======== ======= ========= ========
</TABLE>
F-23
<PAGE> 140
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and
equivalents..... $ 17 $ 6 $ 3,084 $ $ $ 3,107
Accounts
receivable...... 62,548 6,502 (6,137) 62,913
Refundable income
taxes........... 664 156 820
Inventories........ 44,670 44,670
Deferred income
taxes........... 2,623 1,828 4,451
Other.............. 6,636 300 6,936
--------- --------- -------- -------- -------- --------
Total current
assets............. 17 6 120,225 8,786 (6,137) 122,897
Investments and other
assets:
Insurance fund
investments..... 58,579 58,579
Deferred income
taxes........... 6,445 5,141 11,586
Deferred financing
fees, net....... 15,098 15,098
Investment in
subsidiaries.... (153,689) 148,698 4,991
Other.............. 13,447 749 14,196
--------- --------- -------- -------- -------- --------
(153,689) 163,796 19,892 64,469 4,991 99,459
Property, plant and
equipment:
Land and
improvements.... 7,369 7,369
Buildings.......... 34,666 34,666
Machinery and
equipment....... 97,736 173 97,909
--------- --------- -------- -------- -------- --------
139,771 173 139,944
Less accumulated
depreciation and
amortization.... 77,157 127 77,284
--------- --------- -------- -------- -------- --------
62,614 46 62,660
Capital projects in
progress........ 3,169 3,169
--------- --------- -------- -------- -------- --------
65,783 46 65,829
--------- --------- -------- -------- -------- --------
Total assets......... $(153,672) $ 163,802 $205,900 $ 73,301 $ (1,146) $288,185
========= ========= ======== ======== ======== ========
</TABLE>
F-24
<PAGE> 141
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Short-term bank
debt............. $ $ 41,500 $ $ $ $ 41,500
Accounts payable.... 24,904 24,904
Intercompany payable
(receivable)..... 261 (261)
Accrued
liabilities...... 24,597 6,436 (6,137) 24,896
Current maturities
of long-term
debt............. 1,450 1,450
--------- -------- -------- ------- -------- --------
Total current
liabilities......... 42,950 49,762 6,175 (6,137) 92,750
Long-term obligations:
Long-term debt --
less current
maturities (net
of unamortized
discount of
$4,009).......... 274,541 5,000 279,541
Reserve for losses
and loss
adjustment
expenses......... 49,644 49,644
Other............... 19,922 19,922
--------- -------- -------- ------- -------- --------
274,541 24,922 49,644 349,107
Shareholders' equity
(deficit)........... (153,672) (153,689) 131,216 17,482 4,991 (153,672)
--------- -------- -------- ------- -------- --------
Total liabilities and
shareholders' equity
(deficit)........... $(153,672) $163,802 $205,900 $73,301 $ (1,146) $288,185
========= ======== ======== ======= ======== ========
</TABLE>
F-25
<PAGE> 142
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales...................... $ $ $336,029 $1,421 $ (1,421) $336,029
Cost of sales.................. 248,937 248,937
------ ------ -------- ------ -------- --------
Gross profit................... 87,092 1,421 (1,421) 87,092
General and administrative
expense...................... 23,443 2,042 (478) 25,007
Selling and distribution
expense...................... 47,073 47,073
------ ------ -------- ------ -------- --------
Operating profit (loss)........ 16,576 (621) (943) 15,012
Income from equity investees... 6,300 6,300 (12,600)
Other income, net.............. 1,525 2,125 564 4,214
------ ------ -------- ------ -------- --------
Income before interest and
taxes........................ 6,300 6,300 18,101 1,504 (12,979) 19,226
Interest expense............... 7,148 58 7,206
------ ------ -------- ------ -------- --------
Income before provisions for
income taxes................. 6,300 6,300 10,953 1,446 (12,979) 12,020
Income taxes................... 4,964 177 5,141
------ ------ -------- ------ -------- --------
Income before extraordinary
charge....................... 6,300 6,300 5,989 1,269 (12,979) 6,879
Extraordinary charge -- early
extinguishment of debt....... 579 579
------ ------ -------- ------ -------- --------
NET INCOME..................... $6,300 $6,300 $ 5,410 $1,269 $(12,979) $ 6,300
====== ====== ======== ====== ======== ========
</TABLE>
F-26
<PAGE> 143
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... $ $ $366,864 $ 687 $ (687) $366,864
Cost of sales................. 264,977 264,977
------- ------- -------- ------- -------- --------
Gross profit.................. 101,887 687 (687) 101,887
General and administrative
expense..................... 25,926 2,509 (1,408) 27,027
Selling and distribution
expense..................... 47,846 47,846
------- ------- -------- ------- -------- --------
Operating profit (loss)....... 28,115 (1,822) 721 27,014
Income from equity
investees................... 19,360 19,360 (38,720)
Other income, net............. 61 9,629 161 9,851
------- ------- -------- ------- -------- --------
Income before interest and
taxes....................... 19,360 19,360 28,176 7,807 (37,838) 36,865
Interest expense.............. 7,517 7,517
------- ------- -------- ------- -------- --------
Income before provision for
income taxes................ 19,360 19,360 20,659 7,807 (37,838) 29,348
Income taxes.................. 7,413 2,575 9,988
------- ------- -------- ------- -------- --------
NET INCOME.................... $19,360 $19,360 $ 13,246 $ 5,232 $(37,838) $ 19,360
======= ======= ======== ======= ======== ========
</TABLE>
F-27
<PAGE> 144
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $ $ $416,321 $ 2,704 $ (2,704) $416,321
Cost of sales................ 300,095 300,095
-------- -------- -------- -------- -------- --------
Gross profit................. 116,226 2,704 (2,704) 116,226
General and administrative
expense.................... 29,717 2,501 (1,032) 31,186
Selling and distribution
expense.................... 48,944 48,944
Recapitalization expense..... 22,714 22,714
Non-cash compensation
charge..................... 78,527 78,527
-------- -------- -------- -------- -------- --------
Operating (loss) profit...... (63,676) 203 (1,672) (65,145)
(Loss) from equity
investees.................. (90,507) (90,507) 181,014
Other (expense), net......... (1,106) (14,563) (15,669)
-------- -------- -------- -------- -------- --------
(Loss) before interest and
taxes...................... (90,507) (90,507) (64,782) (14,360) 179,342 (80,814)
Interest expense............. 8,979 8,979
-------- -------- -------- -------- -------- --------
(Loss) before provision for
income taxes............... (90,507) (90,507) (73,761) (14,360) 179,342 (89,793)
Income taxes................. 4,623 (3,909) 714
-------- -------- -------- -------- -------- --------
NET (LOSS)................... $(90,507) $(90,507) $(78,384) $(10,451) $179,342 $(90,507)
======== ======== ======== ======== ======== ========
</TABLE>
F-28
<PAGE> 145
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES... $ $ $(3,711) $ 2,343 $ $(1,368)
INVESTING ACTIVITIES
Capital expenditures......... (12,517) (12,517)
Insurance fund securities
available-for-sale:
Purchases of debt and
equity securities..... (74,362) (74,362)
Sale of debt and equity
securities............ 72,358 72,358
Net purchases of other
insurance fund
investments................ (4,147) (4,147)
Other........................ (1,063) 851 (212)
Intercompany transactions.... 2,318 (66) (2,252) -- -- --
------- ------- ------- ------- ------- -------
Net cash provided by (used
in) investing activities... 2,318 (66) (15,832) (5,300) (18,880)
FINANCING ACTIVITIES
Net borrowings under
revolving credit
agreements................. 24,800 24,800
Borrowings of long-term
debt....................... 6,000 6,000
Repayment of long-term
debt....................... (7,676) (7,676)
Dividends paid............... (1,991) (1,991)
Other........................ (2,345) 2,000 (345)
------- ------- ------- ------- ------- -------
Net cash (used in) provided
by financing activities.... (1,991) -- 20,779 2,000 20,788
------- ------- ------- ------- ------- -------
Net increase (decrease) in
cash and equivalents....... 327 (66) 1,236 (957) 540
Cash and equivalents
(overdraft) at beginning of
year....................... 6 76 (950) 957 89
------- ------- ------- ------- ------- -------
CASH AND EQUIVALENTS AT END
OF YEAR.................... $ 333 $ 10 $ 286 $ $ $ 629
======= ======= ======= ======= ======= =======
</TABLE>
F-29
<PAGE> 146
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED
IN) OPERATING
ACTIVITIES............... $ $ $ 24,452 $ (4,934) $ $ 19,518
INVESTING ACTIVITIES
Capital expenditures....... (13,048) (13,048)
Insurance fund securities
available-for-sale:
Purchases of debt and
equity securities... (176,034) (176,034)
Sale of debt and
equity securities... 178,623 178,623
Net sales of other
insurance fund
investments.............. 2,345 2,345
Other...................... (7,718) (7,718)
Intercompany
transactions............. 3,259 3 (3,262)
-------- -------- -------- -------- -------- ---------
Net cash provided by (used
in) investing
activities............... 3,259 3 (24,028) 4,934 (15,832)
FINANCING ACTIVITIES
Net borrowings under
revolving credit
agreements............... 7,600 7,600
Repayments of long-term
debt..................... (7,642) (7,642)
Repurchase of common
stock.................... (1,412) (1,412)
Dividends paid............. (1,836) (1,836)
Other...................... (39) (39)
-------- -------- -------- -------- -------- ---------
Net cash (used in) provided
by financing
activities............... (3,248) (81) (3,329)
-------- -------- -------- -------- -------- ---------
Net increase in cash and
equivalents.............. 11 3 343 357
Cash and equivalents at
beginning of year........ 333 10 286 629
-------- -------- -------- -------- -------- ---------
CASH AND EQUIVALENTS AT END
OF YEAR.................. $ 344 $ 13 $ 629 $ $ $ 986
======== ======== ======== ======== ======== =========
</TABLE>
F-30
<PAGE> 147
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
O. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- --------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED
IN) OPERATING
ACTIVITIES............... $ $ $ 24,318 $ (7,086) $ $ 17,232
INVESTING ACTIVITIES
Capital expenditures....... (11,710) (11,710)
Insurance fund securities
available-for-sale:
Purchases of debt and
equity securities... (79,484) (79,484)
Sale of debt and
equity securities... 59,497 59,497
Net sales of other
insurance fund
investments.............. 24,073 24,073
Other (net)................ 4,062 4,062
Intercompany
transactions............. 212,278 (279,505) 67,227 -- -- --
-------- --------- -------- -------- -------- --------
Net cash provided by (used
in) investing
activities............... 212,278 (279,505) 59,579 4,086 (3,562)
FINANCING ACTIVITIES
Redemption of common
stock.................... (332,899) (332,899)
Issuance of common stock... 122,716 122,716
Payment of recapitalization
fees and expenses........ (37,952) (37,952)
Refinancing of existing
debt..................... (65,571) (65,571)
Issuance of Subordinated
Notes, net............... 130,950 130,950
Borrowings under Senior
Credit Facility.......... 186,500 186,500
Net (repayments) under
revolving credit
agreements............... (6,300) (6,300)
Repayments of long-term
debt..................... (6,571) (6,571)
Repurchase of common
stock.................... (731) (731)
Dividends paid............. (1,691) (1,691)
Capital contribution....... (8,000) 8,000
Other...................... 5,000 (5,000)
-------- --------- -------- -------- -------- --------
Net cash (used in) provided
by financing
activities............... (212,605) 279,498 (81,442) 3,000 (11,549)
-------- --------- -------- -------- -------- --------
Net (decrease) increase in
cash and equivalents..... (327) (7) 2,455 2,121
Cash and equivalents at
beginning of year........ 344 13 629 986
-------- --------- -------- -------- -------- --------
CASH AND EQUIVALENTS AT END
OF YEAR.................. $ 17 $ 6 $ 3,084 $ $ $ 3,107
======== ========= ======== ======== ======== ========
</TABLE>
F-31
<PAGE> 148
WERNER HOLDING CO. (PA), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
P. SUBSEQUENT EVENT (UNAUDITED)
In the first quarter of 1998, the Company made a decision to obtain commercial
insurance coverage for its product liability and workers' compensation claims as
opposed to providing insurance for such claims through MIICA. Accordingly, on
March 31, 1998 the Company entered into an arrangement with a commercial
insurance provider under which the risk associated with the Company's product
liability and workers' compensation claims was transferred to the commercial
insurance provider and the commercial insurance provider agreed to assume losses
which occurred on or before March 31, 1998 and extinguished the Company's
liability in regard to such losses. The Company paid approximately $41,500 for
this insurance coverage from the proceeds of the liquidation of certain of
MIICA's insurance fund investments. As of March 31, 1998, the Company had a
reserve for such losses of approximately $48,500. As a result the Company
recognized a gain of approximately $7,000. The Company has also obtained third
party insurance coverage, subject to certain deductible provisions, for product
liability and workers' compensation claims which occur on or after April 1,
1998.
Further, the Company made a decision to discontinue the operations of
MIICA, a Colorado corporation with its principal place of business in Boulder,
Colorado, and has recorded a charge of $700 at March 31, 1998 relating primarily
to legal fees, employee separation and severance costs, the write-off of certain
of its fixed assets, and other related expenses.
F-32
<PAGE> 149
======================================================
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
BY REGISTERED OR CERTIFIED MAIL:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, New York 10224-0084
Attention: Reorganization Operations Department
BY HAND DELIVERY OR OVERNIGHT COURIER:
IBJ Schroder Bank & Trust Company
1 State Street
New York, New York 10004
Attention: Securities Processing Window
Subcellar One (SC1)
FACSIMILE TRANSMISSION:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
(Originals of all documents submitted by facsimile
should be sent promptly by hand,
overnight courier, or registered or certified mail)
NO BROKER, DEALER OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFER
MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES,
WHETHER OR NOT PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER
A PROSPECTUS.
- ------------------------------------------------------
======================================================
- ------------------------------------------------------
WERNER HOLDING CO. (DE), INC.
WERNER LOGO
OFFER FOR OUTSTANDING
10% SENIOR SUBORDINATED
NOTES DUE 2007
IN EXCHANGE FOR
10% SERIES A SENIOR SUBORDINATED
NOTES DUE 2007
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 150
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law
("PBCL") authorize a Pennsylvania corporation to limit or eliminate the personal
liability of its directors and officers to the corporation, its shareholders or
third parties for monetary damages incurred by reason of the fact that such
director or officer is or was a representative of the corporation, but only if
such director or officer acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation. In addition, for third party actions, this indemnification may
apply to any criminal proceeding if the director or officer had no reasonable
cause to believe his or her conduct was unlawful. The Company's Articles of
Incorporation include a provision which limits or eliminates the personal
liability of its directors and officers to the fullest extent permitted by
Sections 1741 and 1742 of the PBCL.
Section 1743 of the PBCL provides for a mandatory indemnification for a
representative of a business corporation who has been successful on the merits
or otherwise in defense of any action or proceeding referred to in Sections 1741
or 1742. This indemnification covers all expenses (including attorneys' fees)
actually and reasonably incurred by the representative in connection with such
action.
The Company's Bylaws provide that, except as prohibited by law, the Company
will indemnify against any expense, liability and loss (including attorneys'
fees) any director or officer who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, whether brought by or
in the right of the corporation or otherwise, incurred by reason of the fact
that such person is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee,
fiduciary, or other representative of another corporation, partnership, joint
venture, trust, employee benefit plan or other entity. Under Sections 1741 and
1742 of the PBCL, the representative is not indemnified by the corporation if he
or she did not act in good faith or in a manner he or she reasonably believed
was in the best interests of the corporation. The inclusion of these
indemnification provisions in the Company's Bylaws is intended to enable the
Company to attract qualified persons to serve as directors and officers who
might otherwise be reluctant to do so. The Company is also required to advance
expenses to an indemnitee provided that the Company receives a written
undertaking by or on behalf of the indemnitee to repay the amount advanced if it
should ultimately be determined that the indemnitee is not entitled to be
indemnified for such expenses.
II-1
<PAGE> 151
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
*1.1 Purchase Agreement dated November 14, 1997, among the
Company, the Guarantors and the Initial Purchasers.
*1.2 Registration Rights Agreement among the Company, Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman Sachs & Co., dated November 24,
1997.
*1.3 Form of Letter of Transmittal.
*2 Amended and Restated Recapitalization Agreement, dated as of
October 27, 1997 by and among Holding and certain investors
organized by Investcorp S.A.
*3.1 Certificate of Incorporation of Werner Holding Co. (DE),
Inc.
*3.2 By-laws of Werner Holding Co. (DE), Inc.
*3.3 Amended and Restated Articles of Incorporation of Werner
Holding Co. (PA), Inc.
*3.4 By-laws of Werner Holding Co. (PA), Inc.
*3.5 Articles of Incorporation of Werner Co.
*3.6 By-laws of Werner Co.
*3.7 Articles of Incorporation by Gold Medal Ladder Company.
*3.8 By-laws of Gold Medal Ladder Company.
*3.9 Articles of Incorporation of Kentucky Ladder Company.
*3.10 By-laws of Kentucky Ladder Company.
*3.11 Articles of Incorporation of Florida Ladder Company.
*3.12 By-laws of Florida Ladder Company.
*3.13 Articles of Incorporation of Werner Management Co.
*3.14 By-laws of Werner Management Co.
*3.15 Certificate of Incorporation of Werner Financial Inc.
*3.16 By-laws of Werner Financial Inc.
*3.17 Articles of Incorporation of R.D. Arizona Ladder Corp.
*3.18 By-laws of R.D. Arizona Ladder Corp.
*3.19 Certificate of Incorporation by WIP Technologies, Inc.
*3.20 By-laws of WIP Technologies, Inc.
*3.21 Certificate of Incorporation of Ardee Investment Co., Inc.
*3.22 By-laws of Ardee Investment Co., Inc.
*3.23 Articles of Incorporation of Olympus Properties, Inc.
*3.24 By-laws of Olympus Properties, Inc.
*3.25 Articles of Incorporation of Phoenix Management Services,
Inc.
*3.26 By-laws of Phoenix Management Services, Inc.
*4.1 Indenture between the Company and IBJ Schroder Bank & Trust
Company, as Trustee, dated as of November 24, 1997.
*4.2 Form of Note (included as Exhibit B to Exhibit 4.1).
</TABLE>
II-2
<PAGE> 152
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
*4.3 Registration Rights Agreement among the Company, Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman, Sachs & Co. dated November 24, 1997
(filed as Exhibit 1.2)
*4.4 Form of Letter of Transmittal (filed as Exhibit 1.3).
**5.1 Opinion of Gibson, Dunn & Crutcher LLP.
**8.1 Opinion of Gibson, Dunn & Crutcher LLP regarding certain tax
matters.
10.1 Form of Employee Protection Agreements between Holding and
certain employees (schedule attached).
*10.2 Shareholder Agreement, dated as of November 24, 1997, by and
among Holding, Investcorp Investment Equity Limited, certain
other holders of shares of Class D Common Stock of Holding
and the other individuals listed on the signature pages
thereto.
*10.3 Form of Employment Agreement, dated as of November 24, 1997,
between Werner Management Co. and certain named executive
officers.
*10.4 Management Stock Incentive Plan, established by Werner
Holding Co. (PA), Inc. as of November 24, 1997.
*10.5 Form of Stock Option Agreements pursuant to Stock Incentive
Plan between Werner Holding Co. (PA), Inc. and certain
employees (schedule attached).
10.6 Trust Indenture, dated as of September 1, 1990, between the
County of Carroll, Kentucky and Dai-Ichi Kangyo Trust
Company.
10.7 Variable Rate Demand Industrial Building Revenue Bonds
issued by the County of Carroll, Kentucky.
10.8 Lease Agreement, dated as of September 1, 1990, between
County of Carroll, Kentucky and Kentucky Ladder Company.
10.9 Lease Agreement, dated September 22, 1994, between SSMRT
Bensenville Industrial Park (3), Inc. and Olympus
Properties, Inc.
*10.10 Master Registration Rights Agreement, dated as of November
24, 1997, by Werner Holding Co. (PA), Inc. for the benefit
of certain shareholders.
*10.11 Werner 1997 Stock Loan Plan.
*10.12 Credit Agreement, dated as of November 24, 1997, among the
Company, Bankers Trust Company, as Administrative Agent and
Co-Arranger, Merrill Lynch Capital Corporation, as
Syndication Agent and as Co-Arranger, The Chase Manhattan
Bank, as Documentation Agent, and Goldman Sachs Credit
Partners L.P., as Co-Agent.
10.13 Pension Plan for Certain Hourly Bargaining Unit Employees of
Werner Co.
10.14 Retirement Plan for Salaried Employees of Werner Holding Co.
(DE), Inc.
10.15 Supplemental Pension Plan A Applicable to Key Executives of
Werner Holding Co. (DE), Inc., its Parent and Subsidiaries
10.16 Supplemental Pension Plan B Applicable to Elected Salaried
Corporate Officers of Werner Holding Co. (DE), Inc., its
Parent and Subsidiaries
10.17 Amendment to the Supplemental Pension Plan B Applicable to
Elected Salaried Corporate Officers of Werner Holding Co.
(DE), Inc., its Parent and Subsidiaries.
10.18 Werner Holding Co. (DE), Inc. Employee Savings Plan.
*10.19 Form of Management Stock Purchase Agreement between Setup
Limited, Werner Holding Co. (PA), Inc. and certain
individuals.
*10.20 Form of Loan and Pledge Agreement of Werner Holding Co.
(PA), Inc.
</TABLE>
II-3
<PAGE> 153
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
*10.21 Agreement for Management Advisory, Strategic Planning and
Consulting Services between the Company and Investcorp
International, Inc.
*10.22 Financing Advisory Agreement between the Company and
Investcorp International Inc.
*10.23 Stand-By Commitment Letter of Invifin S.A.
10.24 Reinsurance Agreement dated March 31, 1998 among
Manufacturer's Indemnity and Insurance Company of America
and National Union Fire Insurance Company of Pittsburgh, PA
10.25 Agreement dated March 31, 1998 among National Union Fire
Insurance Company of Pittsburgh, PA, Manufacturer's
Indemnity and Insurance Company of America and the
Reinsurers named therein.
10.26 Assumption Agreement, dated March 31, 1998 among National
Union Fire Insurance Company of Pittsburgh, PA,
Manufacturer's Indemnity and Insurance Company of America
and Werner Holding Co., (PA), Inc.
10.27 Novation and Assumption Agreement, dated March 31, 1998
among Insurance Company of North America, National Union
Fire Insurance Company of Pittsburgh, PA and Werner Holding
Co., (PA), Inc.
10.28 Commutation Agreement, dated March 31, 1998 between
Insurance Company of North America, Pacific Employers
Insurance Company and CIGNA Insurance Company of Illinois,
and Manufacturers Indemnity and Insurance Company
10.29 Indemnity Agreement dated March 31, 1998 between National
Union Fire Insurance Company of Pittsburgh, PA and Werner
Holding Co. PA, (Inc.)
10.30 Novation Agreement dated March 31, 1998 among The Travelers
Indemnity Company of Hartford, Connecticut, certain of its
subsidiaries and affiliates, Werner Holding Co. (PA), Inc.
and certain of its subsidiaries, and National Union Fire
Insurance Company of Pittsburgh, PA
*12 Statement re: Computation of Ratio of Earnings to Fixed
Charges.
*21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
**23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1).
*24 Powers of Attorney (included on Signature Pages of
Registration Statement).
**25 Statement of Eligibility of Trustee.
*27 Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS
(a) The Company undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933, as amended; (ii) to reflect in the prospectus any facts or events
arising after the. effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
Registration Statement.
II-4
<PAGE> 154
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will 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) The Company undertakes to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the Registration
Statement when it became effective.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new 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.
II-5
<PAGE> 155
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
WERNER HOLDING CO. (DE), INC.
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
Donald M. Werner Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Vice Chairman of the Board
- --------------------------------------------
Howard L. Solot
* Director
- --------------------------------------------
Savio W. Tung
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-6
<PAGE> 156
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
WERNER HOLDING CO. (PA), INC.
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
Donald M. Werner Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Vice Chairman of the Board
- --------------------------------------------
Howard L. Solot
* Director
- --------------------------------------------
Savio W. Tung
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-7
<PAGE> 157
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
WERNER CO.
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
Donald M. Werner Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Vice Chairman of the Board
- --------------------------------------------
Howard L. Solot
* Director
- --------------------------------------------
Savio W. Tung
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-8
<PAGE> 158
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
GOLD MEDAL LADDER COMPANY
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
Donald M. Werner Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-9
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
KENTUCKY LADDER COMPANY
By: /s/ HOWARD L. SOLOT
------------------------------------
Howard L. Solot
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
* Chairman of the Board and Chief Executive
- -------------------------------------------- Officer (Principal Executive Officer)
Donald M. Werner
* President and Chief Operating Officer
- -------------------------------------------- (Principal Executive Officer)
Howard L. Solot
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-10
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
FLORIDA LADDER COMPANY
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
Donald M. Werner Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-11
<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
WERNER MANAGEMENT CO.
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer, Chief Operating Officer and
Donald M. Werner President (Principal Executive Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Vice Chairman of the Board
- --------------------------------------------
Howard L. Solot
* Director
- --------------------------------------------
Savio W. Tung
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-12
<PAGE> 162
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
WERNER FINANCIAL INC.
By: /s/ DONALD W. RESNICK
------------------------------------
Donald W. Resnick
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD W. RESNICK Chief Executive Officer, Chief Financial
- -------------------------------------------- Officer, President and Treasurer (Principal
Donald W. Resnick Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
* Chairman of the Board
- --------------------------------------------
Donald M. Werner
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-13
<PAGE> 163
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
R.D. ARIZONA LADDER CORP.
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
Donald M. Werner Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-14
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
WIP TECHNOLOGIES, INC.
By: /s/ DONALD M. WERNER
------------------------------------
Donald M. Werner
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD M. WERNER Chairman of the Board, Chief Executive
- -------------------------------------------- Officer and President (Principal Executive
Donald M. Werner Officer)
/s/ DONALD W. RESNICK Chief Financial Officer and Treasurer
- -------------------------------------------- (Principal Financial Officer and Principal
Donald W. Resnick Accounting Officer)
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-15
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
ARDEE INVESTMENT CO., INC.
By: /s/ DONALD W. RESNICK
------------------------------------
Donald W. Resnick
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD W. RESNICK Chief Executive Officer, Chief Financial
- -------------------------------------------- Officer, President and Treasurer (Principal
Donald W. Resnick Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
/s/ DONALD M. WERNER Chairman of the Board
- --------------------------------------------
Donald M. Werner
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-16
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
OLYMPUS PROPERTIES, INC.
By: /s/ DONALD W. RESNICK
------------------------------------
Donald W. Resnick
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD W. RESNICK Chief Executive Officer, Chief Financial
- -------------------------------------------- Officer, President and Treasurer (Principal
Donald W. Resnick Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
/s/ DONALD M. WERNER Chairman of the Board
- --------------------------------------------
Donald M. Werner
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-17
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Greenville, Pennsylvania on April 13, 1998.
PHOENIX MANAGEMENT SERVICES, INC.
By: /s/ DONALD W. RESNICK
------------------------------------
Donald W. Resnick
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
April 13, 1998.
<TABLE>
<C> <S>
/s/ DONALD W. RESNICK Chief Executive Officer, Chief Financial
- -------------------------------------------- Officer, President and Treasurer (Principal
Donald W. Resnick Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
* Chairman of the Board
- --------------------------------------------
Donald M. Werner
* Director
- --------------------------------------------
Charles J. Philippin
* Director
- --------------------------------------------
Christopher J. Stadler
</TABLE>
*By: /s/ DONALD W. RESNICK
-------------------------------
Donald W. Resnick
Attorney-in-Fact
II-18
<PAGE> 1
Exhibit 10.1
FORM OF EMPLOYEE PROTECTION AGREEMENT
THIS EMPLOYEE PROTECTION AGREEMENT dated as of July 2, 1997 among
WERNER HOLDING CO. (PA), INC., a Pennsylvania corporation (the "Company"), [Name
of Employer], a ___________________ corporation (the "Employer") and
________________ (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company and the Employer recognize that the
possibility of a Change of Control (as hereinafter defined) of the Company
currently exists and that such possibility, and the uncertainty and questions it
may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders; and
WHEREAS, the Company and the Employer have determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of the members of the Employer's management; and
WHEREAS, the Company and the Employer desire to induce the
Employee to remain in the employment of the Employer by providing for certain
benefits; and
WHEREAS, the Employee desires to continue to be employed by the
Employer; and
WHEREAS, the Employee is willing to commit to refrain from
competing with the Company and the Employer and to maintain the confidentiality
of the confidential information of the Company and the Employer.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to the following:
1. DEFINITIONS. The capitalized terms used herein shall have the
meanings ascribed to them below.
"Cause" shall mean (A) the willful and continued failure by
the Employee substantially to perform his/her duties with the Employer (other
than any such failure resulting from his/her incapacity due to physical or
mental illness) as determined by the Board of Directors of the Company, after a
demand for substantial performance is delivered to the Employee by the Employer,
which specifically identifies the manner in which the Employer believes the
Employee has not substantially performed his/her duties, (B) the willful
engaging by the Employee in misconduct which is demonstrably and materially
injurious to the Company or the Employer, monetarily or otherwise, or (C) the
breach of any of the terms of this Agreement by the Employee.
Page 1 of 7
<PAGE> 2
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Employee by the Employer a copy of a Notice of Termination authorized by the
Chief Executive Officer of the Employer stating that in the good faith opinion
of such Officer the Employee was guilty of conduct set forth above in clauses
(A), (B) or (C) of the first sentence of this paragraph and specifying the
particulars thereof in detail.
"Change of Control" of the Company shall be deemed to have
occurred if (a) any consolidation or merger of the Company is consummated in
which the Company is not the continuing or surviving corporation (or survives
only as a subsidiary of any entity other than a previously wholly-owned
subsidiary of the Company) or pursuant to which shares of the Company's common
stock would be converted into cash, securities or other property, other than a
merger of the Company in which the holders of the Company's common stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger as they had in
the Company's common stock prior to the merger; or (b) the acquisition by any
person or group of persons acting in concert of 50% or more of the outstanding
shares of Class A Stock (including securities exercisable for or convertible
into shares of Class A Stock) of the Company; or (c) 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. Substantially all of
the assets shall mean assets equal to fifty-one percent (51%) or more in value
of the assets of the Company and its subsidiaries taken as a whole.
"Confidential Information" shall mean all confidential,
proprietary and sensitive information of, or relating to the Company, its
subsidiaries and affiliates and their respective businesses including, but not
limited to, products, financial condition, manufacturing processes, know-how,
business plans, trade secrets, research programs, customer and supplier lists,
pricing information and strategies, and personnel information, whether in
written or oral form, or in the form of models or other tangible property, or
obtained through observation, and whether or not marked or identified as
confidential.
"Disability" shall mean the Employee's incapacity due to
physical or mental illness, if the Employee shall have been absent from his/her
duties with the Employer on a full-time basis for ninety (90) or more
consecutive days.
"Material Employment Change" shall mean any of the following:
(a) the assignment to the Employee by the Employer of
duties, or the assignment of the Employee to a position,
constituting a material diminution in the Employee's role,
responsibilities or authority compared with his/her role,
responsibilities or authority with the Employer on the date of
this Agreement;
(b) a reduction by the Employer in the Employee's
base salary as in effect on the date hereof or as the same may
be increased from time to time during the term of this
Agreement;
Page 2 of 7
<PAGE> 3
(c) any material reduction in the level of benefits
(including participation in any bonus plan) to which the
Employee is entitled under one or more employee benefit plans
on the date of this Agreement, or the taking of any action by
the Company or the Employer which would adversely affect the
Employee's accrued benefits under any such employee benefit
plans or deprive the Employee of any material fringe benefit
enjoyed by the Employee on the date of this Agreement;
(d) a request by the Employer to the Employee to
relocate to any place that exceeds a fifty (50) mile radius
beyond the location at which the Employee performed the
Employee's duties on the date of this Agreement;
(e) any material breach by the Employer or the
Company of any provision of this Agreement; or
(f) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the
Company.
"Retirement" shall mean termination in accordance with the
Employer's retirement policy, including early retirement, generally applicable
to its salaried employees.
2. COMPENSATION RELATING TO CHANGE OF CONTROL. Subject to the
Employee's continued observance of his/her obligations hereunder, in the event
that a Change of Control occurs on or before January 2, 1999, the Employer shall
pay to the Employee on the date which is twelve (12) months from the date of the
Change of Control (the "Payment Date"), an amount, in cash equal to the product
of the Employee's highest annual base salary in effect at any time during the
period from the date of this Agreement to the Payment Date, multiplied by _____
(the "Compensation Amount"). Notwithstanding the foregoing, if prior to the
Payment Date the Employee experiences a Material Employment Change or the
Employee is terminated other than for Cause, then the Compensation Amount shall
be paid to the Employee as follows: (a) if a Material Employment Change occurs,
the Compensation Amount shall be paid to the Employee on the later of the date
of the Change of Control or the Material Employment Change, or (b) if the
Employee is terminated other than for Cause, the Compensation Amount shall be
paid to the Employee on the later of the date of the Change of Control or the
termination date.
The Employer shall pay to the Employee all legal fees and
expenses incurred by him/her in seeking to obtain or enforce any right or
benefit provided by this Agreement that the Employer fails to recognize or make
available, provided the Employee is successful in obtaining or enforcing such
right or benefit.
The Employer and the Company hereby jointly and severally,
unconditionally and absolutely guarantee the full and timely payment by the
Employer of the Compensation Amount to the Employee and all other amounts owing
to the Employee hereunder.
Page 3 of 7
<PAGE> 4
3. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS.
(a) The Employee shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Employee as the
result of employment by another employer after the Date of Termination.
(b) Except as provided in subsection (c) below, the provisions
of this Agreement, and any payment provided for hereunder, shall not reduce any
amounts otherwise payable, or in any way diminish the Employee's existing rights
(or rights which would accrue solely as a result of the passage of time) under
any employee benefit plan or employment agreement or other contract, plan or
arrangement.
(c) During the term of this Agreement, the provisions hereof
shall supersede the terms and provisions of any existing agreement with the
Employee or policy or practice of the Employer with regard to severance.
4. SUCCESSOR TO THE COMPANY.
(a) This Agreement is binding on the Company's and the
Employer's successors and assigns. Without limiting the foregoing, as a
condition to the Company's voluntary agreement or consent to a Change of
Control, the Company shall use its best efforts to attempt to require any
successor or assign of the Company in such Change of Control to assume and agree
to perform all of the obligations of the Employer and the Company under this
Agreement. Any failure of the Company to obtain such agreement prior to the
effectiveness of any such Change of Control shall be deemed to be a Material
Employment Change.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts are still payable to him/her hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Employee's personal representative,
devisee, legatee, or other designee or, if there be no such designee, to the
Employee's estate.
5. NON-COMPETITION. During the term of the Employee's employment
by the Employer and for a period of two (2) years following termination of the
Employee's employment by the Employer for any reason, the Employee shall not,
without the prior written consent of the Company, (i) compete directly or
indirectly as a partner, owner, director, shareholder, manager, employee or
otherwise with the Company, the Employer or any subsidiary or other affiliate of
the Company, and their respective successors and assigns, in the business of
manufacturing and selling climbing equipment at any location in North America,
(ii) solicit or encourage any of the climbing
Page 4 of 7
<PAGE> 5
products customers of the Employer or any subsidiary or other affiliate of the
Company to cease doing business with the Employer or any subsidiary or other
affiliate of the Company or (iii) participate, consult with, render testimony or
act in any other capacity in any adversary proceeding against the Company, the
Employer or any of its affiliates with respect to the climbing products
business.
Notwithstanding the foregoing, the Employee is permitted to
own shares (in an amount not in excess of 5%) of any publicly traded entity that
is in competition with the Company, the Employer or any subsidiary or other
affiliate of the Company.
6. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee
agrees to hold and safeguard in strict confidence all Confidential Information
and agrees that he/she will not, without the prior written consent of the
Company or the Employer, misappropriate or disclose or make available to anyone
for use outside the Company's organization at any time, either during the term
of his/her employment by the Employer or subsequent to such employment, any
Confidential Information. The Employee also agrees to hold in confidence the
fact that he/she entered into this Agreement and the terms hereof, unless the
Employee is required to disclose the existence and terms of this Agreement by
applicable law, rule, regulation or administrative or court order.
7. ARBITRATION. Any claim or controversy arising out of or
relating to this Agreement shall be submitted to binding arbitration, in
accordance with the following procedures:
(a) Any arbitration proceeding shall take place in Pittsburgh,
Pennsylvania and shall be conducted in accordance with the then current
expedited procedures of the commercial arbitration rules of the American
Arbitration Association, except as otherwise specifically provided in this
Section.
(b) The parties shall have 10 days after a notice of
arbitration is given to agree upon an arbitrator to conduct such proceeding. If
the parties fail to so agree within such 10- day period then, within five days
after the end of such 10-day period, each party shall select an arbitrator and,
within 10 days after the end of such five-day period, such two arbitrators shall
select a third arbitrator.
(c) The decision of an arbitrator (or, if there are three
arbitrators, the decision of any two arbitrators) shall be final and binding
upon the parties, and judgment may be entered upon any such decision in any
court having jurisdiction.
(d) Without limiting the provisions of Section 3, all costs
incurred in connection with any arbitration proceeding, including fees and
expenses of counsel and fees paid to the American Arbitration Association and
the arbitrator(s) and the cost of using any facilities for the arbitration
hearings, shall be borne by the non-prevailing party in the proceeding.
Page 5 of 7
<PAGE> 6
8. TERM. This Agreement shall automatically terminate on January
2, 1999 unless prior thereto a Change of Control shall have occurred.
9. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company and/or the Employer:
Werner Holding Co. (PA), Inc.
93 Werner Road
Greenville, PA 16125
Attention: Eric J. Werner, Esquire
If to the Employee:
[To his/her address as it appears on the records of the
Company]
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
10. AMENDMENT, WAIVER. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee, the Company and the Employer. No
waiver by either party hereto at any time of any breach of the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
11. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
Moreover, in the event any one or more of the provisions herein shall, for any
reason, be held excessively broad as to duration, scope, activity or subject,
such provision shall be construed by limiting and reducing it so as to be
enforceable to the maximum extent permitted by applicable law.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
Page 6 of 7
<PAGE> 7
13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
<TABLE>
<S> <C>
[NAME OF EMPLOYER]
By:_____________________________
Printed Name:
Title:
WERNER HOLDING CO. (PA), INC.
By:_____________________________
Printed Name: Donald M. Werner
Title: President and Chief Executive Officer
________________________________
[Employee]
</TABLE>
Page 7 of 7
<PAGE> 8
ATTACHMENT 1
Donald W. Resnick
Howard L. Solot
Donald M. Werner
Eric J. Werner
Michael E. Werner
<PAGE> 1
Exhibit 10.6
EXECUTION DRAFT
CLOSING ITEM NO. 2
TRUST INDENTURE
Between
COUNTY OF CARROLL, KENTUCKY
and
DAI-ICHI KANGYO TRUST COMPANY OF NEW YORK, as Trustee
Dated as of September 1, 1990
The interest of the County of Carroll, Kentucky in a Lease Agreement dated as of
September 1, 1990 between the County and Kentucky Ladder Company, of record in
Lease Book 4, page 546 in the office of the Carroll County Clerk, has been
assigned to Dai-Ichi Kangyo Trust Company of New York, as Trustee, herein.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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Page No.
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ARTICLE I Definitions .....................................................18
Section 1.01. Definitions .....................................................18
ARTICLE II The Bonds .......................................................26
Section 2.01. Amount, Form and Issuance of Bonds ..............................26
Section 2.02. Designation, Denominations, Maturity, Dates,
Interest Accrual and Tender .....................................27
Section 2.03. Execution .......................................................28
Section 2.04. Authentication ..................................................28
Section 2.05. Registration, Transfer and Exchange .............................28
Section 2.06. Persons Deemed Owners ...........................................29
Section 2.07. Payment of Principal and Interest;
Record Dates ....................................................30
Section 2.08. Mutilated, Destroyed, Lost or Stolen Bonds ......................31
Section 2.09. Temporary Bonds .................................................32
Section 2.10. Cancellation and Destruction of Surrendered
Bonds ...........................................................32
Section 2.11. Disposition of Proceeds of Bonds ................................32
Section 2.12. Deposit of Funds for Payment of Bonds ...........................32
ARTICLE III Interest Rates on Bonds .........................................33
Section 3.01. Initial Interest Rate and Subsequent
Conversion ......................................................33
Section 3.02. Variable Weekly Rate ............................................33
Section 3.03. Fixed Rate Conversion at Option of Company ......................34
ARTICLE IV Tender and Purchase of Bonds ....................................36
Section 4.01. Optional Tender of Variable Weekly Rate Bonds ...................36
Section 4.02. Mandatory Tender Upon Fixed Rate Conversion .....................41
Section 4.03. Mandatory Tender Upon Letter of Credit
Expiration ......................................................46
Section 4.04. Bonds Purchased With Proceeds of Letter of
Credit ..........................................................50
Section 4.05. No Purchases After Certain Defaults .............................51
Section 4.06. Inadequate Funds for Tenders ....................................51
ARTICLE V Construction Fund ...............................................51
Section 5.01. Establishment of Construction Fund ..............................51
Section 5.02. Payments From Construction Fund .................................52
Section 5.03. Excess Bond Proceeds ............................................53
ARTICLE VI Revenues and Application Thereof ................................54
Section 6.01. Revenues To Be Paid Over to Trustee .............................54
Section 6.02. Bond Fund .......................................................54
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 6.03. Revenues To Be Held for All Bondholders;
Certain Exceptions .............................................57
Section 6.04. Damage to or Condemnation of the Project
Facilities .....................................................57
Section 6.05. Rebate Fund ....................................................57
ARTICLE VII Letter of Credit ...............................................58
Section 7.01. Letter of Credit ...............................................58
Section 7.02. Drawings on Letter of Credit ...................................58
Section 7.03. Reduction ......................................................59
Section 7.04. Expiration .....................................................59
Section 7.05. Substitution by Bank ...........................................59
Section 7.06. Extension ......................................................59
Section 7.07. Replacement ....................................................60
Section 7.08. Notices of Substitution, Extension or
Replacement ....................................................61
Section 7.09. Fixed Rate Letter of Credit; ...................................62
Section 7.10. Other Credit Enhancement; No Credit
Enhancement ....................................................62
Section 7.11. Substitution for Initial Fixed Rate
Letter of Credit ...............................................63
ARTICLE VIII Investment Or Deposit Of Funds .................................63
Section 8.01. Deposits and Security Therefor .................................63
Section 8.02. Investment or Deposit of Funds .................................63
ARTICLE IX Redemption of Bonds ............................................65
Section 9.01. Bonds Subject to Redemption; Selection of
Bonds to be Called for Redemption ..............................65
Section 9.02. Notice of Redemption ...........................................65
Section 9.03. Payment of Redemption Price ....................................67
Section 9.04. Bonds Redeemed in Part .........................................67
Section 9.05. Special Mandatory Redemption ...................................68
Section 9.06. Extraordinary Mandatory Redemption .............................68
Section 9.07. [Intentionally Omitted.] .......................................69
Section 9.08. Optional Redemption After Fixed Rate
Conversion Date ................................................69
ARTICLE X Covenants of the Issuer ........................................69
Section 10.01. Payment of Principal of and Interest on Bonds ..................69
Section 10.02. Existence; Compliance with Laws ................................69
Section 10.03. Enforcement of Financing Agreement;
Prohibition Against Amendments;
Notice of Default ..............................................69
Section 10.04. Further Assurances .............................................70
Section 10.05. Bonds Not to Become Arbitrage Bonds ............................70
Section 10.06. Arbitrage Rebate Certificate ...................................70
Section 10.07. Financing Statements ...........................................71
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XI Events of Default and Remedies .................................71
Section 11.01. Events of Default ..............................................71
Section 11.02. Acceleration and Annulment Thereof .............................72
Section 11.03. Other Remedies .................................................73
Section 11.04. Legal Proceedings by Trustee ...................................74
Section 11.05. Discontinuance of Proceedings by Trustee .......................74
Section 11.06. Bondholders May Direct Proceedings .............................74
Section 11.07. Limitations on Actions by Bondholders ..........................75
Section 11.08. Trustee May Enforce Rights Without
Possession of Bonds ............................................75
Section 11.09. Remedies Not Exclusive .........................................75
Section 11.10. Delays and Omissions Not to Impair Rights ......................75
Section 11.11. Application of Moneys in Event of Default ......................76
Section 11.12. Trustee's Right to Appoint Receiver;
Compliance With Act ............................................76
Section 11.13. Trustee and Bondholders Entitled to All
Remedies Under Act .............................................76
Section 11.14. Trustee's Obligation Upon Payment of All
Amounts Due Bondholders ........................................77
ARTICLE XII The Trustee ....................................................77
Section 12.01. Acceptance of Trust ............................................77
Section 12.02. No Responsibility for Recitals, etc ............................77
Section 12.03. Trustee May Act Through Agents; Answerable
Only for Willful Misconduct or Gross
Negligence .....................................................78
Section 12.04. Compensation and Indemnity .....................................78
Section 12.05. Notice of Default; Right to Investigate ........................78
Section 12.06. Obligation to Act on Defaults ..................................79
Section 12.07. Reliance .......................................................79
Section 12.08. Trustee May Deal in Bonds ......................................80
Section 12.09. Allowance of Interest ..........................................80
Section 12.10. Construction of Ambiguous Provisions ...........................80
Section 12.11. Resignation of Trustee .........................................80
Section 12.12. Removal of Trustee .............................................80
Section 12.13. Appointment of Successor Trustee ...............................80
Section 12.14. Qualification of Successor Trustee .............................81
Section 12.15. instruments of Succession ......................................81
Section 12.16. Merger of Trustee ..............................................81
Section 12.17. Funds Held in Trust ............................................81
Section 12.18. Intervention by Trustee ........................................81
Section 12.19. Appointment of Co-Trustee ......................................82
ARTICLE XIII The Tender Agent ...............................................83
Section 13.01. Appointment, Capacities and Duties .............................83
Section 13.02. Tender Agent May Act Through Agents;
Answerable Only for Willful Misconduct or
Gross Negligence ...............................................84
Section 13.03. Compensation and Indemnity .....................................84
Section 13.04. Reliance .......................................................84
Section 13.05. Tender Agent May Deal in Bonds .................................84
Section 13.06. Removal or Resignation of Tender Agent .........................84
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 13.07. Successor Tender Agents ........................................85
Section 13.08. Notice to Trustee ..............................................86
ARTICLE XIV The Remarketing Agent ..........................................86
Section 14.01. Appointment ....................................................86
Section 14.02. Duties .........................................................86
Section 14.03. Qualification ..................................................86
Section 14.04. Resignation; Removal ...........................................86
Section 14.05. Notices ........................................................87
ARTICLE XV Acts of Bondholders; Evidence of
Ownership of Bonds .............................................87
Section 15.01. Acts of Bondholders; Evidence of
Ownership of Bonds .............................................87
ARTICLE XVI Amendments and Supplements .....................................88
Section 16.01. Amendments and Supplements Without
Bondholders' Consent ...........................................88
Section 16.02. Amendments and Supplements With
Bondholders' Consent ...........................................88
Section 16.03. Amendment of Financing Agreement ...............................89
Section 16.04. Amendment of Letter of Credit ..................................89
Section 16.05. Trustee Authorized to Join in Amendments and
Supplements; Reliance on Counsel ...............................90
Section 16.06. Bank Consent ...................................................90
Section 16.07. Notice to Rating Agencies ......................................90
ARTICLE XVII Defeasance .....................................................90
Section 17.01. Defeasance .....................................................90
Section 17.02. Provision for Payment ..........................................91
ARTICLE XVIII Miscellaneous Provisions .......................................92
Section 18.01. No Personal Recourse ...........................................92
Section 18.02. No Rights Conferred on Others ..................................93
Section 18.03. Illegal, etc. Provisions Disregarded ...........................93
Section 18.04. Notices ........................................................93
Section 18.05. Successors and Assigns .........................................94
Section 18.06. Headings for Convenience Only ..................................94
Section 18.07. Counterparts ...................................................94
Section 18.08. Applicable Law .................................................95
Section 18.09. Bank's Rights ..................................................95
</TABLE>
<PAGE> 6
TRUST INDENTURE dated as of September 1, 1990 between COUNTY OF
CARROLL, KENTUCKY (the "Issuer"), a county and political subdivision of the
State of Kentucky, and DAI-ICHI KANGYO TRUST COMPANY OF NEW YORK, as Trustee (in
such capacity, the "Trustee"), a trust company organized and existing under the
laws of the State of New York and having its principal corporate trust office in
the City of New York, New York.
RECITALS:
---------
A. The Issuer is authorized and empowered under Chapter 103 of the
Kentucky Revised Statutes, as amended (the "Act"), and its ordinance adopted
September 11, 1990 to issue its Variable Rate Demand Industrial Building Revenue
Bonds (Kentucky Ladder Company Project) in the aggregate principal amount of
$5,000,000 (the "Bonds") and to use the proceeds thereof to finance a project
(the "Project") involving the acquisition and construction of a manufacturing
facility consisting of a 193,000 square foot building on a parcel of land
located in Carroll County, Kentucky (the "Project Facilities"), to be leased to
Kentucky Ladder Company, a Pennsylvania corporation qualified to do business in
Kentucky (the "Company"). The Company will operate the Project Facilities for
the manufacture, processing and assembly of climbing ladder products and related
products, together with storage, warehousing and distribution facilities with
respect thereto. The Issuer has found that the financing of the Project
Facilities will promote the public purposes of the Act by alleviating
unemployment and by creating and developing business opportunities for the
residents of Carroll County.
B. In order to finance the Project Facilities, the Issuer has duly
authorized the issuance and sale of the Bonds to be issued under the terms of
this Trust Indenture (this "Indenture").
C. The Issuer has entered into a Lease Agreement dated as of the date
hereof with the Company (as the same may hereafter be amended or supplemented,
the "Financing Agreement") providing for the use of the proceeds of the Bonds to
finance the acquisition and construction of the Project Facilities and providing
for rental payments by the Company in amounts sufficient to pay, when due, the
principal of, premium, if any, on and interest on the Bonds.
D. The Bonds will be secured by, among other things, (i) a pledge and
assignment by the Issuer to the Trustee under this Indenture of all of the
Issuer's right, title and interest in and to the Financing Agreement and all
amounts payable thereunder (except for payments with respect to certain fees and
expenses, indemnification payments to the Issuer and excess investment
earnings), and (ii) all moneys and obligations held by
<PAGE> 7
the Trustee from time to time in the Construction Fund and the Bond Fund created
under this Indenture.
E. The Company has caused to be delivered to Dai-Ichi Kangyo Trust
Company of New York, as Tender Agent (in such capacity, the "Tender Agent") an
irrevocable letter of credit (the "Letter of Credit") issued by The Dai-Ichi
Kangyo Bank, Limited, New York Branch (the "Bank"). The Tender Agent is
authorized under the Letter of Credit, subject to the terms and conditions
thereof, to draw up to (1) an amount equal to the principal of the outstanding
Bonds (i) to pay the principal of the Bonds when due at maturity or upon
redemption or acceleration or (ii) to pay the portion of the purchase price
corresponding to the principal of Bonds tendered for purchase pursuant to this
Indenture to the extent remarketing proceeds are not available for such purpose,
plus (2) an amount equal to 53 days' accrued interest on the outstanding Bonds
at a maximum rate of 15% per annum (i) to pay interest on the Bonds when due or
(ii) to pay the portion of the purchase price of Bonds tendered for purchase
pursuant to this Indenture corresponding to the accrued interest, if any, on
such Bonds to the extent remarketing proceeds are not available for such
purpose. The Letter of Credit expires on September 19, 1993, unless terminated
earlier pursuant to its terms or extended. Unless the Letter of Credit is
extended or replaced in accordance with the terms of this Indenture, the Bonds
will become subject to mandatory tender. The Letter of Credit is being issued
pursuant to a Reimbursement Agreement dated as of September 1, 1990 (as the same
may hereafter be amended or supplemented, the "Reimbursement Agreement") between
the Company and the Bank, under which the Company will be obligated, among,other
things, to reimburse the Bank, with interest, for any draws under the Letter of
Credit.
F. The Bonds are to be substantially in the following form:
-2-
<PAGE> 8
[Form of Bond - Face Side]
No. R- ______ $_________
United States of America
Commonwealth of Kentucky
COUNTY OF CARROLL, KENTUCKY
Variable Rate Demand
Industrial Building Revenue Bond
(Kentucky Ladder Company Project)
<TABLE>
<CAPTION>
DATED MATURITY DATE ISSUE DATE CUSIP
- ----- ------------- ---------- -----
<S> <C> <C> <C>
September 1, 2015 September 19, 1990 144836AA1
</TABLE>
REGISTERED OWNER:
PRINCIPAL AMOUNT:
The County of Carroll, Kentucky (the "Issuer"), a county and political
subdivision of the Commonwealth of Kentucky, for value received, hereby promises
to pay (but only out of the sources hereinafter mentioned) to the registered
owner specified above, or registered assigns, on the maturity date specified
above, unless this Bond shall have been called for redemption in whole or in
part and payment of the redemption price shall have been duly made or provided
for, upon surrender hereof, the principal amount specified above and to pay (but
only out of the sources hereinafter mentioned) interest thereon on each Interest
Payment Date (as hereinafter defined) from the dated date hereof specified
above, until payment of said principal amount has been made or provided for, at
the rates determined as provided in this Bond, commencing on the first Interest
Payment Date after the dated date hereof specified above.
So long as this Bond bears interest at a Variable Weekly Rate (as
hereinafter defined), this Bond shall be purchased on demand of the registered
owner hereof as hereinafter described.
The principal or redemption price of this Bond shall be paid upon
presentation and surrender hereof at the principal corporate trust office of
Dai-Ichi Kangyo Trust Company of New York, as Tender Agent (in such capacity,
the "Tender Agent") or at the duly designated office of any duly appointed
alternate or successor tender agent. The interest on this Bond shall be
-3-
<PAGE> 9
payable by check mailed to the registered owner of this Bond at such owner's
address as it appears on the Bond Register of the Issuer maintained by the
Tender Agent, or, at the request of any registered owner of at least $1,000,000
aggregate principal amount of Bonds, by wire transfer within the continental
United States to the bank account number of such owner appearing on the Bond
Register. The principal or redemption price of and interest on this Bond shall
be paid in any coin or currency of the United States of America which, at the
time of payment, is legal tender for the payment of public and private debts.
The interest payable as provided in this Bond on any Interest Payment
Date, and duly provided for, will be paid to the person in whose name ownership
of this Bond is registered at the close of business on the Regular Record Date
for such interest, which shall be the day two Business Days prior to the
Interest Payment Date; provided that if this Bond bears interest at a Fixed Rate
(as hereinafter defined), then the Regular Record Date shall be the 15th day of
the month immediately preceding the month in which the Interest Payment Date
occurs. Any such interest not so paid or duly provided for on such Interest
Payment Date, or within three Business Days thereafter, shall forthwith cease to
be payable to the person in whose name this Bond is registered on such Regular
Record Date, and shall be paid to the person in whose name this Bond is
registered at the close of business on a Special Record Date for the payment of
such defaulted interest to be fixed by the Trustee referred to below, notice of
which shall be given to such person not less than ten days prior to such Special
Record Date, or may be paid, at any time in any other lawful manner, all as more
fully provided in the Indenture (as defined on the reverse hereof). This Bond
shall bear interest on overdue principal at the rate borne by this Bond during
such time.
THIS BOND IS ISSUED UNDER THE PROVISIONS OF KENTUCKY REVISED STATUTES
103.200 THROUGH 103.286, INCLUSIVE, AND DOES NOT CONSTITUTE AN INDEBTEDNESS OF
THE ISSUER, THE COMMONWEALTH OF KENTUCKY, OR ANY POLITICAL SUBDIVISION THEREOF,
WITHIN THE MEANING OF THE CONSTITUTION OF THE COMMONWEALTH OF KENTUCKY.
-4-
<PAGE> 10
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET
FORTH ON THE REVERSE SIDE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF FULLY SET FORTH IN THE TEXT OF THIS BOND
WRITTEN ABOVE.
This Bond is not valid unless the Certificate of Authentication
endorsed hereon is duly executed by the Tender Agent.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in
its name by the manual or facsimile signature of its County Judge/Executive and
its official seal or a facsimile thereof to be affixed, imprinted, lithographed
or reproduced hereon and attested by the manual or facsimile signature of its
Carroll County Clerk.
ATTEST: COUNTY OF CARROLL, KENTUCKY
___________________________ By:________________________
Carroll County Clerk County Judge/Executive
[Form of Certificate of Authentication)
This Bond is one of the Bonds described in the within
mentioned Indenture. Printed hereon is the complete text of the opinion
of Cohen & Grigsby, A Professional Corporation, of Pittsburgh, Pennsylvania,
Bond Counsel, a signed original of which is on file with the Trustee.
DAI-ICHI KANGYO TRUST COMPANY
OF NEW YORK
as Tender Agent
By:________________________
Authorized Signature
[Form of Reverse Side of Bond)
This Bond is one of a duly authorized series (the "Bonds") limited in
aggregate principal amount to $5,000,000 issued under and secured by a Trust
Indenture dated as of September 1, 1990 (the "Indenture") between the Issuer and
Dai-Ichi Kangyo Trust Company of New York, as Trustee (in such capacity, the
"Trustee") to accomplish the public purposes of Chapter 103 of the Kentucky
Revised Statutes, as amended (the "Act") by undertaking the financing of a
project for Kentucky Ladder Company (the "Company") involving the acquisition
and construction of a manufacturing facility consisting of a 193,000 square foot
building to be located on a parcel of land in Carroll County, Kentucky (the
"Project Facilities") for use as a
-5-
<PAGE> 11
manufacturing facility inn the manufacture, processing and assembly of climbing
ladder products and related products, together with storage, warehousing and
distribution facilities with respect thereto. The Issuer has entered into a
Lease Agreement dated as of September 1, 1990 with the Company (the "Financing
Agreenment") providing for the use of the proceeds of the Bonds to finance the
acquisition and construction of the Project Facilities and providing for lease
payments by the Company in amounts sufficient to pay, when due, the principal
of, premium, if any, on andn interest on the Bonds. As security for the Bonds,
the Issuer has assigned to the Trustee under and pursuant to the Indenture all
of the Issuer's right, title and interest in and to the Financing Agreement and
all amounts payable thereunder (except for payments with respect to certain fees
and expenses, indemnification payments to the Issuer and excess investment
earnings).
The Bonds are issued under the provisions of Kentucky Revised Statutes
103.200 through 103.286, inclusive, and do not constitute an indebtedness of the
Issuer, the Commonwealth of Kentucky or any political subdivision thereof within
the meaning of the Constitution of the Commonwealth of Kentucky, and are limited
obligations of the Issuer payable solely from lease payments to be made by the
Company to the Trustee pursuant to the Financing Agreement and from any other
moneys pledged to or held by or on behalf of the Trustee or the Tender Agent
under the Indenture for such purpose, including, but not limited to, proceeds of
drawings on the Letter of Credit described below, and there shall be no other
recourse against the Issuer or any other property now or hereafter owned by it.
Except as otherwise specified in the Indenture, this Bond is entitled to the
benefits of the Indenture equally and ratably both as to principal (and
redemption price) and interest with all other Bonds issued under the Indenture.
No additional Bonds may be issued under the Indenture. Reference is made to the
Indenture and the Financing Agreement for a description of the rights of the
owners of the Bonds; the rights and obligations of the Issuer and the Company;
the rights, duties and obligations of the Trustee and the Tender Agent; and the
provisions relating to amendments and modifications thereof. The acceptance of
the terms and conditions of such documents and the Letter of Credit described
below (including amplifications and qualifications of the provisions thereof),
copies of which or copies of forms of which are on file at the principal
corporate trust office of the Trustee, is an explicit and material part of the
consideration of the Issuer's issuance hereof, and each owner hereof by
acceptance of this Bond accepts and assents to all such terms and conditions as
if fully set forth herein. The owner of this Bond shall have no right to enforce
the provisions of the Indenture, the Financing Agreement or the Letter of Credit
or the rights and remedies thereunder, except as provided in the Indenture.
Capitalized terms used in this Bond which are not defined herein
-6-
<PAGE> 12
but which are defined in the Indenture shall have the respective meanings set
forth in the Indenture.
The Company has caused an irrevocable Letter of Credit to be issued by
The Dai-Ichi Kangyo Bank, Limited, New York Branch, a Japanese banking
corporation, to be delivered to the Tender Agent. Such irrevocable Letter of
Credit or any replacement letter of credit or similar credit facility delivered
to the Tender Agent in accordance with the terms of the Indenture is herein
called the "Letter of Credit." As used herein, the term "Bank" shall mean The
Dai-Ichi Kangyo Bank, Limited, New York Branch, as issuer of the Letter of
Credit or the bank or financial institution or insurance company issuing any
replacement Letter of Credit or similar credit facility. The Tender Agent shall
be authorized under the Letter of Credit, subject to the terms and conditions
thereof, to draw up to (a) an amount equal to the principal of the outstanding
Bonds (i) to pay the principal of the Bonds when due at maturity or upon
redemption or acceleration or (ii) to pay the portion of the purchase price of
Bonds corresponding to the principal of Bonds tendered for purchase pursuant to
the Indenture to the extent remarketing proceeds are not available for such
purpose, plus (b) an amount equal to 53 days' accrued interest on the
outstanding Bonds (computed at the maximum rate of 15% per annum) (i) to pay
interest on the Bonds when due or (ii) to pay the portion of the purchase price
of Bonds tendered for purchase pursuant to the Indenture corresponding to the
accrued interest, if any, on such Bonds to the extent remarketing proceeds are
not available for such purpose. The Letter of Credit expires on September 19,
1993, unless terminated earlier pursuant to its terms or extended. Subject to
the provisions of the Indenture, the Company may, but is not required to, cause
the Letter of Credit to be extended or replaced with another Letter of Credit or
similar credit facility having substantially similar terms. The Bank is under no
obligation to extend the Letter of Credit. Unless the Letter of Credit is
extended or replaced in accordance with the terms of the Indenture, this Bond
will become subject to mandatory tender, as described below. After a mandatory
purchase of Bonds in anticipation of expiration of a Letter of Credit, the
Company shall have the right to provide other credit enhancement as security for
the Bonds or no credit enhancement thereon. The Letter of Credit is being issued
pursuant to a Reimbursement Agreement dated as of September 1, 1990 (the
"Reimbursement Agreement") between the Company and the Bank, under which the
Company will be obligated, among other things, to reimburse the Bank, with
interest, for any draws under the Letter of Credit.
-7-
<PAGE> 13
INTEREST ON BONDS
- -----------------
GENERAL. The Bonds shall initially bear interest at an initial fixed
rate based on a 365-day year (as set forth in the Indenture) from the issue date
hereof until October 2, 1990, and thereafter at a Variable Weekly Rate, subject
to conversion to a Fixed Rate, as described herein. All computations of interest
at Variable Weekly Rates shall be based on a year of 365 or 366 days, as
appropriate; and all computations of interest at a Fixed Rate shall be based on
a 360-day year of twelve 30-day months. As used in this Bond, the term "Interest
Payment Date" means (i) on or prior to the Fixed Rate Conversion Date, the first
Business Day of each calendar month and (ii) after the Fixed Rate Conversion
Date, each Marchn 1 and September 1. As used in this Bond, the term "Fixed Rate
Conversion Date" means the effective date of a conversion of the interest rate
on the Bonds from a Variable Weekly Rate to a Fixed Rate.
VARIABLE WEEKLY RATE. A Weekly Rate shall be determined for each Weekly
Rate Period as described below. Weekly Rate Periods shall commence on Wednesday
of each week and end at the close of business on Tuesday of the following week;
except that in the case of conversion to a Fixed Rate, the last Weekly Rate
Period prior to such conversion shall end on the last day immediately preceding
the Fixed Rate Conversion Date. The Weekly Rate for each Weekly Rate Period
shall be effective from and including the commencement date of such period and
shall remain in effect through and including the last day thereof. Each such
Weekly Rate shall be determined by the Remarketing Agent (described below) on
the Tuesday or, if such Tuesday is not a Business Day, on the Business Day next
preceding the commencement date of the Weekly Rate Period to which it relates
and provided by the Remarketing Agent to the Tender Agent by the close of
business on that same day. The Weekly Rate so to be determined shall be the
lowest rate of interest which, in the judgment of the Remarketing Agent, would
cause the Bonds to have a market value equal to the principal amount thereof,
plus accrued interest, taking into account Prevailing Market Conditions as of
the date of determination; provided that: (i) if the Remarketing Agent fails for
any reason to determine or notify the Tender Agent of the Weekly Rate for any
Weekly Rate Period, the Weekly Rate shall be the same as the Weekly Rate in
effect for the immediately preceding Weekly Rate Period, except that if such
failure continues for more than one consecutive Weekly Rate Period, the Weekly
Rate shall be equal to 80% of the average of the annual bond equivalent yield
evaluations at par of 13-week United States Treasury obligations at the most
recent Treasury auction and (ii) in no event shall the Weekly Rate for any
Weekly Rate Period exceed 15% per annum. No notice of Weekly Rates will be given
to the registered owners of the Bonds; however, such owners may obtain Weekly
Rates from the Tender Agent or the Remarketing Agent. All determinations of
Weekly
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<PAGE> 14
Rates pursuant to the Indenture shall be conclusive and binding upon the Issuer,
the Company, the Bank, the Trustee, the Tender Agent and the registered owners
of the Bonds to which such rates are applicable. The Issuer, the Company, the
Bank, the Trustee, the Tender Agent and the Remarketing Agent shall not be
liable to any registered owner for failure to give any notice required with
respect to Weekly Rates or for the failure of any registered owner to receive
any such notice.
FIXED RATE. The Indenture provides that the Company, with the provision
of a Favorable Opinion of nationally recognized bond 'counsel and upon
compliance with certain other conditions, has the right to convert the interest
rate on this Bond to a Fixed Rate to maturity. In the event of such conversion,
this Bond shall be subject to mandatory tender for purchase on the Fixed Rate
Conversion Date, unless the registered owner elects to retain this Bond. After
the Fixed Rate Conversion Date (i) the rate borne on the Bonds shall be a Fixed
Rate, (ii) the registered owner of this Bond shall have no right to tender this
Bond for purchase, and (iii) the original Letter of Credit shall be terminated.
In the event the Bonds are converted to a Fixed Rate, the Company may provide
for a Fixed Rate Letter of Credit or other credit enhancement.
OPTIONAL TENDER
- ---------------
While this Bond bears interest at a Variable Weekly Rate, the
registered owner of this Bond has the right to tender this Bond (or a portion
hereof equal to a whole multiple of $100,000 in principal amount) for purchase,
at a price equal to the principal amount hereof (or of such portion) plus
accrued interest, on any Business Day upon written notice to the Tender Agent
and the Remarketing Agent on any Business Day at least seven (7) days prior to
the Business Day on which such purchase is to be made.
Each notice of tender shall (1) be delivered to then Tender Agent at
its principal corporate trust office and to the Remarketing Agent at its
principal office and be substantially in the form prescribed by the Indenture or
in other form satisfactory to the Tender Agent; (2) state (A) the principal
amount of this Bond to which the notice relates, (B) the serial number of this
Bond, (C) that the registered owner irrevocably demands purchase of this Bond
(or a specified portion hereof in an amount equal to a whole multiple of
$100,000), (D) the date on which this Bond (or such specified portion) is to be
purchased, and (E) payment instructions with respect to the purchase price; and
(3) automatically constitute (A) an irrevocable offer to sell this Bond (or such
specified portion) on the purchase date at a price equal to the principal amount
of this Bond (or such specified portion) plus any interest thereon accrued and
unpaid
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<PAGE> 15
as of the purchase date, (B) an irrevocable authorization and instruction to the
Tender Agent to effect transfer of this Bond (or such specified portion) upon
payment of such price to the Tender Agent on the purchase date, (C) an
irrevocable authorization and instruction to the Tender Agent to effect the
exchange of this Bond in whole or in part for other Bonds in an equal aggregate
principal amount so as to facilitate the sale of this Bond (or such specified
portion), and (D) an acknowledgment that such registered owner will have no
further rights with respect to this Bond (or such specified portion) upon
payment of the purchase price thereof to the Tender Agent on the purchase date,
except for the right of such registered owner to receive such purchase price
upon surrender of this Bond to the Tender Agent endorsed for transfer in blank
and with guaranty of signature satisfactory to the Tender Agent. The
determination of the Tender Agent as to whether a notice of tender has been
properly delivered pursuant to the foregoing shall be conclusive and binding
upon the registered owner.
Bonds tendered for redemption must be delivered to the principal
corporate trust office of the Tender Agent at or before 11:00 a.m. on the
purchase date, and if such Bond is to be purchased prior to the next succeeding
Interest Payment Date and after the Record Date in respect thereof (which is two
Business Days prior to such interest payment date) a non-recourse due bill for
interest due from the preceding interest payment date to the next succeeding
Interest Payment Date. Any owner who fails to deliver such Bond for purchase on
or before the purchase date shall have no further rights thereunder except the
right to receive the purchase price thereof upon presentation and surrender of
such Bond (or portion thereof) to the Tender Agent properly endorsed for
transfer in blank.
The Issuer has appointed Manufacturers Hanover Securities Corporation,
New York, New York, as Remarketing Agent (the "Remarketing Agent") under the
Indenture. The Remarketing Agent may be removed and replaced by the Issuer in
accordance with the provisions of the Indenture.
MANDATORY TENDER
- ----------------
While this Bond bears interest at a Variable Weekly Rate, this Bond is
subject to mandatory tender for purchase, at a price equal to the principal
amount hereof plus accrued interest (the "purchase price"), on (i) the Fixed
Rate Conversion Date in the event of a conversion of the interest rate on this
Bond to a Fixed Rate and (ii) on the Interest Payment Date immediately preceding
the expiration date of the Letter of Credit then in effect in the event such
Letter of Credit shall not have been extended or replaced in accordance with the
terms of the Indenture. If the Fixed Rate Conversion Date coincides with the
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<PAGE> 16
Interest Payment Date immediately preceding the expiration date of the Letter of
Credit, it shall be a Fixed Rate Conversion Date for the purpose of mandatory
tender.
Any Bond which the registered owner has not elected to continue to own
after a mandatory tender date in accordance with the procedure and conditions
for such election described in the Indenture and which is not surrendered on the
mandatory tender date, but for which there has been irrevocably deposited with
the Tender Agent an amount sufficient to pay the purchase price thereof, shall
be deemed to have been tendered on the mandatory tender date and interest on
such Bond shall cease to accrue on the mandatory tender date. Thereafter, the
registered owner of such Bond shall not be entitled to any payment other than
the purchase price for such Bond upon surrender thereof to the Tender Agent
endorsed for transfer in blank and with guaranty of signature satisfactory to
the Tender Agent. Except for payment of such purchase price from moneys held by
the Tender Agent for such purpose, such Bond shall no longer be outstanding and
entitled to the benefits of the Indenture. On the mandatory tender date the
Tender Agent shall authenticate and deliver to the new purchasers thereof
substitute Bonds in lieu of such un-surrendered Bonds.
OPTIONAL REDEMPTION
- -------------------
So long as the rate of interest on the Bonds has not been converted to
a Fixed Rate, the Bonds are subject to redemption prior to maturity at the
option of the Issuer, upon the direction of the Company, on any Interest Payment
Date in whole or in part by lot, at a redemption price equal to 100% of the
principal amount thereof plus interest accrued to the redemption date.
After the rate of interest on the Bonds has been converted to a Fixed
Rate, the Bonds shall not be subject to optional redemption upon any Interest
Payment Date as provided in the immediately preceding paragraph, but shall be
subject to redemption prior to maturity at the option of the Issuer, upon the
direction of the Company, in whole or in part, at any time during the applicable
redemption periods and at the redemption prices set forth in the Indenture.
EXTRAORDINARY OPTIONAL REDEMPTION
- ---------------------------------
The Bonds are subject to redemption prior to maturity at the option of
the Issuer, upon direction of the Company, in whole on any date, at a redemption
price equal to 100% of the principal amount thereof plus interest accrued to the
redemption date following the occurrence of any of the following events:
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<PAGE> 17
(a) the Project Facilities (or the manufacturing facilities of which they are a
part) shall have been damaged or destroyed to such extent that, in the Company's
judgment, (i) they cannot be reasonably restored within a period of six months
to substantially the same condition thereof immediately preceding such damage or
destruction, (ii) the normal operation of such facilities will thereby be
prevented for a period of six months or more, or (iii) the cost of restoration
of such facilities would exceed by $100,000 the net proceeds of insurance
carried thereon, plus amounts deductible under such insurance; or (b) title to,
or the temporary use of, the Project Facilities (or the manufacturing facilities
of which they are a part) or a part thereof shall have been taken under the
power of eminent domain by any governmental body or by any person, firm or
corporation acting under governmental authority (or a bona fide sale in lieu of
such taking shall have occurred) to such an extent that, in the Company's
judgment, the normal operation of such facilities will thereby be prevented for
a period of six months or more; or (c) any Federal, state or local body
exercising governmental or judicial authority shall have taken any action which
results in unreasonable burdens or excessive liabilities, including without
limitation taxes not presently levied, with respect to the Project Facilities
(or the manufacturing facilities of which they are a part) or the ownership or
operation thereof, which in the Company's judgment render such facilities or the
operation thereof impractical or uneconomic.
SPECIAL MANDATORY REDEMPTION
- ----------------------------
The Bonds are subject to mandatory redemption prior to maturity in
whole following the occurrence of a Determination of Taxability (as hereinafter
defined), such mandatory redemption to be made as soon as practicable after the
date on which the Trustee first receives written notice of the Determination of
Taxability, at a redemption price equal to 100% of the principal amount thereof,
plus accrued interest to the redemption date. As used herein and in the
Indenture, a "Determination of Taxability" shall mean one of the following
determinations, made in regard to Section 103 of the Internal Revenue Code of
1986 and the rules and regulations thereunder (including any amendments and
successor provisions thereto, the "Code"), to the effect that the interest
payable on the Bonds is includable in the gross income of the owners of the
Bonds (other than an owner who is a "substantial user" or "related person" as
such terms are used in the Code): (i) a final determination, decision or decree
by the Commissioner or any District Director of Internal Revenue, or by any
court of competent jurisdiction, which is not subject to further review, in a
proceeding in which the Company was afforded the opportunity to contest the
issues involving Federal income tax treatment of interest on the Bonds, either
directly or in the name of the owner of the Bonds, at the Company's expense, as
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<PAGE> 18
described in the Indenture, or (ii) a determination that the $10,000,000
limitation set forth in Section 144(a)(4)(A) of the Code or the $40,000,000
limitation set forth in Section 144(a)(10) of the Code has been exceeded, which
determination shall be deemed to have been made on the date on which the Company
or any principal user of the Project Facilities files any tax schedule, return
or document with the Internal Revenue Service and the Trustee which expressly
discloses that either of such limits has been exceeded, or (iii) an opinion of
nationally recognized bond counsel furnished by the Company to the Trustee.
EXTRAORDINARY MANDATORY REDEMPTION
- ----------------------------------
If the rate of interest on the Bonds has been converted to a Fixed Rate
and in connection with such conversion a Fixed Rate Letter of Credit has been
delivered to the Tender Agent, then the Bonds are subject to mandatory
redemption, at a price equal to the principal amount thereof plus accrued
interest to the redemption date, on the Interest Payment Date immediately
preceding the expiration date of the Fixed Rate Letter of Credit then in effect
in the event such Fixed Rate Letter of Credit shall not have been extended or
replaced in accordance with the terms of the Indenture.
REDEMPTION NOTICE
- -----------------
Any notice of redemption shall be given not more than 60 and not less
than 30 days prior to the redemption date, by mailing a copy of the redemption
notice by first class mail, postage prepaid, to the registered owner of each
Bond to be redeemed in whole or in part at the address shown on the Bond
Register. Notice of optional redemption may be conditioned upon the deposit of
moneys in the Bond Fund established under the Indenture before the date fixed
for redemption and such notice shall be of no effect and the redemption shall be
deemed cancelled unless such moneys are so deposited. All Bonds or portions
thereof so called for redemption will cease to bear interest on the specified
redemption date provided funds for their redemption are on deposit at the
principal place of payment at that time.
DEFAULT, ACCELERATION
- ---------------------
If an Event of Default as defined in the Indenture occurs, the
principal of all Bonds issued under the Indenture may be declared due and
payable upon the conditions and in the manner and with the effect provided in
the Indenture.
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<PAGE> 19
DENOMINATIONS, TRANSFER, OWNERSHIP
- ----------------------------------
Subject to the provisions of the Indenture, the Bonds are issuable as
registered Bonds in the denomination of $100,000 or any whole multiple thereof,
except that if the interest rate borne by the Bonds is converted to a Fixed
Rate, replacement Bonds shall be in the denomination of $5,000 or any whole
multiple thereof. Subject to the limitations provided in the Indenture and upon
payment of any tax or governmental charge, Bonds may be exchanged for a like
aggregate principal amount of Bonds of authorized denominations.
This Bond is transferable by the registered owner hereof or his duly
authorized attorney at the principal corporate trust office of Dai-Ichi Kangyo
Trust Company of New York, as Tender Agent, or at the duly designated office of
any duly appointed alternate or successor bond registrar, upon surrender of this
Bond, accompanied by a duly executed instrument of transfer in form and with
guaranty of signature satisfactory to the Tender Agent, subject to such
reasonable regulations as the Issuer, the Trustee or the Tender Agent may
prescribe, and upon payment of any tax or other governmental charge incident to
such transfer. Upon any such transfer a new Bond or Bonds in the same aggregate
principal amount will be issued to the transferee. Except as provided in the
Indenture, the person in whose name this Bond is registered on the Bond Register
shall be deemed the owner hereof for all purposes, and the Issuer, the Trustee,
the Tender Agent and the Remarketing Agent shall not be affected by any notice
to the contrary.
THIS BOND IS A LIMITED OBLIGATION OF THE ISSUER AND IS PAYABLE SOLELY
FROM THE SOURCES REFERRED TO HEREIN. NEITHER THE GENERAL CREDIT NOR THE TAXING
POWER OF THE COUNTY OF CARROLL, THE COMMONWEALTH OF KENTUCKY OR ANY POLITICAL
SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THIS BOND, AND THIS BOND SHALL
NOT BE OR BE DEEMED AN INDENTURE OF THE COUNTY OF CARROLL, THE COMMONWEALTH OF
KENTUCKY OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF THE
CONSTITUTION OF THE COMMONWEALTH OF KENTUCKY.
The liability of the undersigned shall be limited to the proceeds
resulting from the lease of the Project Facilities and the payments, revenues,
rents and receipts receivable by the Issuer therefrom.
No covenant or agreement contained in this Bond shall be deemed to be
the covenant or agreement of any member, officer, attorney, agent or employee of
the Issuer in an individual capacity. No recourse shall be had for the payment
of the principal, the interest thereon, or the premium, if any, payable upon the
redemption of this Bond or any claim based thereon against any officer, member,
agent, attorney or employee of the
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<PAGE> 20
Issuer past, present or future, or its successors or assigns, as such, either
directly or through the Issuer or any such successor, whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise, all of such liability of such members,
officers, agents, attorneys or employees being hereby released as a condition of
and as a consideration for the execution and delivery of this Bond.
All acts, conditions and things required by the laws of the
Commonwealth of Kentucky and by the Indenture to exist, to have happened and to
have been performed prior to or in connection with the issuance of this Bond do
exist, have happened, and have been performed.
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<PAGE> 21
[Form of Abbreviations)
The following abbreviations, when used in the inscription on the face
of the within Bond, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with the right of
survivorship and not as tenants in common
UNIFORM GIFT MIN ACT - _________________ Custodian _____________
(Cust) (Minor)
under Uniform Gift to Minors
Act __________________________
(State)
Additional abbreviations may also be used though not
in the above list.
[Form of Assignment)
For value received, the undersigned hereby sells, assigns and transfers
unto ______________________ the within Bond and all rights thereunder, and
hereby irrevocably constitutes and appoints _______________________ , attorney
to transfer the said Bond on the Bond Register, with full power of substitution
in the premises.
Assignor's Signature: ___________________________________
Dated: ___________________________________
Signature guaranteed: ___________________________________
Social Security
Number or Employer
Identification Number
of Transferee: ___________________________________
NOTICE: The assignor's signature to this Assignment must correspond with the
name as it appears on the face of the within Bond in every particular
without alteration or any change whatsoever.
[End of Form of Bond)
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<PAGE> 22
G. The execution and delivery of the Bonds and of this Indenture have
been duly authorized by a resolution duly adopted by the Issuer, and all things
necessary to make the Bonds, when executed by the Issuer and authenticated by
the Tender Agent, valid and binding legal obligations of the Issuer and to make
this Indenture a valid and binding agreement and pledge of the revenues herein
made to the payment of the principal or redemption price of, premium, if any, on
and interest on the Bonds, have been done.
NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:
That the Issuer, in consideration of the acceptance by the Trustee of
the trusts hereby created and of the purchase and acceptance of the Bonds by the
owners thereof, and of the sum of one dollar, lawful money of the United States
of America, to it duly paid by the Trustee at or before the execution and
delivery of these presents, and for other good and valuable considerations, the
receipt of which is hereby acknowledged, in order to secure, FIRST, the payment
of the principal of, premium, if any, on and interest on the Bonds according to
their tenor and effect and the performance and observance by the Issuer of all
the covenants expressed or implied herein and in the Bonds, and, SECOND, the
payment to the Bank and performance by the Company of its reimbursement and
other obligations under the Reimbursement Agreement, does hereby assign,
transfer, pledge and grant a security interest unto Dai-Ichi Kangyo Trust
Company of New York, as Trustee and unto its successors in trust and its assigns
forever:
A. The Financing Agreement, which is of record in Lease Book 4, page
546 in the office of the Carroll County Clerk, and the right, title and interest
(but not the obligations) of the Issuer under and pursuant to the terms thereof,
and all payments, revenues, rents and receipts receivable by the Issuer
thereunder (except amounts payable to the Issuer under Sections 5.4 and 5.5 of
the Financing Agreement) including without limitation any payment or prepayment
under Section 4.3 or 4.5 thereof and any property pledged under Section 4.2
thereof.
B. All of the right, title and interest of the Issuer in and to all
funds (other than the Rebate Fund) and accounts established under this Indenture
and all moneys and investments now or hereafter held therein and all future and
present Revenues.
TO HAVE AND TO HOLD, the Financing Agreement, funds, accounts, Revenues
and the other right, title and interest (collectively, the "Trust Estate")
hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and
its successors in said trust and to it and said assigns forever;
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<PAGE> 23
IN TRUST NEVERTHELESS, upon the terms herein set forth, FIRST, for the
equal and proportionate benefit, security and protection of all present and
future owners of the Bonds issued under and secured by this Indenture without
privilege, priority or distinction as to the lien or otherwise of any of the
Bonds over any other of the Bonds except as provided herein, and SECOND, for the
benefit and security of the Bank with respect to the Company's obligations under
the Reimbursement Agreement.
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal or redemption price of
the Bonds and the interest due or to become due thereon, at the times and in the
manner mentioned in the Bonds according to the true intent and meaning thereof,
or shall provide, as permitted hereby, for the payment thereof by depositing
with the Trustee the entire amount due or to become due thereon, and shall well
and truly keep, perform and observe all the covenants and conditions pursuant to
the terms of this Indenture to be kept, performed and observed by it, and shall
pay or cause to be paid to the Trustee all sums of money due or to become due to
it in accordance with the terms and provisions hereof, and if the Company shall
pay and perform or cause to be paid and performed all of its reimbursement and
other obligations under the Reimbursement Agreement, then, upon such final
payments and subject to the provisions of Article XVII hereof, this Indenture
and the rights hereby granted shall cease, determine and be void, and the
Trustee shall forthwith release, surrender and otherwise cancel any interest it
may have in the Trust Estate; otherwise this Indenture is to be and remain in
full force and effect.
THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that
all Bonds issued and secured hereunder are to be issued, authenticated and
delivered and the Trust Estate, including all said payments, Revenues, rents and
receipts hereby pledged, is to be dealt with and disposed of, under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts,
uses and purposes as hereinafter expressed, and the Issuer has agreed and
covenanted, and does hereby agree and covenant, with the Trustee and with the
respective owners, from time to time, of the Bonds, or any part thereof, as
follows:
ARTICLE I
Definitions
-----------
Section 1.01. DEFINITIONS. In this Indenture and any indenture
supplemental hereto (except as otherwise expressly provided for or unless the
context otherwise requires), defined terms may be used in the singular or the
plural, the use of any gender includes all other genders, and the following
terms shall
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<PAGE> 24
have the meanings specified in the foregoing recitals (other than in the form of
Bonds):
Act Project
Financing Agreement Project Facilities
Issuer Trust Estate
In addition, the following terms shall have the meanings specified in this
Article, unless the context otherwise requires:
"Affiliate" means any person or company directly or indirectly
controlling, controlled by or under common control with the Company.
"Available Moneys" means money continuously on deposit in trust with
the Trustee, or on behalf of the Trustee, for the benefit of the Bondholders
which are (i) proceeds of the Bonds, (ii) proceeds of a draw under the Letter of
Credit which are either applied directly to the payment of principal of and
interest and premium on the Bonds or which, if not so applied, are held in a
separate and segregated subaccount of the General Account until so applied,
(iii) amounts paid or collateral pledged by the Company on deposit for a period
of 366 consecutive days (or 123 consecutive days if the Trustee receives an
unqualified opinion of counsel nationally recognized as expert in bankruptcy
matters acceptable to the Trustee that payment of such amounts to the
Bondholders would not constitute a voidable preference under Section 547 of the
United States Bankruptcy Code or similar state laws with voidable preference
provisions in the event of the filing of a petition for relief under the United
States Bankruptcy Code or similar state laws with voidable preference provisions
by or against the Issuer or any borrower or the Person from whom the money is
received, if other than the Company) during which no petition in bankruptcy
under the United States Bankruptcy Code has been filed by or against the
Company, or other Person which paid such money or the Issuer, as debtor, and no
similar proceedings have been initiated under state insolvency or other laws
affecting creditors' rights generally, provided that such amounts will again be
deemed Available Moneys, if the petition or proceedings have been dismissed and
the dismissal is no longer subject to appeal, (iv) interest earnings on the
proceeds of the Bonds, or (v) from a Person not subject to the United States
Bankruptcy Code or similar state laws with the voidable preference provisions,
or (vi) monies derived from the proceeds of other bonds or obligations issued
for the purpose of refunding the Bonds or from any other source but only if the
Trustee receives an unqualified Opinion of counsel nationally recognized as
expert in bankruptcy matters acceptable to the Trustee that payment of such
amounts to the Bondholders would not constitute a voidable preference under
Section 547 of the United States Bankruptcy Code or similar state laws with
voidable preference provisions in the event of the filing of a petition
-19-
<PAGE> 25
for relief under the United States Bankruptcy Code or similar state laws with
voidable preference provisions by or against the Issuer or any borrower or the
person from whom the money is received, if other than the Company.
"Bank" means The Dai-Ichi Kangyo Bank, Limited, New York Branch, the
issuer of the original Letter of Credit, and the bank or other
financial institution issuing any replacement Letter of Credit.
"Bond" or "Bonds" means any bond or bonds authenticated and delivered
under this Indenture.
"Bondholder" or "Owner" means the registered owner of any Bond.
"Bond Fund" means the fund so designated established pursuant to
Section 6.02.
"Bond Register" shall have the meaning specified in Section 2.05.
"Bond Year" means the one-year period from the Issue Date to the first
anniversary of such date, and the one-year period ending on each successive
anniversary of such Issue Date until the Bonds are retired.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in any city in which the Principal
Office of the Trustee, the Tender Agent, the Remarketing Agent or the Bank, is
located are required or authorized by law (including executive order) to close
or on which the Principal Office of the Trustee, the Tender Agent, the
Remarketing Agent or the Bank is closed for a reason not related to its
financial condition.
"Code" means the Internal Revenue Code of 1986, including any
amendments and successor provisions thereto, and the rules and regulations
thereunder.
"Company" means Kentucky Ladder Company, a Pennsylvania corporation
qualified to do business in Kentucky, and its successors and assigns.
"Company Bonds" means any Bonds of which ownership is registered in the
name of the Company or any Affiliate, other than Custody Bonds.
"Company Purchase Account" means the special trust account so
designated established by the Tender Agent pursuant to Section 4.01(h).
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"Construction Fund" means the fund so designated established pursuant
tO Section 5.01.
"Construction Fund Surplus Account" means the account so designated
established pursuant to Section 5.03 in the Construction Fund.
"Cost" or "Costs" means any cost of the Project or in respect of the
Project Facilities now or hereafter permitted under the Act. Without limiting
the generality of the foregoing, such costs may include: (i) amounts payable to
contractors and suppliers (including fees for designing Project Facilities where
the designs are provided by the contractor or supplier); (ii) costs of labor,
services, materials, supplies and equipment furnished by the Company (including
shipping costs); (iii) architectural, engineering, legal and other professional
fees, marketing costs and brokerage commissions; (iv) interest on the Bonds to
the extent permitted by the Act; and (v) costs of financing, including without
limitation bond discount, printing expense, and recording fees, Trustee, Tender
Agent and Remarketing Agent fees, Letter of Credit issuance fees and expenses
and legal and accounting fees.
"Counsel" means an attorney at law or law firm (who may be counsel for
the Issuer or the Company) satisfactory to the Trustee.
"Custody Bonds" shall have the meaning specified in Section 4.04(a).
"Excess Investment Earnings" are determinable as of the end of each
Bond Year on the basis of the period from the date of original delivery and
payment for the Bonds through the last day of the most recently completed Bond
Year, and are the excess of:
(a) the aggregate amount earned on investments held under this
Indenture (including unrealized gains and losses upon the retirement of the last
Bond, but excluding investments in evidences of indebtedness described in
Section 103(a) of the Code and investments of amounts held in the Rebate Fund)
over
(b) the amount that would have been earned on such investments if they
had a yield equal to the yield of the Bonds (determined on a present value basis
from the date of original delivery and payment for the Bonds, without adjustment
for costs of issuance other than credit enhancement fees).
"Event of Default" means any of the events specified in Section 11.01
to be an Event of Default.
"Favorable Opinion" means an opinion of nationally recognized bond
counsel addressed to the Issuer and the Trustee
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to the effect that the actidn proposed to be taken is authorized or permitted by
the Act and this Indenture and will not adversely affect any exclusion from
gross income of interest on the Bonds for the purposes of federal income
taxation.
"Fixed Rate" means the fixed rate of interest on the Bonds determined
pursuant to Section 3.03(e).
"Fixed Rate Conversion Date" means the date on which the Bonds begin to
bear interest at a Fixed Rate.
"Fixed Rate Letter of Credit" means any Letter of Credit delivered to
the Tender Agent pursuant to Section 7.09.
"General Account" means the account so designated established pursuant
to Section 6.02 in the Bond Fund with the Trustee.
"General Debt Service Account" means the account so designated
established pursuant to Section 6.02 in the Bond Fund with the Tender Agent.
"Indenture" means this Trust Indenture as amended or supplemented at
the time in question.
"Interest Payment Date" means (i) on or prior to the Fixed Rate
Conversion Date, the first Business Day of October 1990 and the first Business
Day of each calendar month thereafter and (ii) after the Fixed Rate Conversion
Date, each March 1 and September 1.
"Issue Date" shall have the meaning specified in Section 2.02(d).
"Letter of Credit" means the original Letter of Credit described in the
foregoing recitals or any letter of credit substituted therefor or any
replacement letter of credit delivered to the Tender Agent pursuant to Section
7.05 or 7.07 or any Fixed Rate Letter of Credit.
"Letter of Credit Debt Service Account" means the account so designated
established pursuant to Section 6.02 in the Bond Fund with the Tender Agent.
"Letter of Credit Purchase Account" means the special trust account so
designated established by the Tender Agent pursuant to Section 4.01(g).
"Majority" means more than 50 percent.
"Minimum Fixed Rate" means the minimum fixed rate of interest on the
Bonds determined pursuant to Section 3.03(e).
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"Moody's" means Moody's Investors Service, Inc. a Delaware
corporation, its successors and assigns, and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by the Remarketing Agent, with
the consent of the Company.
"Outstanding", in connection with Bonds means, as of the time in
question, all Bonds authenticated and delivered under the Indenture, except:
A. Bonds theretofore cancelled or required to be cancelled under
Section 2.10;
B. On or after any purchase date for Bonds pursuant to Article IV, all
Bonds (or portions of Bonds) which are tendered or deemed to have been tendered
for purchase on such date, provided that funds sufficient for such purchase are
on deposit with the Tender Agent;
C. Bonds which are deemed paid in accordance with Article XVII; and
D. Bonds in substitution for which other Bonds have been authenticated
and delivered pursuant to Article II.
In determining whether the Owners of a requisite aggregate principal amount of
Bonds Outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof or of the
Financing Agreement, Company Bonds and Custody Bonds (unless all of the
Outstanding Bonds are then owned by the Company) shall be disregarded for the
purpose of any such determination. Notwithstanding the foregoing, Bonds so owned
which have been pledged in good faith shall not be disregarded as aforesaid if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Bonds and that the pledgee is not the Company or
an Affiliate of the Company as described above.
"Owner" or "Bondholder" means the registered owner of a Bond.
"Prevailing Market Conditions" means, to the extent relevant (in the
best professional judgment of the Remarketing Agent) at the time of the
establishment of an interest rate for the Bonds in accordance with this
Indenture, (a) any past sales of, or efforts to sell, the Bonds at a purchase
price equal to the principal amount thereof, plus accrued interest thereon; (b)
interest rates for comparable securities (i) with interest rate periods and
demand purchase options substantially the same as the Bonds and bearing'
interest at a variable rate intended to
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maintain their secondary market price at the principal amount thereof, plus
accrued interest thereon, and (ii) rated by a national credit rating agency in
the same category as the Bonds; (c) other financial market rates and indices
that may have a bearing on the rate of interest (which may include, without
limitation, rates and rate periods borne by comparable securities, commercial
paper and United States Treasury Bills; commercial bank prime rates, certificate
of deposit rates and federal funds rates; the London Interbank Offered Rate,
and publicly available rate indices for comparable securities); (d) general
financial market conditions (including current forward supply) that may have a
bearing on the rate of interest; and (e) the financial condition, results of
operations and credit standing of the Bank and/or the Company to the extent such
standing has a bearing on the rate of interest of the Bonds.
"Rebate Fund" means the fund so designated which is established
pursuant to Section 6.05.
"Record Date" means, as the case may be, the applicable Regular or
Special Record Date.
"Regular Record Date" means the Business Day two Business Days prior to
any Interest Payment Date, provided that if the Bonds bear interest at a Fixed
Rate, then the Regular Record Date shall be the 15th day of the month
immediately preceding the month in which the Interest Payment Date occurs.
"Reimbursement Agreement" means the Reimbursement Agreement dated as of
September 1, 1990 between the Company and the Bank, as the same may be amended
from time to time and filed with the Trustee and the Tender Agent, and any
agreement of the Company with the Bank issuing a replacement Letter of Credit
setting forth the obligations of the Company to such Bank arising out of any
payments under the replacement Letter of Credit and which provides that it shall
be deemed to be a Reimbursement Agreement for the purpose of this Indenture.
"Remarketing Agent" means Manufacturers Hanover Securities Corporation,
New York, New York, and its successor for the time being in such capacity as
provided in Article XIV. "Principal Office" of the Remarketing Agent means the
principal office of the Remarketing Agent at the address set forth in Section
18.04, or any other office so designated in writing by the Remarketing Agent to
the Issuer, the Trustee, the Tender Agent, the Company and the Bank.
"Remarketing Agreement" means the Remarketing Agreement dated as of
September 1, 1990 between the Company and the Remarketing Agent or any agreement
executed by the Company and any subsequent Remarketing Agent appointed pursuant
hereto.
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"Remarketing Proceeds Purchase Account" means the special trust
account so designated established by the Tender Agent pursuant to Section
4.01(f).
"Revenues" means (i) all amounts paid or payable by the Company under
the Financing Agreement and assigned to the Trustee hereunder, (ii) any proceeds
of Bonds originally deposited with the Trustee for the payment of interest
accrued on the Bonds or otherwise paid to the Trustee by or on behalf of the
Company or the Issuer for deposit in the Bond Fund or moneys remaining in the
Construction Fund following certification of completion of the Project
Facilities, (iii) any insurance proceeds or condemnation awards in respect of
the Project Facilities receivable by the Trustee, and (iv) investment income
with respect to any moneys held by or on behalf of the Trustee under the
Indenture, except for investment income on moneys held in the Rebate Fund.
"S & P" means Standard & Poor's Corporation, a New York corporation,
its successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "S & P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the
Company.
"Special Record Date" means such date as may be fixed for the payment
of defaulted interest in accordance with Section 2.07.
"State" means the Commonwealth of Kentucky.
"Tender Agent" means any national banking association, bank and trust
company or trust company appointed as such by the Issuer and accepting such
appointment for the time being pursuant to Article XIII. The initial Tender
Agent is Dai-Ichi Kangyo Trust Company of New York (a New York trust company).
"Principal Office" of the Tender Agent means the principal corporate trust of
fice of the Tender Agent at the address of the Tender Agent set forth in Section
18.04, or any other corporate trust office so designated in writing by the
Tender Agent to the Issuer, the Trustee, the Remarketing Agent, the Company and
the Bank.
"Trustee" means Dai-Ichi Kangyo Trust Company of New York, a New York
trust company and its successor for the time being in the trust hereunder.
"Principal Office" of the Trustee means the principal corporate trust office of
the Trustee at the address of the Trustee set forth in Section 18.04, or any
other corporate trust office so designated in writing by the Trustee to the
Issuer, the Tender Agent, the Remarketing Agent, the Company and the Bank.
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"Variable Weekly Rate" means the rate of interest borne by the Bonds
and determined on a weekly basis pursuant to Section 3.02 prior to the Fixed
Rate Conversion Date.
"Weekly Rate" means the rate of interest borne by the Bonds for a
Weekly Rate Period determined pursuant to Section 3.02.
"Weekly Rate Period" means, while the Bonds bear interest at a Variable
Weekly Rate, the weekly period which begins on Wednesday of each calendar week
and ends at the close of business on Tuesday of the immediately following
calendar week; except that in the case of conversion to a Fixed Rate, the last
Weekly Rate Period prior to such conversion shall end on the last day
immediately preceding the Fixed Rate Conversion Date. The Weekly Rate for each
Weekly Rate Period shall be effective from and including the commencement date
of such period and shall remain in effect through and including the last day
thereof.
The words "hereof," "herein," "hereto," "hereby" and "hereunder"
(except in the form of Bonds) refer to this entire Indenture. Unless otherwise
indicated, all references to particular Articles or Sections are references to
the Articles or Sections of this Indenture. References to any time of the day in
this Agreement shall refer to Eastern Standard Time or Eastern Daylight Saving
Time, as in effect in the City of New York, on such day.
ARTICLE II
The Bonds
---------
Section 2.01. AMOUNT, FORM AND ISSUANCE OF BONDS.
(a) The Bonds shall, except as provided in Section 2.08, be limited to
$5,000,000 in aggregate principal amount and shall contain substantially the
terms recited in the form of Bonds above. No additional series of Bonds may be
issued under this Indenture. All Bonds shall provide that principal (or
redemption price) and interest in respect thereof shall be payable only out of
the Revenues. The Issuer may cause a copy of the text of the opinion of
nationally recognized bond counsel delivered in connection with the issuance of
the Bonds to be printed on such Bonds, and, upon request of the Issuer and
deposit with the Trustee and the Tender Agent of executed counterparts of such
opinion, the Tender Agent shall certify to the correctness of the copy appearing
on the Bonds by manual or facsimile signature. Pursuant to recommendations
promulgated by the Committee on Uniform Security Identification Procedures,
"CUSIP" numbers may be printed on the Bonds. The Bonds may bear such endorsement
or legend satisfactory to the Tender Agent as may be required to conform to
usage or law with respect thereto.
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(b) Bonds authenticated and delivered after the Fixed Rate Conversion
Date (1) shall set forth the Fixed Rate Conversion Date and state the Fixed Rate
at which the Bonds bear interest and (2) may have deleted therefrom, or
appropriately modified, any provisions or references in the form of Bond set
forth in this Indenture which are no longer applicable.
(c) Upon the execution and delivery hereof, the Issuer shall execute
the Bonds in the principal amount of $5,000,000 and deliver them to the Tender
Agent for authentication. At the direction of the Issuer, the Tender Agent shall
authenticate the Bonds and deliver them to the purchasers thereof.
Section 2.02; DESIGNATION, DENOMINATIONS, MATURITY, DATES, INTEREST
ACCRUAL AND TENDER.
(a) The Bonds shall be designated "County of Carroll, Kentucky Variable
Rate Demand Industrial Building Revenue Bonds (Kentucky Ladder Company
Project)."
(b) The Bonds shall be issuable in denominations of $100,000 or any
whole multiple thereof, except that if the interest rate borne by the Bonds
shall be converted to a Fixed Rate, the Bonds shall be in denominations of
$5,000 or any whole multiple thereof.
(c) The Bonds shall mature, subject to prior redemption as provided in
the form thereof recited in this Indenture, on September 1, 2015.
(d) The Bonds shall have an "Issue Date" which shall be September 19,
1990, the date of original issuance and first authentication and delivery
against payment therefor, and which shall be set forth on the face side of all
Bonds authenticated by the Tender Agent. Bonds issued prior to the first
Business Day of October, 1990 shall be dated the Issue Date. Bonds issued on or
subsequent to the first Business Day of October, 1990 shall be dated as of the
Interest Payment Date next preceding the date of authentication thereof, unless
such date of authentication shall be an Interest Payment Date to which interest
on the Bonds has been paid in full or duly provided for, in which case they
shall be dated as of such date of authentication; provided that if, as shown by
the records of the Tender Agent, interest on the Bonds shall be in default,
Bonds issued in exchange for Bonds surrendered for transfer or exchange shall
be dated as of the date to which interest has been paid in full on the Bonds
or, if no interest has been paid on the Bonds, the Issue Date of the Bonds.
(e) The Bonds shall bear interest from and including the dated date
thereof until payment of the principal or redemption price thereof shall' have
been made or provided for in
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accordance with the provisions hereof, whether at maturity, upon redemption or
otherwise. Interest on the Bonds shall be determined as provided in Article III.
Interest on the Bonds shall be paid on each Interest Payment Date. Each Bond
shall bear interest on overdue principal at the rates borne by the Bonds during
such time. So long as the Bonds do not bear interest at the Fixed Rate, interest
on the Bonds shall be computed on the basis of a year of 365 or 366 days, as
applicable, for the number of days actually elapsed. Interest accruing on the
Bonds at the Fixed Rate shall be computed on the basis of a 360-day year of
twelve 30-day months.
(f) So long as the Bonds bear interest at a Variable Weekly Rate, the
Bonds shall be subject to optional and mandatory tender as provided in Article
IV.
Section 2.03. EXECUTION. The Bonds shall be executed by the manual or
facsimile signature of the County Judgel Executive of the Issuer, and the seal
of the Issuer or a facsimile thereof shall be affixed, imprinted, lithographed
or reproduced thereon and shall be attested by the manual or facsimile signature
of the County Clerk of the Issuer. Bonds executed as above provided may be
issued and shall, upon request of the Issuer, be authenticated by the Tender
Agent, notwithstanding that any officer signing such Bonds or whose facsimile
signature appears thereon shall have ceased to hold office at the time of
issuance or authentication or shall not have held office at the date of the
Bond.
Section 2.04. AUTHENTICATION. No Bond shall be valid for any purpose
until the certificate of authentication shall have been duly executed by the
Trustee and/or the Tender Agent as provided in this Indenture, and such
authentication shall be conclusive proof that such Bond has been duly
authenticated and delivered under this Indenture and that the Owner thereof is
entitled to the benefit of the trust hereby created.
Section 2.05. REGISTRATION, TRANSFER AND EXCHANGE.
(a) All Bonds shall be issued in fully-registered form. The Bonds shall
be registered upon original issuance and upon subsequent transfer or exchange as
provided in this Indenture. The Tender Agent shall act as registrar and transfer
agent for the Bonds. The Tender Agent shall keep at its Principal Office a
register (herein sometimes referred to as the "Bond Register") in which, subject
to such reasonable regulations as it, the Trustee or the Issuer may prescribe,
the Issuer shall provide for the registration of the Bonds and for the
registration of transfers of the Bonds. The Tender Agent shall, at any time as
reasonably requested by the Trustee, certify and furnish to the Trustee, the
names, addresses and holdings of Bondholders and any other relevant information
reflected in the Bond Register, and the
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Trustee shall for all purposes be fully entitled to rely upon the information so
furnished to it and shall have no liability or responsibility in connection with
the preparation thereof.
(b) Bonds may be transferred only on the Bond Register. Upon surrender
for transfer of any Bond at the Principal Office of the Tender Agent, the Issuer
shall execute and the Tender Agent shall authenticate and deliver in the name of
the transferee or transferees, one or more new fully registered Bonds of
authorized denomination for the aggregate principal amount which the Owner is
entitled to receive.
(c) At the option of the Owner, Bonds may be exchanged for other Bonds
of any authorized denomination, of a like aggregate principal amount, upon
surrender of the Bonds to be exchanged at any such office. Whenever any Bonds
are so surrendered for exchange, the Issuer shall execute, and the Tender Agent
shall authenticate and deliver, the Bonds which the Bondholder making the
exchange is entitled to receive.
(d) All Bonds presented for transfer or exchange, redemption or payment
(if so required by the Issuer, the Tender Agent or the Trustee), shall be
accompanied by a written instrument or instruments of transfer or authorization
for exchange, in form and with guaranty of signature satisfactory to the Tender
Agent, duly executed by the Owner or by his attorney duly authorized in writing.
(e) No service charge shall be made for any transfer or exchange of
Bonds, but the Issuer may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto.
(f) Except as provided in Article IV, the Issuer shall not be required
to transfer or exchange any bonds selected, called or being called for
redemption.
(g) New Bonds delivered upon any transfer or exchange shall be valid
obligations of the Issuer, evidencing the same debt as the Bonds surrendered,
shall be secured by this Indenture and shall be entitled to all of the security
and benefits hereof to the same extent as the Bonds surrendered.
Section 2.06. PERSONS DEEMED OWNERS. The Issuer, the Trustee and the
Tender Agent may' deem and treat the person in whose name ownership Of any Bond
is registered as the absolute owner thereof (whether or not such Bond shall be
overdue and notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Trustee or the Tender Agent) for the purpose of
receiving payment of or on account of the principal of (and premium, if any,
on), and (subject to Section 2.07) interest on, such Bond, and for all other
purposes,
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and neither the Issuer, the Trustee nor the Tender Agent shall be affected by
any notice to the contrary. All such payments so made to any such Owner, or upon
his order, shall be valid and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Bond.
Section 2.07. PAYMENT OF PRINCIPAL AND INTEREST; RECORD DATES.
(a) The principal and redemption price of any Bond shall be payable,
upon surrender of such Bond, in any coin or currency of the United States of
America which, at the time of payment, is legal tender for the payment of public
and private debts, at the Principal Office of the Tender Agent. Interest on any
Bond on each Interest Payment Date in respect thereof shall be payable by check
mailed to the address of the person entitled thereto as such address shall
appear in the Bond Register. Interest on the Bonds will also be payable by wire
transfer within the continental United States to any Owner of Bonds in the
principal amount of $1,000,000 or more as of the close of business on the Record
Date next preceding any Interest Payment Date, provided such Owner submits to
the Tender Agent not less than 15 days before such Interest Payment Date a
written request therefor.
(b) Interest on any Bond which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Bond is registered at the close of business on the Regular
Record Date for such interest.
(c) Any interest on any Bond which is payable on any Interest Payment
Date but is not paid or provided for on such date or within three Business Days
thereafter (herein called "Defaulted Interest") shall forthwith cease to be
payable to the Owner on the relevant Regular Record Date by virtue of having
been such Owner, and such Defaulted Interest shall be paid, pursuant to Section
11.11, to the Owner in whose name the Bond is registered at the close of
business on a Special Record Date to be fixed by the Trustee, such Date to be
not more than 15 nor less than five (5) days prior to the date of proposed
payment. The Tender Agent shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to each Bondholder, at his address as it appears in the
Bond Register, not less than ten (10) days prior to such Special Record Date.
(d) Subject to the foregoing provisions of this Section, each Bond
delivered under this Indenture upon transfer of or exchange for or in lieu of
any other Bond shall carry the rights to interest adcrued and unpaid, and to
accrue, which were carried by such other Bond.
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Section 2.08. MUTILATED, DESTROYED, LOST OR STOLEN BONDS.
(a) If any Bond shall become mutilated, lost, stolen or destroyed, the
affected Bondholder shall be entitled to the issuance of a substitute Bond only
as follows:
(1) in the case of a lost, stolen or destroyed Bond, the
Bondholder shall (i) provide notice of the loss to the Tender Agent within a
reasonable time after the Bondholder receives notice of the loss, (ii) request
the issuance of a substitute Bond, and (iii) provide evidence, satisfactory to
the Issuer and the Tender Agent, of the ownership and the loss, theft or
destruction of the affected Bond;
(2) in the case of a mutilated Bond, the Bondholder shall
surrender the Bond to the Tender Agent for cancellation; and
(3) in all cases, the Bondholder shall provide indemnity against
any and all claims arising out of or otherwise related to the issuance of
substitute Bonds pursuant to this Section satisfactory to the Tender Agent, the
Trustee, the Company and the Bank.
Upon compliance with the foregoing, a new Bond of like tenor and denomination,
executed by the Issuer, shall be authenticated by the Tender Agent and delivered
to the Bondholder, all at the expense of the Bondholder to whom the substitute
Bond is delivered. Notwithstanding the foregoing, the Tender Agent shall not be
required to authenticate and deliver any substitute Bond for a Bond which has
been called for redemption or which has matured or is about to mature and, in
any such case, the principal or redemption price and interest then due or
becoming due shall be paid by the Tender Agent in accordance with the terms of
the mutilated, lost, stolen or destroyed Bond without substitution therefor.
(b) Every substituted Bond issued pursuant to this Section shall
constitute an additional contractual obligation of the Issuer and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Bonds duly issued hereunder uhless the Bond alleged to have
been destroyed, lost or stolen shall be at any time enforceable by a bona fide
purchaser for valueRwithout notice. In the event the Bond alleged to have been
destroyed, lost or stolen shall be enforceable by anyone, the Issuer may recover
the substitute Bond from the Bondholder to whom it was issued or from anyone
taking under the Bondholder except a bona fide purchaser for value without
notice.
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(c) All Bonds shall be held and owned upon the express condition that
the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any
and all other rights or remedies, notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or investment or other securities without their
surrender.
Section 2.09. TEMPORARY BONDS. Pending preparation of definitive Bonds,
or by agreement with the purchasers of all the Bonds, the Issuer may issue, and,
upon its request, the Tender Agent shall authenticate, in lieu of definitive
Bonds one or more temporary printed or typewritten Bonds in denominations of
$100,000 and integral multiples thereof of substantially the tenor recited
above. If temporary Bonds shall be issued, the Issuer shall cause the definitive
Bonds to be printed or engraved without undue delay and, upon request of the
Issuer, the Tender Agent shall authenticate definitive Bonds in exchange for and
upon surrender of an equal principal amount of temporary Bonds. Until so
exchanged, temporary Bonds shall have the same rights, remedies and security
hereunder as definitive Bonds.
Sectiond 2.10. CANCELLATION AND DESTRUCTION OF SURRENDERED BONDS. Bonds
surrendered for payment, redemption, transfer or exchange and Bonds surrendered
to the Tender Agent by the Issuer or by the Company for cancellation shall be
cancelled and destroyed by the Tender Agent. Bonds purchased pursuant to Article
IV shall not be surrendered Bonds and shall be outstanding Bonds, unless
otherwise specifically provided in this Indenture. The Tender Agent shall
deliver to the Issuer and to the Company certificates of destruction in respect
of all Bonds so destroyed.
Section 2.11. DISPOSITION OF PROCEEDS OF BONDS. Upon the issuance and
sale of the Bonds, the Issuer shall cause the proceeds thereof to be delivered
to the Trustee, and the Trustee shall forthwith cause such proceeds to be
deposited in the Construction Fund as provided in Article V hereof, except that
any such proceeds constituting accrued interest, if any, on the Bonds shall be
deposited in the Bond Fund.
Section 2.12. DEPOSIT OF FUNDS FOR PAYMENT OF BONDS. If the principal
or redemption priceR or tender purchase price of any Bonds becoming due, either
at maturity or by call for redemption or mandatory tender or otherwise, together
with all interest accruing thereon to the due date, has been paid or provision
therefor made in accordance with Section 17.02, all interest on such Bonds shall
cease to accrue on the due date and all liability of the Issuer with respect to
such Bonds shall likewise cease, except as hereinafter provided. Thereafter, the
Owners of such Bonds shall be restricted exclusively to the funds
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so deposited for any claim mof whatsoever nature with respect to such Bonds, and
the Trustee and the Tender Agent shall hold such funds in trust for such Owners
uninvested and without liability for interest thereon. Moneys so deposited with
the Trustee or the Tender Agent which remain unclaimed five years after the date
payment thereof becomes due shall, at the request of the Company and if neither
the Issuer nor the Company is at the time to the knowledge of the Trustee in
default with respect to any covenant contained in the Indenture, the Bonds or
the Financing Agreement, be paid to the Company; and the Owners of the Bonds for
which the deposit was made shall thereafter be limited to a claim against the
Company; provided that the Trustee, before making payment to the Company, may,
at the expense of the Company, cause a notice to be given to the Owners of the
Bonds at their registered addresses, stating that the moneys remaining unclaimed
will be returned to the Company after a specified date.
ARTICLE III
Interest Rates on Bonds
-----------------------
Section 3.01. INITIAL INTEREST RATE AND SUBSEQUENT CONVERSION. All
Bonds shall bear interest from the Issue Date to October 2, 1990 at an initial
fixed rate of 7% per annum (based on a 365-day year). Thereafter, the Bonds
shall bear interest at a Variable weekly Rate determined weekly in accordance
with Section 3.02, except that the interest rate on the Bonds may be converted
to a Fixed Rate as provided in Section 3.03.
Section 3.02. VARIABLE WEEKLY RATE. A weekly Rate shall be determined
for each weekly Rate Period as described below. weekly Rate Periods shall
commence on wednesday of each week and end at close of business on Tuesday of
the following week; except that in the case of conversion to a Fixed Rate, the
last weekly Rate Period prior to such conversion shall end oh the last day
immediately preceding the Fixed Rate Conversion Date. The weekly Rate for each
weekly Rate Period shall be effective from and including the commencement date
of such period and shall remain in effect through and including the last day
thereof. Each such weekly Rate shall be determined by the Remarketing Agent on
the Tuesday or, if such Tuesday is not a Business Day, on the Business Day next
preceding the commencement date of the weekly Rate Period to which it relates
and shall be provided by the Remarketing Agent to the Tender Agent by the close
of business on that same day. The Weekly Rate so to be determined shall be the
lowest rate of interest which, in the judgment of the Remarketing Agent, would
cause the Bonds to have a market value equal to the principal amount thereof,
plus accrued interest, taking into account Prevailing Market Conditions as of
the date of determination; provided that (i) if the Remarketing Agent fails for
any reason to determine or notify the Tender Agent of the weekly Rate for any
weekly Rate Period, the weekly Rate shall be
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the same as the weekly Rate in effect for the immediately preceding weekly Rate
Period, except that if such failure continues for more than one consecutive
weekly Rate Period, the Weekly Rate shall be equal to 80% of the average of the
annual bond equivalent yield evaluations at par of 13-week United States
Treasury obligations at the most recent Treasury auction and (ii) in no event
shall the weekly Rate for any Weekly Rate Period exceed 15% per annum. No notice
of Weekly Rates will be given to the Company or to the registered Owners of the
Bonds; however, the Company and such Owners may obtain weekly Rates from the
Tender Agent or the Remarketing Agent. All determinations of weekly Rates
pursuant to the Indenture shall be conclusive and binding upon the Issuer, the
Company, the Bank, the Trustee, the Tender Agent and the Owners of the Bonds to
which such rates are applicable. The Issuer, the Company, the Bank, the Trustee,
the Tender Agent and the Remarketing Agent shall not be liable to any Owner for
failure to give any notice required with respect to Weekly Rates or for the
failure of any Owner to receive any such notice.
Section 3.03. FIXED RATE CONVERSION AT OPTION OF COMPANY. The Bonds may
be converted to bear interest at a Fixed Rate to their final maturity. Any such
conversion shall be made in accordance with the following procedures and
conditions:
(a) The Fixed Rate Conversion Date shall be an Interest Payment Date.
(b) The Company shall give written notice of any such conversion and
specify the proposed Fixed Rate Conversion Date to the Issuer, the Trustee, the
Tender Agent, the Remarketing Agent and the Bank not fewer than 45 days prior to
the proposed Fixed Rate Conversion Date.
(c) The Company shall have furnished to the Trustee a Favorable
Opinion.
(d) The Company shall have furnished to the Trustee the written consent
of the Bank with respect to the proposed Fixed Rate Conversion not fewer than 35
days prior to the Fixed Rate Conversion Date.
(e) A Minimum Fixed Rate shall be determined no later than the 31st day
preceding the Fixed Rate Conversion Date (or the immediately preceding Business
Day, if such 31st day is not a Business Day) by the Remarketing Agent. The
Minimum Fixed Rate shall be the minimum rate of interest to be borne by the
Bonds to maturity, which rate of interest shall be equal to 80% of (in the case
of the Minimum Fixed Rate; 100% in the case of the Fixed Rate) the lowest rate
of interest which, in the judgment of the Remarketing Agent as of the date of
determination and under Prevailing Market Conditions, would cause the Bonds to
have a
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market value equal to the principal amount thereof, such rate in any event not
to exceed 15% per annum. The Remarketing Agent shall notify the Tender Agent and
the Tender Agent shall notify the Issuer, the Trustee, the Company and the Bank
by telephone (promptly confirmed in writing), telegram, telecopy, telex or other
similar means of communication of the rate so determined.
(f) Promptly after the Minimum Fixed Rate is determined, notice of the
conversion and the Minimum Fixed Rate shall be given by first class mail by the
Tender Agent to the Owners of all Bonds. Such notice shall inform the Owners of:
(1) the proposed Fixed Rate Conversion Date;
(2) the dates by which the Remarketing Agent will determine and the
Tender Agent will notify the Owners of the Fixed Rate pursuant to Section
3.03(e):
(3) the conditions to the conversion pursuant to Section 3.03(g); and
(4) the matters required to be stated pursuant to Section 4.02(b) with
respect to mandatory tender and purchases of Bonds governed by such Section.
(g) Not later than 12:00 noon on the 7th Business Day immediately
preceding the Fixed Rate Conversion Date, the Remarketing Agent shall determine
the Fixed Rate for the Bonds and make the Fixed Rate available to the Tender
Agent. Such determination shall be made in the same manner as the preliminary
determination described in Section 3.03(e) (except that the Fixed Rate shall not
be less than the Minimum Fixed Rate) and in any event shall not exceed 15% per
annum. Promptly after the date of determination, the Tender Agent shall give
notice of the Fixed Rate by first class mail to the Issuer, the Company, the
Trustee and the Owners (as of the Fixed Rate Conversion Date).
As of the Fixed Rate Conversion Date, sufficient funds shall be
available to purchase Bonds which are then required to be purchased pursuant to
Section 4.02(i). If this condition is not met for any reason, the conversion
shall not be effective, the Bonds shall continue to bear interest at the
Variable weekly Rate, and the Tender Agent shall promptly notify the Owners of
such fact and shall give all additional notices and take all further actions
required pursuant to Section 4.06.
(h) The determination of the Minimum Fixed Rate and the Fixed Rate
pursuant to this Section shall be conclusive and binding upon the Issuer, the
Company, the Trustee, the Tender Agent and the Owners. The Issuer, the Company,
the Trustee, the Tender Agent, the Bank and the Remarketing Agent shall not be
liable to any Owners for failure to give any notice required
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above or for the failure of the Tender Agent or the Remarketing Agent of any
Owners to receive any such notice.
ARTICLE IV
Tender and Purchase of Bonds
----------------------------
Section 4.01. OPTIONAL TENDER OF VARIABLE WEEKLY RATE BONDS.
(a) OPTIONAL TENDER RIGHTS; PURCHASE DATES. The Owners of Bonds bearing
interest at a weekly Variable Rate shall have the right to tender their Bonds
(or portions thereof in amounts equal to whole multiples of $100,000) for
purchase, at a price equal to 100% of the principal amount thereof (or of such
portions) plus accrued interest, on any Business Day upon written notice to the
Tender Agent and the Remarketing Agent on any Business Day at least seven (7)
days prior to the Business Day on which such purchase is to be made (for
purposes hereof the phrase "Bonds bearing interest at a Variable weekly Rate"
shall be deemed to also include Bonds bearing interest at the initial rate
described in Section 3.01 hereof). Notwithstanding anything in this Section to
the contrary, any Owner who has elected to retain any Bond (or portion thereof)
upon a conversion to a Fixed Rate shall no longer be entitled to elect to have
such Bond purchased as provided in this Section.
(b) NOTICE BY OWNER OF TENDER. Each notice of tender pursuant to
Section 4.01(a) shall:
(1) be delivered to the Tender Agent at its Principal Office and be
substantially in the form set forth in Exhibit A to this Indenture or in other
form satisfactory to the Tender Agent;
(2) state (i) the principal amount of the Bond to which the notice
relates, (ii) the serial number(s) of the Bond(s) to which the notice relates,
(iii) that the Owner irrevocably demands purchase of such Bond (or a specified
portion thereof in an amount equal to whole multiples of $100,000), (iv) the
date on which such Bond (or specified portion) is to be purchased, and (v)
payment instructions with respect to the purchase price; and
(3) automatically constitute (i) an irrevocable offer to sell the Bond
(or portion thereof) to which such notice relates on the purchase date at a
price equal to the principal amount of such Bond (or portion thereof) plus any
interest thereon accrued and unpaid as of the purchase date, (ii) an irrevocable
authorization and instruction to the Tender Agent to payment of such price to
the Tender Agent on the purchase date, (iii) an irrevocable authorization and
instruction to the Tender Agent to effect the exchange of such Bond in whole or
in part for other Bonds in an equal aggregate principal amount so as to
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facilitate the sale of such Bond (or portion thereof), and (iv) an
acknowledgment that such Owner will have no further rights with respect to such
Bond (or portion thereof) upon payment of the purchase price thereof to the
Tender Agent on the purchase date, except for the right of such Owner to receive
such purchase price upon surrender of such Bond to the Tender Agent endorsed for
transfer in blank with such appropriate guaranty of signature as the Tender
Agent may require, and that after the purchase date such Ownepr will hold such
Bond as agent for the Tender Agent.
The determination of the Tender Agent as to whether a notice of tender has been
properly delivered pursuant to the foregoing shall be conclusive and binding
upon the Owner.
(c) NOTICE BY TENDER AGENT OF BONDS TO BE REMARKETED. Not later than
12:00 noon on the Business Day immediately following the date of receipt of any
notice of tender, the Tender Agent shall notify, by telephone promptly confirmed
in writing, the Remarketing Agent of the principal amount of Bonds (or portions
thereof) to be purchased and the date of purchase.
(d) REMARKETING OF TENDERED BONDS. The Remarketing Agent shall use its
best efforts to find purchasers for and arrange for the sale of all Bonds or
portions thereof in respect of which notice of tender has been received pursuant
to Section 4.01(a), at a price equal to 100% of the principal amount thereof
plus accrued interest thereon. The terms of any such sale shall provide for the
payment of the purchase price for tendered Bonds to the Tender Agent (in
exchange for new registered Bonds) in immediately available funds at or before
11:00 a.m. on the purchase date. Notwithstanding the foregoing, the Remarketing
Agent shall not arrange for the sale of any Bond as to which a notice of
conversion to a Fixed Rate has been given by the Tender Agent unless the
Remarketing Agent has advised the person to whom the sale is made of such
conversion. Anything herein to the contrary notwithstanding, no Bonds shall be
remarketed to the Issuer or the Company or any Affiliate of the Company.
(e) CERTAIN NOTICES BY REMARKETING AGENT AND TENDER AGENT.
(1) NOTICE BY REMARKETING AGENT OF REMARKETED BONDS. At or before 4:00
p.m. on the Business Day immediatelyp preceding the date fixed for purchase of
tendered Bonds, the Remarketing Agent shall give notice by telephone, telegram,
telecopy, telex or other similar communication to the Tender Agent of (i) the
principal amount of tendered Bonds which have been remarketed and (ii) the
principal amount of tendered Bonds, if any, as to which the Remarketing Agent
has not found a purchaser at such time.
(2) NOTICE BY TENDER AGENT OF BONDS NOT REMARKETED. Not later than 5:00
p.m. on the date of receipt of any notice
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pursuant to Section 4.01(e)(1)(ii) , the Tender Agent shall give notice by
telephone, telegram, telecopy or other similar communication to the Company and
the Bank, specifying the principal amount of tendered Bonds as to which the
Remarketing Agent has not found a purchaser at that time.
(3) REMARKETING AGENT NOTICE OF MOUNTS TO BE DRAWN UNDER LETTER OF
CREDIT. At or before 5:00 p.m. on the Business Day immediately preceding the
date fixed for purchase of tendered Bonds, the Remarketing Agent shall give
telephonic notice, promptly confirmed in writing, to the Tender Agent, the
Company and the Bank specifying the amounts of principal and interest, if any,
representing purchase price of Bonds for the payment of which the Remarketing
Agent does not then expect to hold remarketing proceeds (other than proceeds of
the Bonds remarketed to the Company, any Affiliate or the Issuer) in trust at
the time the payment of remarketing proceeds pursuant to Section 4.01(f) is to
be made, which amounts (except to the extent any such amounts are then held by
the Tender Agent) the Tender Agent shall draw under the Letter of Credit and
deposit in the Letter of Credit Purchase Account for use to the extent necessary
to effect such purchase of such Bonds.
(4) NOTICE BY REMARKETING AGENT IDENTIFYING PURCHASERS OF REMARKETED
BONDS. At or before 5:00 p.m. on the Business Day immediately preceding the date
fixed for purchase of tendered Bonds, the Remarketing Agent shall give notice to
the Tender Agent by telephone (promptly confirmed in writing) of the names,
addresses and taxpayer identification numbers of the purchasers, the
denominations of Bonds to be delivered to each purchaser and, if available, the
payment instructions for regularly scheduled interest payments.
(f) PAYMENT OF REMARKETING PROCEEDS. The Remarketing Agent shall cause
to be paid to the Tender Agent by 11:00 a.m. on the date fixed for purchase of
tendered Bonds, all amounts then held by the Remarketing Agent representing
proceeds of the remarketing of such Bonds, such payments to be made in the
manner specified in Section 4.01(d). All moneys received by the Tender Agent as
remarketing proceeds shall be deposited by the Tender Agent in a special trust
account designated as the Remarketing Proceeds Purchase Account which the Tender
Agent shall establish and use as provided in this Article and shall not be
commingled with other funds held by the Tender Agent; provided that any moneys
received by the Tender Agent as remarketing proceeds from Bonds remarketed to
the Company or any Affiliate shall be deposited in the Company Purchase Account
and applied as provided in Section 4.01(h).
(g) DRAWINGS ON LETTER OF CREDIT FOR PURCHASE PRICE. As provided by
Section 4.01(e)(3), the Remarketing Agent shall advise the Tender Agent of the
amounts to be drawn under the
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Letter of Credit which are necessary for the Tender Agent to make timely
payments of purchase price of tendered Bonds from remarketing proceeds Or moneys
drawn under the Letter of Credit. The Tender Agent shall by 11:00 a.m. on the
purchase date take all action necessary to draw on the Letter of Credit the
specified amounts for receipt by the Tender Agent on the purchase date. The
Tender Agent shall establish a special trust account designated as the Letter of
Credit Purchase Account into which the Tender Agent shall deposit and hold in
trust, uninvested and without liability for interest thereon, all such amounts
received by the Tender Agent from drawings on the Letter of Credit for purchases
of tendered Bonds pending application of such amounts by the Tender Agent
pursuant to this Article. Any remaining amounts in the Letter of Credit Purchase
Account after any application required by Section 4.01(i) shall be paid over by
the Tender Agent to the Bank for the account of the Company as reimbursement for
the drawing on the Letter of Credit from which such amounts were derived;
provided that the Letter of Credit shall be reinstated to the extent of such
reimbursement and the Tender Agent shall take all necessary action on its part
pursuant to the Letter of Credit to effect such reinstatement. The Letter of
Credit shall provide that the Bank shall deliver to the Tender Agent by 2:00
p.m. on the purchase date all amounts drawn on the Letter of Credit for
purchases of tendered Bonds. Anything herein to the contrary notwithstanding, no
amounts drawn on the Letter of Credit shall be applied to the purchase of
Custody Bonds or Company Bonds.
(h) PAYMENTS BY COMPANY. Any moneys paid by the Company pursuant to
Section 4.3 of the Financing Agreement and furnished by the Trustee to the
Tender Agent for purchase of tendered Bonds shall be deposited by the Tender
Agent in a special trust account designated as the Company Purchase Account
which the Tender Agent shall establish and use (i) to reimburse the Bank for
drawings under the Letter of Credit for such purpose or (ii) if no Letter of
Credit is then held by the Tender Agent, to pay the purchase price of tendered
Bonds to the selling Owners thereof.
(i) PAYMENTS OF PURCHASE PRICE BY TENDER AGENT. On the date set for
purchase of tendered Bonds and upon receipt by the Tender Agent of 100% of the
aggregate purchase price of the tendered Bonds, ethe Tendeer Agent shall pay the
purchase price of such Bonds to the selling Owners thereof at its Principal
Office on or before 2:00 p.m. on the later of the day of surrender of such Bonds
to the Tender Agent properly endorsed for transfer in blank, with all signatures
guaranteed to the satisfaction of the Tender Agent, or the date designated in
the notice delivered pursuant to Section 4.01(b). Such payments shall be made in
immediately available funds, but solely from the following sources in the order
of priority indicated, neither the Issuer,
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the Trustee, the Tender Agent nor the Remarketing Agent having an obligation to
use funds from any other source:
(1) moneys held in the Remarketing Proceeds Purchase
Account representing proceeds of the remarketing of such
Bonds pursuant to Section 4.01(f) to any person other than
the Company, any Affiliate or the Issuer;
(2) moneys held in the Letter of Credit Purchase
Account representing proceeds of a drawing by the Tender
Agent under the Letter of Credit for such purpose; and
(3) moneys held in the Company Purchase Account paid
by the Company pursuant to Section 4.3 of the Financing
Agreement and furnished by the Trustee to the Tender Agent.
(j) Registration and Delivery of Tendered or Purchased Bonds. On the
date of purchase of tendered Bonds, the Tender Agent shall register and deliver
(or hold) all Bonds purchased on such date as follows:
(1) Bonds remarketed by the Remarketing Agent shall
be registered and made available to the Remarketing Agent or
the purchasers thereof in accordance with the instructions of
the Remarketing Agent;
(2) Bonds purchased with proceeds of a drawing on
the Letter of Credit shall be held by the Tender Agent as
Custody Bonds pursuant to Section 4.04; and
(3) Bonds purchased with amounts provided by the
Company shall be registered in the name of the Company and
shall be held in trust by the Tender Agent on behalf of the
Company and shall not be released from such trust unless the
Tender Agent shall have received written instructions from
the Company; provided that so long as a Letter of Credit is
in epffect such Bonds shall not be remarketed or delivered to
the Company unless the Letter of Credit supports the payment
of such Bonds in accordance with the terms of this Indenture
and the Letter of Credit.
(k) Delivery of Bonds; Effect of Failure to Surrender Bonds. All Bonds
to be purchased on any date shall be required to be delivered to the Principal
Office of the Tender Agent at or before 11:00 a.m. on the purchase date. If the
Owner of any Bond
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(or portion thereof) that is subject to purchase pursuant to this Section 4.01
fails to deliver such Bonds to the Tender Agent for purchase on the purchase
date with an appropriate endorsement for transfer or accompanied by a bond power
endorsed in blank, and if such Bond is to be purchased prior to the next
succeeding Interest Payment Date and after the Regular Record Date in respect
thereof, a non-recourse due-bill, for interest due from the preceding Interest
Payment Date to the next succeeding Interest Payment Date, and if the Tender
Agent is in receipt of the purchase price therefor, such Bond (or portion
thereof) shall nevertheless be deemed tendered and purchased on the day fixed
for purchase theereof and ownership of such Bond (or portion thereof) shall be
transferred to the purchaser thereof as provided in Section 4.01(j). Any Owner
who fails to deliver such Bond for purchase on (or before) the purchase date
shall have no further rights thereunder, except the right to receive the
purchase price thereof upon presentation and surrender of such Bond to the
Tender Agent properly endorsed for transfer in blank. The Tender Agent shall, as
to any tendered Bonds which have not been delivered to it, (i) promptly notify
the Remarketing Agent of such nondelivery and (ii) place a stop transfer against
the serial number of such Bond(s) registered in the name of the Owner(s) on the
Bond Register and specified in the notice of tender described in Section 4.01(b)
until the tendered Bonds are delivered to the Tender Agent. Upon such delivery,
the Tender Agent shall make any necessary adjustments to the Bond Register.
Section 4.02. MANDATORY TENDER UPON FIXED RATE CONVERSION.
(a) Mandatory Tender Upon Conversion. If the Bonds are to be converted
to bear interest at a Fixed Rate pursuant to Section 3.03, they shall be subject
to mandatory tender for purchase on the Fixed Rate Conversion Date, at a price
equal to the principal amount thereof plus accrued interest to the Fixed Rate
Conversion Date; provided that the Owners of any such Bonds may elect to retain
their Bonds by complying with the provisions of Section 4.02(c).
(b) Notice to Registered Owners. Any notice of conversion given to
Owners pursuant to Section 3.03(f) shall, in addition to the requirements of
such Section, specify:
(1) the Interest Payment Dates for the payment of
interest on the Bonds after the Fixed Rate Conversion Date;
(2) that the Letter of Credit then held by the
Tender Agent will expire on the Fixed Rate Conversion Date
and whether there will be a Fixed Rate Letter of Credit and,
if so, the issuing Bank
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and expiration date of such Fixed Rate Letter of Credit;
(3) that ratings of the Bonds, if any, by Moody's
and S & P may be withdrawn or reduced from such ratings then
prevailing;
(4) that subsequent to the Fixed Rate Conversion
Date the Owners will no longer have the right to require
purchase of Bonds;
(5) that all Outstanding Bonds are subject to
mandatory tender pursuant to the provisions thereof and of
this Indenture and will be purchased on the Fixed Rate
Conversion Date by payment of a purchase price equal to the
principal amount thereof plus accrued interest to the Fixed
Interest Conversion Date, except Bonds which the Owner shall
have elected to retain in accordance with Section 4.02(c);
(6) that the Owner shall have the right to elect to
retain such Owner's Bonds by complying with the provisions of
Section 4.02(c) (a copy of which Section shall be included in
such notice); and
(7) the date and time by which any notice of
election to retain Bonds pursuant to Section 4.02(c) must be
received.
(c) OWNER ELECTION TO RETAIN BONDS. Notwithstanding a mandatory tender
pursuant to this Section, the Owners of any Bonds to be converted to bear
interest at a Fixed Rate may elect to retain their Bonds by delivering to the
Tender Agent at its Principal Office, for receipt not later than 5:00 p.m. on a
Business Day which is not fewer than 15 days prior to the Fixed Rate Conversion
Date, a written notice of such election. Such notice shall be effective upon
receipt and shall:
(1) state that the person delivering the same is an
Owner (specifying the principal amount of Bonds such Owner is
electing to retain);
(2) acknowledge receipt of the notice of conversion
and mandatory tender delivered pursuant to Sections 3.03(f)
and 4.02(b); and
(3) direct the Tender Agent not to purchase the
specified principal amount of Bonds of such Owner and specify
the serial number(s) of Bond(s) which such Owner is electing
to retain.
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Any such notice delivered to the Tender Agent shall be irrevocable and binding
upon the Owner delivering the same and all subsequent Owners of the Bonds to be
retained, including any Bonds issued in exchange therefor or upon transfer
thereof.
(d) REMARKETING. At or before 4:00 p.m. on the Business Day immediately
following the last day on which notices of elections to retain Bonds may be
delivered to the Tender Agent pursuant to Section 4.02(c), the Tender Agent
shall notify the Issuer, the Company, the Bank and the Remarketing Agent by
telephone, telegraph, telecopy, telex or other similar communication, of the
principal amount of Bonds to be tendered for purchase on the Fixed Rate
Conversion Date. The Remarketing Agent shall use its best efforts to find
purchasers for and arrange for the sale of such Bonds; provided that in no event
shall the Remarketing Agent arrange for the sale of any such Bond to any person
unless the Remarketing Agent has advised such person of the fact that, after the
Fixed Rate Conversion Date, the Bonds will no longer be subject to tender at the
option of the Owners and has received written acknowledgment from such person
that he has received the notice required by Section 4.02(b). The terms of any
sale arranged by the Remarketing Agent shall provide for the payment of the
purchase price to the Tender Agent of the tendered Bonds in immnediately
available funds at or before 11:00 a.m. on the purchase date. Anything herein to
the contrary notwithstanding, the Remarketing Agent shall have no obligation to
find purchasers for and arrange for the sale of Bonds on the Fixed Rate
Conversion Date or to make any effort to such end, unless and to the extent the
Remarketing Agent shall have expressly and specifically agreed in writing with
the Issuer and the Company to perform such duties.
(e) CERTAIN NOTICES BY REMARKETING AGENT. Subject to the provisions of
Section 4.02(d), the Remarketing Agent shall give the following notices:
(1) At or before 3:00 p.m. on the Business Day
immediately preceding the Fixed Rate Conversion Date, the
Remarketing Agent shall give notice by telephone, telegram,
telecopy, telex or other similar communication to the Tender
Agent, the Company and the Bank of (i) the principal amount
of Bonds which have been remarketed and (ii) the principal
amount of Bonds, if any, which have not been remarketed.
(2) At or before 3:00 p.m. on the Business Day
immediately preceding the Fixed Rate Conversion Date, the
Remarketings Agent shall give notice to the Tender Agent by
telephone (promptly confirmed in writing) of the names,
addresses and taxpayer identification numbers of the
purchasers
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and the denominations of Bonds to be delivered to each
purchaser.
(f) PAYMENT OF REMARKETING PROCEEDS. The Remarketing Agent shall cause
to be paid to the Tender Agent by 3:00 p.m. on the Fixed Rate Conversion Date,
all amounts then held by the Remarketing Agent representing proceeds of the
remarketing of such Bonds, such payment to be made in the manner specified in
Section 4.02(d). All such remarketing proceeds received by the Tender Agent
shall be deposited in the Remarketing Proceeds Purchase Account and applied by
the Tender Agent, FIRST, to reimburse the Bank for the drawing(s) on the Letter
of Credit to purchase such Bonds, SECOND, if no Letter of Credit is then held by
the Tender Agent, to pay the purchase price of tendered Bonds which have been
remarketed, and THIRD, to pay any purchase price owing to the Company for any
tendered Company Bonds which have been remarketed, provided that if the Bank has
notified the Tender Agent of any other obligations then due and owing to the
Bank under the Reimbursement Agreement, then such remarketing proceeds otherwise
payable to the Company shall be paid to the Bank for the account of the Company.
(g) DRAWINGS ON LETTER OF CREDIT FOR PURCHASE PRICE. The Tender Agent
shall draw on the Letter of Credit, for receipt by the Tender Agent by 2:00 p.m.
on the Fixed Rate Conversion Date, an amount equal to the aggregate principal
amount of all Outstanding Bonds (other than any Custody Bonds or Company Bonds
or Bonds retained by the Owner thereof pursuant to Section 4.02(c) hereof) plus
accrued interest to the Fixed Rate Conversion Date, constituting the mandatory
tender purchase price of such Bonds. The proceeds of such drawing shall be
deposited into the Letter of Credit Purchase Account for application pursuant to
Section 4.02(i).
(h) PAYMENTS BY COMPANY. Any moneys paid by the Company pursuant to
Section 4.3 of the Financing Agreement and furnished by the Trustee to the
Tender Agent for purchase of tendered Bonds shall be deposited by the Tender
Agent in the Company Purchase Account which the Tender Agent shall use (i) to
reimburse the Bank for drawings under the Letter of Credit for such purpose or
(ii) if no Letter of Credit is then held by the Tender Agent, to pay the
purchase price of tendered Bonds to the selling Owners thereof.
(i) PAYMENTS OF PURCHASE PRICE BY TENDER AGENT. On the Fixed Rate
Conversion Date the Tender Agent shall pay the purchase price of the Bonds to
the selling Owners thereof at its Principal Office on or before 2:00 p.m. on the
day of surrender of such Bonds to the Tender Agent properly endorsed for
transfer in blank, with all signatures guaranteed to the satisfaction of the
Tender Agent. Such payments shall be made in immediately available funds, but
solely from the following sources in the
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order of priority indicated, neither the Issuer, the Trustee, the Tender Agent
nor the Remarketing Agent having an obligation to use funds from any other
source:
(1) the purchase price of Bonds (other than Custody
Bonds or Company Bonds) shall be paid from moneys in the
Letter of Credit Purchase Account representing proceeds of a
drawing by the Tender Agent under the Letter of Credit for
such purpose;
(2) moneys in the Remarketing Proceeds Purchase
Account representing proceeds of the remarketing of the Bonds
pursuant to Section 4.02(d) shall be applied as provided in
Section 4.02(f); and
(3) moneys in the Company Purchase Account shall be
applied pursuant to Section 4.02(h).
(j) REGISTRATION AND DELIVERY OF TENDERED OR PURCHASED BONDS. On the
date of purchase of tendered Bonds, the Tender Agent shall register and deliver
(or hold) all Bonds purchased on such date as follows:
(1) Bonds remarketed by the Remarketing Agent shall
be registered and made available to the Remarketing Agent or
the purchasers thereof in accordance with the instructions of
the Remarketing Agent;
(2) Bonds purchased with proceeds of a drawing on
the Letter of Credit for which the Bank has not been
reimbursed shall be held by the Tender Agent as Custody Bonds
pursuant to Section 4.04; and
(3) Bonds purchased with proceeds of a drawing on
the Letter of Credit for which the Bank has been reimbursed
with amounts provided by the Company shall be registered in
the name of the Company and shall be held in trust by the
Tender Agent on behalf of the Company and shall not be
released from such trust unless the Tender Agent shall have
received written instructions from the Company; provided that
if a Fixed Rate Letter of Credit is in effect such Bonds
shall not be remarketed or delivered to the Company unless
such Fixed Rate Letter of Credit supports the payment of such
Bonds in accordance with the terms of this Indenture and such
Fixed Rate Letter of Credit.
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(k) DELIVERY OF BONDS; EFFECT OF FAILURE TO SURRENDER BONDS. All Bonds
to be purchased on the Fixed Rate Conversion Date shall be required to be
delivered to the Principal Office of the Tender Agent at or before 11:00 a.m. on
such date. If the Owner of any Bond (or portion thereof) that is subject to
purchase pursuant to this Section fails to deliver such Bonds to the Tender
Agent for purchase on the purchase date, and if the Tender Agent is in receipt
of the purchase price therefor, such Bond (or portion thereof) shall
nevertheless be deemed tendered and purchased on the Fixed Rate Conversion Date
and registration of the ownership of such Bond (or portion thereof) shall be
transferred to the purchaser thereof as provided in Section 4.02(j). Any Owner
who fails to deliver such Bond for purchase on (or before) the Fixed Rate
Conversion Date shall have no further rights thereunder, except the right to
receive the purchase price thereof upon presentation and surrender of such Bond
to the Tender Agent properly endorsed for transfer in blank. The Tender Agent
shall, as to any tendered Bonds which have not been delivered to it, (i)
promptly notify the Remarketing Agent of such nondelivery and (ii) place a stop
transfer against the serial number(s) of such Bonds registered in the name of
the Owner(s) on the Bond Register and not specified in the notice of election to
retain bonds described in Section 4.02(c) until the tendered Bonds are delivered
to the Tender Agent. Upon such delivery, the Tender Agent shall make any
necessary adjustments to the Bond Register.
Section 4.03. MANDATORY TENDER UPON LETTER OF CREDIT EXPIRATION.
(a) MANDATORY TENDER UPON EXPIRATION. Bonds bearing interest at a
Variable weekly Rate shall be subject to mandatory tender for purchase on the
Interest Payment Date (the "mandatory tender date") immediately preceding the
expiration date of the Letter of Credit then in effect in the event such Letter
of Credit shall not have been extended or replaced effective on or before such
Interest Payment Date in accordance with Section 7.06 or 7.07, at a price equal
to the principal amount thereof plus accrued interest to the mandatory tender
date; provided that the Owners of any such Bonds may elect to retain their Bonds
by complying with the provisions of Section 4.03(c).
(b) NOTICE TO REGISTERED OWNERS. In the event that, by the 35th day
prior to the mandatory tender date, the Letter of Credit shall not have been
extended or replaced in compliance with the conditions of Section 7.06 or
Sections 7.07(b) and (c), the Tender Agent shall promptly give notice of
mandatory tender pursuant to this Section 4.03 by first class mail to the Owners
of all Bonds. Such notice shall state:
(1) the expiration date of the Letter of Credit then
held by the Tender Agent;
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(2) that ratings of the Bonds, if any, by Moody's
and S & P may be withdrawn or reduced from such ratings then
prevailing;
(3) that all Outstanding Bonds are subject to
mandatory tender pursuant to the provisions thereof and of
this Indenture and will be purchased on the mandatory tender
date (which date shall be set forth in such notice) by
payment of a purchase price equal to the principal amount
thereof plus accrued interest to the mandatory tender date,
except Bonds which the Owner shall have elected to retain in
accordance with Section 4.03(c);
(4) that the Owner shall have the right to elect to
retain such Owner's Bonds by complying with the provisions of
Section 4.03(c) (a copy of which Section shall be included in
such notice); and
(5) the date and time by which any notice of
election to retain Bonds pursuant to Section 4.03(c) must be
received.
(c) OWNER ELECTION TO RETAIN BONDS. Notwithstanding a mandatory tender
pursuant to this Section, the Owners of any Bonds in respect of which the Letter
of Credit will expire may elect to retain their Bonds by delivering to the
Tender Agent at its Principal Office for receipt not later than 5:00 p.m., on a
Business Day which is not fewer than 15 days prior to the mandatory tender date,
a written notice of such election. Such notice shall be effective upon receipt
and shall:
(1) state that the person delivering the same is an
Owner (specifying the principal amount and serial number(s)
of Bonds such Owner is electing to retain);
(2) acknowledge receipt of the notice of mandatory
tender delivered pursuant to Section 4.03(b); and
(3) direct the Tender Agent not to purchase the
specified principal amount of Bonds of such Owner.
Any such notice delivered to the Tender Agent shall be irrevocable and binding
upon the Owner delivering the same and all subsequent Owners of the Bonds to be
retained, including any Bonds issued in exchahge therefor or upon transfer
thereof.
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(d) NOTICE BY TENDER AGENT; NO REMARKETING. At or before 4:00 p.m. on
the Business Day immediately following the last day on which notices of
elections to retain Bonds may be delivered to the Tender Agent pursuant to
Section 4.03(c), the Tender Agent shall notify the Issuer, the Company, the Bank
and the Remarketing Agent by telephone, telegraph, telecopy, telex or other
similar communication, of the principal amount of Bonds to be tendered for
purchase on the mandatory tender date. Anything in this Indenture to the
contrary notwithstanding, the Remarketing Agent shall have no obligation to
remarket Bonds for purchase after notice of mandatory tender has been given
pursuant to Section 4.03(b); provided, however, that if the Remarketing Agent
does remarket the Bonds prior to conversion to a Fixed Rate, then, prior to such
sale, it shall obtain written acknowledgment from the purchaser thereof that
such purchaser has received the notice required in Section 4.03(b) hereof.
(e) DRAWINGS ON LETTER OF CREDIT FOR PURCHASE PRICE. The Tender Agent
shall draw on the Letter of Credit by 11:00 a.m. for receipt by the Tender Agent
by 1:00 p.m. on the mandatory tender date, an amount equal to the aggregate
principal amount of all Bonds Outstanding (other than any Custody Bonds or
Company Bonds) plus accrued interest to the mandatory tender date, constituting
the mandatory tender purchase price of such Bonds. The proceeds of such drawing
shall be deposited into the Letter of Credit Purchase Account for application
pursuant to Section 4.03(g).
(f) PAYMENTS BY COMPANY. Any moneys paid by the Company pursuant to
Section 4.3 of the Financing Agreement and furnished by the Trustee to the
Tender Agent for purchase of tendered Bonds shall be deposited by the Tender
Agent in the Company Purchase Account which the Tender Agent shall use to
reimburse the Bank for drawings under the Letter of Credit for such purpose.
(g) PAYMENTS OF PURCHASE PRICE BY TENDER AGENT. On the mandatory tender
date the Tender Agent shall pay the purchase price of the Bonds to the selling
Owners thereof at its Principal Office upon surrender of such Bonds to the
Tender Agent properly endorsed for transfer in blank with all signatures
guaranteed to the satisfaction of the Tender Agent. Such payments shall be made
in immediately available funds, but solely from the following sources in the
order of priority indicated, neither the Issuer, the Trustee nor the Tender
Agent having an obligation to use funds from any other source:
(1) the purchase price of Bonds (other than Custody
Bonds or Company Bonds) shall be paid from moneys in the
Letter of Credit Purchase Account representing proceeds of a
drawing by the Tender
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Agent under the Letter of Credit for such purpose; and
(2) moneys in the Company Purchase Account shall be
applied pursuant to Section 4.03(f).
(h) REGISTRATION AND DELIVERY OF TENDERED OR PURCHASED BONDS. On the
mandatory tender date, the Tender Agent shall register and deliver (or hold) all
Bonds purchased on such date as follows:
(1) Bonds purchased with proceeds of a drawing on
the Letter of Credit for which the Bank has not been
reimbursed shall be held by the Tender Agent as Custody Bonds
pursuant to Section 4.04; and
(2) Bonds purchased with proceeds of a drawing on
the Letter of Credit for which the Bank has been reimbursed
with amounts provided by the Company shall be registered in
the name of the Company and shall be held in trust by the
Tender Agent on behalf of the Company and shall not be
released from such trust unless the Tender Agent shall have
received written instructions from the Company.
(i) DELIVERY OF BONDS; EFFECT OF FAILURE TO SURRENDER BONDS. All Bonds
to be purchased on the mandatory purchase date shall be required to be delivered
to the Principal Office of the Tender Agent for receipt at or before 11:00 a.m.
on such date. If the Owner of any Bond (or portion thereof) that is subject to
purchase pursuant to this Section fails to deliver such Bonds to the Tender
Agent for purchase on the mandatory tender date, and if the Tender Agent is in
receipt of the purchase price therefor, such Bond (or portion thereof) shall
nevertheless be deemed tendered and purchased on the mandatory purchase date and
ownership of such Bond (or portion thereof) shall be transferred to the
purchaser thereof as provided in Section 4.03(h). Any Owner who fails to deliver
such Bond for purchase on (or before) the mandatory purchase date shall have no
further rights thereunder, except the right to receive the purchase price
thereof upon presentation and surrender of such Bond to the Tender Agent
properly endorsed for transfer in blank. The Tender Agent shall, as to any
tendered Bonds which have not been delivered to it, place a stop transfer
against the serial number(s) of Bonds registered in the name of the Owner(s) on
the Bond Register and not specified in the notice described in Section 4.03(c).
The Tender Agent shall place such stop transfer(s) commencing with the lowest
serial number Bond registered in the name of such Owner(s) (until stop transfers
have been placed against an appropriate amount of Bonds) until
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the appropriate tendered Bonds are delivered to the Tender Agent. Upon such
delivery, the Tender Agent shall make any necessary adjustments to the Bond
Register.
Section 4.04. Bonds Purchased With Proceeds of Letter of Credit.
-------------------------------------------------
(a) CUSTODY BONDS. The Tender Agent shall hold in its custody and
control for the benefit of the Bank as pledgee of the Company any Bonds
purchased with proceeds of a drawing on the Letter of Credit pursuant to this
Article, unless and until (1) with respect to Bonds purchased pursuant to
Section 4.01, the Tender Agent has received confirmation from the Bank to the
extent contemplated by the terms of the Letter of Credit (or has otherwise
complied with the terms of the Letter of Credit) that the Letter of Credit has
been reinstated with respect to such drawing or (2) with respect to Bonds
purchased pursuant to Section 4.02 or 4.03, the Tender Agent holds in trust for
prompt delivery to the Bank remarketing proceeds equal to the amount(s) drawn
under the Letter of Credit to pay the purchase price of such Bonds or the Bank
has notified the Tender Agent in writing that the Bank is releasing such Bonds
from such pledge. Such Bonds so held by the Tender Agent are herein called
"Custody Bonds." Pending reinstatement of the Letter of Credit or release of
such pledge as aforesaid, the Bank shall be entitled to receive interest payable
on Custody Bonds as pledgee of the Company and such Bonds shall not be
transferable or deliverable to any party (including the Company) except the
Bank.
(b) REMARKETING OF CUSTODY BONDS. The Remarketing Agent shall continue
to use its best efforts to arrange for the sale of any Custody Bonds bearing
interest at a Variable Weekly Rate, subject to the reinstatement of the Letter
of Credit with respect to the drawing with which such Bonds were purchased, at a
price equal to the principal amount thereof, plus accrued interest. This
subsection shall not apply to Bonds after the Bonds have been converted to bear
interest at a fixed rate or after purchase of the Bonds upon mandatory tender by
reason of the expiration of the Letter of Credit.
(c) NOTICE OF REMARKETING. On or prior to each Business Day on which
any Custody Bonds that are successfully remarketed by the Remarketing Agent are
to be purchased, the Remarketing Agent shall give telephonic notice, promptly
confirmed in writing, to the Tender Agent, the Company and the Bank specifying:
(1) the Business Day on which such purchase will
take place and the principal amount of Custody Bonds
successfully remarketed by the Remarketing Agent, and
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(2) to the Tender Agent only, the names, addresses
and tax identification numbers of the proposed purchasers
thereof.
(d) DELIVERY OF REMARKETED CUSTODY BONDS AND PROCEEDS THEREOF. Upon
reinstatement of the Letter of Credit as described in Section 4.04(b) and the
sale of Custody Bonds arranged by the Remarketing Agent, the Tender Agent shall
contemporaneously deliver (i) such Bonds to the Remarketing Agent for redelivery
to the purchasers thereof and (ii) the proceeds of such sale to the Bank to the
extent of any unpaid reimbursement obligation under the Reimbursement Agreement
for the prior drawing made by the Tender Agent on the Letter of Credit in
respect of the purchase of such Bonds.
Section 4.05. NO PURCHASES AFTER CERTAIN DEFAULTS. Anything in this
Indenture to the contrary notwithstanding, there shall be no purchases of Bonds
pursuant to this Article if there shall have occurred any Event of Default in
respect of which the principal of all Bonds Outstanding shall have been declared
immediately due and payable pursuant to Section 11.02 and such declaration shall
not have been annulled, and there shall be no purchase of Bonds pursuant to
Section 4.01 if there shall have occurred and be continuing an Event of Default
described in Section 11.01(A), 11.01(B) or 11.01(C).
Section 4.06. INADEQUATE FUNDS FOR TENDERS. If the funds available for
purchases of Bonds pursuant to this Article are inadequate for the purchase of
all Bonds tendered on any purchase date pursuant to this Article, the Tender
Agent shall, after any applicable grace period: (a) return all tendered Bonds to
the Owners thereof; (b) return all moneys received for the purchase of such
Bonds (other than moneys provided by the Company and other than Letter of Credit
proceeds, unless the Letter of Credit is reinstated with respect thereto) to the
persons providing such moneys; and (c) notify the Trustee of the return of such
Bonds and moneys and the failure to make payment for tendered Bonds.
ARTICLE V
Construction Fund
-----------------
Section 5.01. ESTABLISHMENT OF CONSTRUCTION FUND. The Trustee shall
establish a Construction Fund for the payment of the Costs of the Project. The
Construction Fund shall consist of the amounts deposited therein pursuant to
this Indenture and any other amounts the Issuer may deposit therein. The amounts
in the Construction Fund, until applied as hereinafter provided, shall be held
as security for all Bonds Outstanding hereunder. The Trustee shall maintain a
record of the income on investments and interest earned on amounts held in the
Construction Fund and on
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proceeds of Bonds held in respect of accrued or capitalized interest held by the
Trustee as Revenues. Subject to the provisions of Section 6.05, such income or
interest may be expended at any time or from time to time to pay Costs of the
Project in the same manner as the proceeds of Bonds deposited in the
Construction Fund are expended.
Section 5.02. Payments From Construction Fund.
-------------------------------
(a) CLOSING STATEMENT. Subject to the limitations of Section 5.02(c),
the Trustee is authorized to pay from the Construction Fund in connection with
the issuance of the Bonds, in the amounts set forth in a closing statement
signed by the Chairman or other authorized officer of the Issuer and approved by
an authorized officer of the Company and the Bank, any or all costs of issuance
of the Bonds, including but not limited to Trustee's fees, Letter of Credit
issuance fees, placement fees, legal fees and expenses and printing costs.
(b) REQUISITION. The Trustee shall make payments from the Construction
Fund upon receipt of a requisition from the Company, executed by the Company
and, with respect to payments of Costs for construction of improvements included
in the Project Facilities, approved by an architect or engineer, stating:
(1) The Costs to which the payment relates;
(2) The payee and the address of the payee, which
payee may be the Company in the case of work done by Company
personnel and in the case of reimbursement for payments made
or being made by the Company for the Issuer's account (other
than payments made by way of set-off of mutual claims between
the Company and the payee), and which payee may be the
Trustee or Tender Agent in the case of a requisition for
payment of interest on the Bonds during acquisition,
construction and equipping of the Project Facilities;
(3) The amount of the payments to be made;
(4) That the payment is due, is a proper charge
against the Construction Fund and has not been the subject of
any previous withdrawal therefrom or any other funds
representing proceeds of Bonds issued by the Issuer on the
Company's behalf;
(5) That payment of the Costs requested by such
requisition will comply with the restrictions contained in
Section 3.4 of the Financing Agreement; and
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(6) That no Event of Default exists and is
continuing under the Indenture, the Financing Agreement or
any other security document, nor any condition, event or act
which, with notice or lapse of time or both, would constitute
such an Event of Default.
Each requisition will be accompanied by a statement in reasonable detail listing
the Costs of the Project to be paid to any contractors, materialmen or suppliers
or the Costs incurred or advanced by the Company for which it is to be
reimbursed. The Trustee shall retain copies or records of each requisition and
shall not destroy such records without the prior consent of the Company, which
consent will not be unreasonably withheld.
Nothing contained in this Section shall impose on the Trustee any
obligation to see to the proper application of the Construction Fund. In making
such disbursements from the Construction Fund, the Trustee shall rely upon the
requisition delivered to it and shall be relieved of any liability except as set
forth in the Indenture with respect to making such disbursements.
(c) LIMITATION ON COSTS OF ISSUANCE. The costs of issuance paid with
the proceeds of the Bonds (but excluding Letter of Credit issuance fees) shall
not exceed two percent (2%) of the original principal amount of the Bonds.
(d) ENFORCEMENT BY COMPANY. The establishment of the Construction Fund
shall be for the benefit of the Company, and, except during the continuance of
an Event of Default hereunder, the Company may enforce payments therefrom upon
compliance with the requisition procedures set forth in this Section.
Section 5.03. EXCESS BOND PROCEEDS. Upon the completion of the Project
Facilities, as evidenced by a certificate of the Company delivered to the
Trustee and the Issuer, any amounts remaining in the Construction Fund
(including the earnings from investments thereof) shall be deposited by the
Trustee in the Construction Fund Surplus Account which the Trustee shall
establish in the Construction Fund. Moneys in the Construction Fund Surplus
Account (including the earnings from investments thereon) shall be applied by
the Trustee to reimburse the Bank for drawings on the Letter of Credit applied
to pay (i) the redemption price of Bonds on the first redemption date occurring
after completion of the Project Facilities, at the applicable redemption price
(provided, however, that no exercise of any option to redeem shall be required
if such exercise would include the payment of a premium), or (ii) principal or
interest on the Bonds; provided that, with respect to the payment of interest,
the Trustee shall have received a Favorable Opinion. In addition, amounts held
in the Construction Fund Surplus
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Account for application under this Section (i) shall not be invested at a yield
in excess of the yield on the Bonds, unless there shall have been delivered to
the Trustee a Favorable Opinion of nationally recognized bond counsel with
respect to such investment, or (ii) shall be invested in tax-exempt municipal
securities or other investments which are not deemed "investment property" for
purposes of Section 148 of the Code.
ARTICLE VI
Revenues and Application Thereof
--------------------------------
Section 6.01. REVENUES TO BE PAID OVER TO TRUSTEE. The Issuer has
caused the Revenues to be paid directly to the Trustee. If, notwithstanding
these arrangements, the Issuer receives any payments pursuant to the Financing
Agreement (other than payments to the Issuer in accordance with Sections 5.4 and
5.5 thereof), the Issuer shall immediately pay over the same to the Trustee to
be held as Revenues or otherwise applied pursuant to this Indenture. Any moneys
received by the Trustee with the written stipulation that they constitute
payments by the Company under Section 4.3 of the Financing Agreement
corresponding to payments of purchase price of Bonds shall be identified as such
and promptly paid to the Tender Agent for application pursuant to Article IV.
Except as provided in the immediately preceding sentence and as otherwise
specifically directed under the terms of this Indenture, all Revenues received
by the Trustee shall be deposited into the General Account of the Bond Fund.
Section 6.02. Bond Fund.
---------
(a) ESTABLISHMENT OF BOND FUND AND ACCOUNTS. There is hereby
established with the Trustee and the Tender Agent as described in this Section a
Bond Fund, within which there shall be established a General Account with the
Trustee, a General Debt Service Account with the Tender Agent and a Letter of
Credit Debt Service Account with the Tender Agent. All moneys held by the
Trustee in the General Account shall be made available to the Tender Agent for
deposit into the General Debt Service Account and applied in accordance with
this Indenture (i) to pay the principal or redemption price of Bonds as they
mature or become due, upon surrender thereof, and the interest on Bonds as it
becomes payable and (ii) to reimburse the Bank for drawings on the Letter of
Credit to make such payments. Any moneys paid to the Trustee by the Company for
the designated purpose of paying the portion representing premium over par of
the optional redemption price of Bonds after they have been converted to bear
interest at a fixed rate shall be maintained in a segregated subaccount in the
General Account until they constitute Available Moneys for such purpose, at
which time they shall be transferred to the Tender Agent for deposit in a
segregated subaccount in the General Debt Service Account until used for such
purpose or
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otherwise applied pursuant to this Indenture; provided that if, at the time such
moneys are paid to the Trustee by the Company, no Letter of Credit is held by
the Tender Agent, then they shall be transferred immediately to the Tender Agent
for deposit in the General Debt Service Account until used for such purpose or
otherwise applied pursuant to this Indenture. All moneys received by the Tender
Agent from drawings under the Letter of Credit to pay principal of, premium, if
any, on (to the extent the Letter of Credit permits application to such premium)
and interest on the Bonds shall be deposited in the Letter of Credit Debt
Service Account and applied to such purpose.
(b) APPLICATION OF BOND FUND. Except as otherwise provided in Section
11.11, moneys in the Bond Fund shall be applied as follows:
(1) Moneys in the Letter of Credit Debt Service
Account shall be applied to the payment when due of principal
of, premium, if any, on (but only to the extent the Letter of
Credit provides for such premium) and interest on the Bonds
(other than Custody Bonds or Company Bonds, for which such
moneys shall not be Available Moneys).
(2) Moneys in the General Debt Service Account
(including moneys transferred from the General Account) shall
be applied to the following in the order of priority
indicated:
(A) the reimbursement of the Bank when due for
moneys drawn under the Letter of Credit and deposited in
the Letter of Credit Debt Service Account for payment of
principal of, premium, if any, on and interest on the
Bonds;
(B) the payment of the portion representing
premium over par of the optional redemption price of Bonds
after conversion to a fixed rate of interest (and if the
Bonds are secured by a Fixed Rate Letter of Credit), to
the extent they have been designated and constitute
Available Moneys for such purpose;
(C) when no Letter of Credit is held by the
Tender Agent or when a Letter of Credit is held by the
Tender Agent but insufficient funds have been received
thereunder for application pursuant to Section 6.02(b)(l)
or when there are insufficient Available Moneys to pay the
portion representing premium over par of the optional
redemption price of Bonds after conversion to a fixed rate
of interest, the payment when due of
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principal of, premium, if any, on and interest on the
Bonds, other than Company Bonds or Custody Bonds;
(D) the payment when due of principal of,
premium, if any, on and interest on Custody Bonds;
(E) if the Tender Agent shall have received
written notice from the Bank that any amounts are due and
owing to the Bank under the Reimbursement Agreement, such
payments shall be made to the Bank for the account of the
Company; and
(F) unless all of the Outstanding Bonds are to
be paid (in which case the provisions of Section 6.02(d)
shall apply), the payment when due of principal of,
premium, if any, on and interest on the Company Bonds.
(c) DRAWINGS ON THE LETTER OF CREDIT. On the Business Day immediately
preceding each Interest Payment Date, each redemption date and the maturity date
of the Bonds, the Tender Agent shall present the requisite draft and certificate
for a drawing on the Letter of Credit, if any, then held by the Tender Agent so
as to receive the proceeds of such drawing to pay principal of, premium, if any,
on (but only to the extent the Letter of Credit provides for such premium) and
interest on the Bonds when due. In addition, the Tender Agent shall draw on the
Letter of Credit in accordance with and in order to satisfy the requirements of
Section 11.02. By 5:00 p.m. on each date it presents a draw on the Letter of
Credit, the Tender Agent shall give notice to the Company by telephone, promptly
confirmed in writing, of the amount so drawn.
(d) PAYMENT IN FULL. Whenever the amount in the Bond Fund available for
the payment of principal or redemption price and interest in accordance with
Section 6.02(b) is sufficient to redeem all of the Outstanding Bonds and to pay
interest accrued to the redemption date, the Issuer will, upon request of the
Company, cause the Trustee and the Tender Agent to redeem all such Bonds on the
redemption date specified by the Company pursuant to the Bonds and the
Indenture. Any amounts remaining in the Bond Fund after payment in full of the
principal or redemption price of and interest on the Bonds (or provision for
payment thereof) and the fees, charges and expenses of the Issuer, the Trustee,
the Tender Agent and the Remarketing Agent shall be paid to the person entitled
thereto in accordance with Section 17.01.
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(e) CREDITS. If at any time the Trustee or the Tender Agent has funds,
including funds received pursuant to the Letter of Credit, which under the
provisions of this Indenture are to be applied to pay the principal or
redemption price of or interest on the Bonds, the Company, to the extent that
such funds are to be so applied, shall be entitled to a reduction, equal to the
amount of such funds, of payments due from the Company under the Financing
Agreement; provided that, in the case of funds received pursuant to the Letter
of Credit, the Bank is reimbursed therefor by or on behalf of the Company.
Section 6.03. REVENUES TO BE HELD FOR ALL BONDHOLDERS; CERTAIN
EXCEPTIONS. Revenues and investments thereof in the Bond Fund shall, until
applied as provided in this Indenture, be held by the Trustee or the Tender
Agent for the benefit of the Owners of all Outstanding Bonds, except that any
portion of the Revenues representing principal or redemption price of, and
interest on, any Bonds previously matured or called for redemption in accordance
with Article IX, shall be held for the benefit of the Owners of such Bonds only.
Section 6.04. DAMAGE TO OR CONDEMNATION OF THE PROJECT FACILITIES. All
proceeds of insurance on or condemnation awards respecting the Project
Facilities in the event of damage to or destruction or condemnation of the
Project Facilities from any cause whatsoever received by the Trustee (a) if no
Event of Default hereunder has occurred and is continuing shall, at the election
of the Company, be paid to the Company for application to repair or restoration
of the portion of the Project Facilities which is the subject of such damage,
destruction or condemnation, or, if permitted by the terms of the Bonds, to
redeem the Bonds, and (b) if any Event of Default hereunder has occurred and is
continuing, may at the option of the Trustee, with the consent of the Bank, be
applied to the repair or restoration of the Project Facilities as aforesaid, or
to the payment of the principal or redemption price of, and interest on, the
Bonds then Outstanding (or to the reimbursement of the Bank for drawings on the
Letter of Credit for such payment).
Section 6.05. REBATE FUND. There is hereby established with the Trustee
a Rebate Fund which shall be held separate and apart from all other Funds
established under this Indenture. Promptly after each Bond Year (but not later
than 30 days after the redemption, payment at maturity or other retirement of
the last Bond) the Company shall instruct the Trustee in writing to transfer
from the Bond Fund and the Construction Fund to the Rebate Fund, or shall
otherwise pay to the Trustee for deposit into the Rebate Fund, such amounts as
shall be necessary to cause the aggregate amount transferred to or otherwise
deposited in the Rebate Fund to equal the Excess Investment Earnings as of the
end of such Bond Year; provided that no such transfers or deposits shall be
necessary if the
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proceeds of the Bonds are fully expended within six months of the date of issue.
Withdrawals from the Rebate Fund may be made on account of negative arbitrage in
other Funds, but not on account of negative arbitrage in the Rebate Fund. All
amounts in the Rebate Fund, including income earned from investment of the
Rebate Fund, shall be held by the Trustee free and clear of the lien of this
Indenture, and the Trustee shall pay said amounts over to the United States from
time to time as the Trustee shall be instructed in writing by the Company,
provided that the Trustee shall so pay over to the United States: (1) not less
frequently than once each five years after the Issue Date, an amount equal to
90% of the net aggregate amount transferred or deposited to or earned in the
Rebate Fund during such period (and not theretofore paid to the United States or
withdrawn on account of negative arbitrage in other Funds, and (2) not later
than 30 days after the redemption, payment at maturity or other retirement of
the last Bond, 100% of all moneys remaining in the Rebate Fund.
ARTICLE VII
Letter of Credit
----------------
Section 7.01. LETTER OF CREDIT. The Letter of Credit is an irrevocable
obligation of the Bank to pay to the Tender Agent, upon request made with
respect to the Bonds and in accordance with the terms thereof, up to (a) an
amount equal to the aggregate principal amount of the Outstanding Bonds
sufficient (i) to pay the principal of the Bonds when due at maturity or upon
redemption or acceleration or (ii) to pay the principal portion of the purchase
price of Bonds tendered for purchase pursuant to the Indenture to the extent
remarketing proceeds are not available for such purpose, plus (b) an amount
equal to 53 days' interest accrued on the Bonds at a maximum rate of 15% per
annum (i) to pay interest on the Bonds when due or (ii) to pay the accrued
interest portion of the purchase price of the Bonds tendered for purchase
pursuant to the Indenture to the extent remarketing proceeds are not available
for such purpose. In no event will the Tender Agent be entitled to draw on the
Letter of Credit with respect to Custody Bonds or Company Bonds. The Letter of
Credit provides that the Bank's obligation under the Letter of Credit will be
reduced to the extent of any drawing thereunder, subject to reinstatement as
described therein.
Section 7.02. DRAWINGS ON LETTER OF CREDIT.
(a) DEBT SERVICE. The Tender Agent shall draw moneys under the Letter
of Credit in accordance with the terms thereof and the provisions of Section
6.02 to the extent necessary to make timely payments of principal or redemption
price of and interest on the Bonds required to be made from the Bond Fund. The
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proceeds of all such drawings shall be deposited in the Letter of Credit Debt
Service Account.
(b) PURCHASE PRICE. In addition, the Tender Agent shall draw moneys
under the Letter of Credit in accordance with the terms thereof to the extent
necessary to make timely payments of purchase price required to be made pursuant
to, and in accordance with, Article IV. The proceeds of such drawings shall be
deposited in the Letter of Credit Purchase Account.
Section 7.03. REDUCTION. In each case that Bonds are redeemed or deemed
to have been paid pursuant to Section 17.01, the Tender Agent shall take such
action as may be permitted under the Letter of Credit to reduce the amount
available thereunder (a) prior to the Fixed Rate Conversion Date, to an amount
equal to the principal amount of the Bonds Outstanding, plus 53 days' interest
on such principal amount computed at 15% per annum based on a 365/366-day year,
as applicable, and (b) on or after the Fixed Rate Conversion Date, to an amount
equal to the principal amount of the Bonds Outstanding, plus 225 days' interest
thereon at the Fixed Rate based on a 360-day year.
Section 7.04. EXPIRATION. Unless all of the conditions of Section 7.06
or Section 7.07 have been met by the times specified therein prior to the
expiration of a Letter of Credit, the Tender Agent shall take all action
necessary to call the Bonds for mandatory tender pursuant to Section 4.03 or
extraordinary mandatory redemption pursuant to Section 9.06, as applicable, by
reason of the expiration of the Letter of Credit, on the Interest Payment Date
preceding such expiration date. Notice of the expiration of the Letter of Credit
shall be given by the Tender Agent to Moody's (if the Bonds are then rated by
Moody's) and S & P (if the Bonds are then rated by S & P).
Section 7.05. SUBSTITUTION BY BANK. Upon reduction of the amount
available under the Letter of Credit pursuant to the terms of the Letter of
Credit and Section 7.03 as a result of redemption of Bonds, the Bank shall have
the right, at its option, to require the Tender Agent to promptly surrender the
outstanding Letter of Credit to the Bank and to accept in substitution therefor
a substitute Letter of Credit in the same form, dated the date of such
substitution, for an amount equal to the amount available under the Letter of
Credit as so reduced, but otherwise having terms identical to the then
outstanding Letter of Credit.
Section 7.06. EXTENSION. The Company may arrange to extend the term of
the Letter of Credit, provided that the extended Letter of Credit shall have a
term of not less than one year (five years or such shorter period as may then
remain to the final maturity of the Bonds, in the case of a Fixed Rate Letter of
Credit) and shall expire on a date not less than 10 days after
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the last Interest Payment Date preceding such expiration date. The Company shall
give the Tender Agent and the Trustee notice of such extension, no later than 60
days preceding the Interest Payment Date immediately preceding the expiration
date of the Letter of Credit, and shall cause the Bank's written amendment
effecting such extension to be delivered to the Tender Agent no later than 35
days immediately preceding the Interest Payment Date next preceding the
expiration date of the existing Letter of Credit.
Section 7.07. REPLACEMENT.
(a) Upon satisfaction of the conditions set forth in Section 7.07(c)
and provided that no Event of Default has occurred and is continuing hereunder,
the Company may, at the close of business on any Interest Payment Date prior to
the expiration of a Letter of Credit, replace such Letter of Credit with a new
Letter of Credit meeting the requirements of Section 7.07(b).
(b) Each Letter of Credit must:
(1) Be an irrevocable, unconditional obligation of a
financial institution having capital and surplus of not less
than $50,000,000;
(2) Subject to the conditions thereof, entitle the
Tender Agent to draw upon or demand payment and receive in
immediately available funds (A) prior to the Fixed Rate
Conversion Date, up to an amount equal to the principal
amount of the Bonds Outstanding, plus up to 53 days' accrued
interest on such principal amount at a maximum rate of 15%
per annum, to pay such principal of or interest on the Bonds
or the purchase price of Bonds tendered for purchase, and (B)
on or after the Fixed Rate Conversion Date, up to an amount
equal to the principal amount of the Bonds Outstanding, plus
up to 225 days' accrued interest thereon at the Fixed Rate,
to pay such principal, premium and interest:
(3) Have a term of not less than one year (five
years or such shorter period as may then remain to the final
maturity of the Bonds, in the case of a Fixed Rate Letter of
Credit), which term expires not less than 10 days after the
last Interest Payment Date immediately preceding the
expiration date of the Letter of Credit; and
(4) Otherwise have terms substantially identical to
the Letter of Credit being replaced.
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(c) Prior to the replacement of any Letter of Credit, the following
conditions shall have been met:
(1) The Trustee and the Tender Agent shall have
received from the Company written notice of such replacement
and the date thereof no later than 45 days preceding such
replacement date; and
(2) The Trustee and the Tender Agent shall have
received the following no later than 35 days preceding such
replacement:
(i) Written confirmation from Moody's (if the
Bonds are then rated by Moody's) and S & P (if the Bonds
are then rated by S & P), that the ratings of the Bonds
held after replacement of the Letter of Credit will be no
lower than the ratings assigned by such agencies to the
Bonds prior to such replacement;
(ii) The form of an opinion of Counsel for the
issuer of the replacement Letter of Credit that such
Letter of Credit constitutes a legal, valid and binding
obligation of the issuer in accordance with its terms; and
(iii) A Favorable Opinion with respect to such
replacement.
(3) The Tender Agent shall have received the
original replacement Letter of Credit no later than 35 days
preceding such replacement.
(d) Upon receipt by the Tender Agent of the new Letter of Credit and
satisfaction of all other conditions set forth in Section 7.07(c)(2), the Tender
Agent shall immediately notify the issuer of the Letter of Credit being replaced
that such Letter of Credit is being replaced by a new Letter of Credit, and on
the effective date of the replacement Letter of Credit the replaced Letter of
Credit shall be promptly surrendered to the issuer thereof for cancellation.
Section 7.08. NOTICES OF SUBSTITUTION, EXTENSION OR REPLACEMENT.
(a) The Tender Agent shall, at least 15 Business Days prior to the
proposed replacement of a Letter of Credit with a new Letter of Credit
pursuant to Section 7.07, give notice thereof to the Bondholders by mailing
notice to the Owners of Bonds.
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(b) The Tender Agent shall, within 30 days after the extension of the
term of the Letter of Credit pursuant to Section 7.06 or the substitution of a
Letter of Credit pursuant to Section 7.05, give notice thereof by mailing
written notice to the Owners of the Bonds.
(c) The Tender Agent shall promptly give notice of any proposed
substitution, extension or replacement of a Letter of Credit to the Issuer, the
Trustee and the Remarketing Agent and to Moody's (if the Bonds are then rated by
Moody's) and S & P (if the Bonds are then rated by S & P).
Section 7.09. FIXED RATE LETTER OF CREDIT. Not later than 35 days prior
to the effective date of conversion of the interest on the Bonds to a Fixed
Rate, the Company may, at its option, provide for the delivery to the Tender
Agent of a Fixed Rate Letter of Credit which shall be effective on the Fixed
Rate Conversion Date and may terminate not less than five years (or such shorter
period as may then remain to the final maturity of the Bonds) and 10 days
thereafter. The Fixed Rate Letter of Credit shall be an irrevocable letter of
credit of a Bank to pay the Tender Agent, upon request and in accordance with
the terms thereof, up to (a) an amount sufficient to pay the principal of the
Outstanding Bonds when due whether at stated maturity or upon redemption or
acceleration, plus (b) an amount equal to 225 days' interest on the Outstanding
Bonds (i) until a Fixed Rate has been determined at an assumed rate of interest
estimated by the Remarketing Agent to be at least equal to the Minimum Fixed
Rate to be determined pursuant to Section 3.03(e), and (ii) from and after the
determination of a Fixed Rate, at the Fixed Rate to pay interest accrued on the
Bonds at the Fixed Rate on or prior to the expiration date of such Fixed Rate
Letter of Credit. Upon the determination of a Fixed Rate, the Bank issuing the
Fixed Rate Letter of Credit shall have the right pursuant to Section 7.11
hereof, to substitute for the outstanding Fixed Rate letter of Credit a
substitute Fixed Rate Letter of Credit conforming to the requirements of this
Section. On or prior to the date of the delivery of the Fixed Rate Letter of
Credit to the Tender Agent, the Company shall furnish to the Trustee and the
Tender Agent a Favorable Opinion stating that the delivery of such Fixed Rate
Letter of Credit is authorized under this Indenture and complies with the terms
hereof. Nothing in this Section shall limit the Company's rights to provide any
other credit enhancement device or other security for the payment of the Bonds.
Section 7.10. OTHER CREDIT ENHANCEMENT; NO CREDIT ENHANCEMENT. After a
mandatory purchase of Bonds in anticipation of expiration of a Letter of Credit,
nothing in this Indenture shall limit the Company's right to provide other
credit enhancement (such as a letter of credit not meeting the requirements of
Section 7.07, bond insurance or a standby bond purchase agreement) or no credit
enhancement as security for the
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Bonds; provided, however, that any such credit enhancement shall have
administrative provisions reasonably satisfactory to the Trustee.
Section 7.11. SUBSTITUTION FOR INITIAL FIXED RATE LETTER OF CREDIT.
Upon the determination of a Fixed Rate by the Remarketing Agent pursuant to
Section 3.03(e) hereof, the Bank issuing the Fixed Rate Letter of Credit in an
amount sufficient to pay principal and 225 days' interest on the Outstanding
Bonds at an assumed rate of interest described in Section 7.09(b)(i) hereof
shall have the right, at its option, to require the Tender Agent to promptly
surrender the outstanding Fixed Rate Letter of Credit to the Bank and to accept
in substitution therefor a substitute Fixed Rate Letter of Credit in the same
form, dated the date of such substitution, for an amount sufficient to pay
principal and 225 days' interest on the Outstanding Bonds at the Fixed Rate.
ARTICLE VIII
INVESTMENT OR DEPOSIT OF FUNDS
Section 8.01. DEPOSITS AND SECURITY THEREFOR. All moneys received by
the Trustee or the Tender Agent under this Indenture shall be deposited with the
Trustee, until or unless invested or deposited as provided in Section 8.02.
Section 8.02. INVESTMENT OR DEPOSIT OF FUNDS.
(a) CONSTRUCTION FUND. The Trustee shall, at the request and direction
(which may be telephonic, confirmed in writing) of the Company, invest moneys
held in the Construction Fund in obligations of the type described below, or
deposit such moneys in time accounts (including accounts evidenced by time
certificates of deposit) maintained with the commercial department of the
Trustee, secured as provided in Section 8.01 and under the terms permitted by
applicable law; provided that all investments shall mature, or be subject to
redemption by the holder at not less than the principal amount thereof or the
cost of acquisition, whichever is lower, and all deposits in time accounts shall
be subject to withdrawal, not later than the date when the amounts will
foreseeably be needed for purposes of this Indenture. The investments of the
Construction Fund permitted under this Section 8.02 are (i) obligations issued
or guaranteed by the United States of America; (ii) obligations issued or
guaranteed by any person controlled or supervised by and acting as an
instrumentality of the United States of America pursuant to authority granted by
the Congress of the United States; (iii)
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commercial or finance company paper receiving the highest rating of any
nationally recognized rating service; (iv) certificates of deposit of, and
bankers' acceptances drawn on and accepted by, any bank organized and doing
business under the laws of the United States of America or any state of the
United States of America having a rating of its unsecured, senior debt
obligations within one of the three highest rating categories by any nationally
recognized rating service; and (v) obligations issued or guaranteed by any state
of the United States or the District of Columbia, any political subdivision or
instrumentality of any state, or by any political subdivision of any state or
political subdivision rated within one of the three highest rating categories by
any nationally recognized rating service (unless otherwise consented to by the
Bank). The Trustee may purchase shares of an investment company, mutual fund,
investment fund or similar fund whose sole assets are of a type described in the
immediately preceding sentence.
(b) BOND FUND AND REBATE FUND. At the direction of the Company (which
may be telephonic, confirmed in writing), the Trustee shall invest moneys held
by the Trustee in the Bond Fund and the Rebate Fund in (i) obligations issued or
guaranteed by the United States of America and (ii) obligations issued or
guaranteed by any person controlled or supervised by and acting as an
instrumentality of the United States of America, in either case maturing or
subject to redemption by the holder at not less than the principal amount
thereof or the cost of acquisition, whichever is lower, on or before the date or
dates when the payments for which such moneys are held are to become due. Moneys
held by the Tender Agent in the Bond Fund or any other account shall not be
invested and the Tender Agent shall not be liable for the payment of interest
thereon.
(c) INCOME. The interest and income received upon such investments of
the Construction Fund, the Bond Fund or the Rebate Fund and any profit or loss
resulting from the sale of any such investments shall be added or charged to the
respective Fund. In the case of the Bond Fund, such interest or income received
or paid shall be held in the Bond Fund with a corresponding credit against the
Company's obligation to make lease payments under the Financing Agreement.
(d) INVESTMENT AT DISCRETION OF TRUSTEE. If the Company shall not give
directions as to investment of money held by the Trustee in the Construction
Fund or the Bond Fund, or if an Event of Default has occurred and is continuing
hereunder, the Trustee shall, at its option, (i) maintain the investments
pursuant to the most recent direction of the Company or (ii) make such
investments in obligations of the type described in Section 8.02(a)(v) as
permitted under applicable law as it deems advisable; provided that in no event
shall it invest in securities issued by or obligations of, or guaranteed by, the
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Issuer, the Company or any affiliate or agent of either of the foregoing.
ARTICLE IX
Redemption of Bonds
-------------------
Section 9.01. BONDS SUBJECT TO REDEMPTION; SELECTION OF BONDS TO BE
CALLED FOR REDEMPTION. The Bonds are subject to redemption prior to maturity as
provided in the form of Bonds hereinbefore recited. Except as otherwise provided
herein or in the Bonds, if less than all the Bonds are to be redeemed, the
particular Bonds to be called for redemption shall be selected by lot or by such
other method as the Tender Agent deems fair and appropriate; provided that any
Custody Bonds shall be redeemed first to the extent redemption moneys are
available therefor. On or prior to the Fixed Rate Conversion Date, the Tender
Agent shall treat any Bond of a denomination greater than $100,000 as
representing that number of separate Bonds each of the denomination of $100,000
as can be obtained by dividing the actual principal amount of such Bond by
$100,000. After the Fixed Rate Conversion Date, the Tender Agent shall treat any
Bond of a denomination greater than $5,000 as representing that number of
separate Bonds each of the denomination of $5,000 as can be obtained by dividing
the actual principal amount of such Bond by $5,000. The Company on behalf of the
Issuer shall direct the Tender Agent to call Bonds for optional redemption when
and only when and to the extent that (a) the Company has itself notified the
Trustee and the Tender Agent of a corresponding prepayment made or proposed to
be made under the Financing Agreement, or (b) there are otherwise sufficient
moneys in the Bond Fund to redeem the Bonds pursuant to Article XVII. So long as
a Letter of Credit is held by the Tender Agent, the Tender Agent shall only call
Bonds for optional redemption if (i) it holds moneys in the Bond Fund available
for payment of the Bonds to be redeemed pursuant to Section 6.02(b) or (ii) the
Bank has consented to such optional redemption. Notice of any optional
redemption shall specify the principal amount of Bonds to be redeemed and the
redemption date.
Section 9.02. NOTICE OF REDEMPTION.
(a) When required to redeem Bonds under any provision of this
Indenture, or when directed to do so by the Company on behalf of the Issuer, the
Tender Agent shall cause notice of the redemption to be given not more than 60
days and not less than 30 days prior to the redemption date by mailing copies of
such notice of redemption by first class mail, postage prepaid, to all Owners of
Bonds to be redeemed at their registered addresses and also to S & P and
Moody's, if they rated the Bonds, and to THE BOND BUYER, or their respective
successors, if any, but failure to mail any such notice or defect in the mailing
thereof in
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respect of any Bond shall not affect the validity of the redemption
of any other Bond with respect to which notice was properly given. Each such
notice shall be dated and shall be given in the name of the Issuer and shall
state the following information:
(i) the identification numbers, as established under the
Indenture, and the CUSIP numbers, if any, of the Bonds being redeemed,
provided that any such notice shall state that no representation is
made as to the correctness of CUSIP numbers either as printed on such
Bonds or as contained in the notice of redemption and that reliance may
be placed only on the identification numbers contained in the notice or
printed on such Bonds;
(ii) any other descriptive information needed to identify
accurately the Bonds being redeemed, including, but not limited to, the
original issuance date and maturity date of, and interest rate on, such
Bonds;
(iii) in the case of partial redemption of any Bonds, the
respective principal amounts thereof to be redeemed;
(iv) the redemption date;
(v) the redemption price;
(vi) that on the redemption date the redemption price will
become due and payable upon each such Bond or portion thereof called
for redemption, and that interest thereon shall cease to accrue from
and after said date; and
(vii) the place where such Bonds are to be surrendered for
payment of the redemption price, which place of payment shall be the
principal corporate trust office of the Tender Agent.
In addition, the Tender Agent shall at all reasonable times make available to
any interested party complete information as to Bonds which have been redeemed
or called for redemption.
(b) In addition to the foregoing notice, further notice of any redemption of
Bonds hereunder shall be given by the Tender Agent in accordance with
then-current guidelines of the Securities and Exchange Commission and to such
other addresses as the Company may designate. Such further notice shall contain
the
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information required in clause (a) above. Failure to give all or any portion of
such further notice shall not in any manner defeat the effectiveness of a call
for redemption if notice thereof is given to the Bondholders as prescribed in
clause (a) above.
(c) If at the time of mailing of notice of any optional redemption the
Issuer shall not have deposited moneys in the Bond Fund available for payment
pursuant to Section 6.02(b) sufficient to redeem all the Bonds called for
redemption, such notice shall state that it is conditional in that it is subject
to the deposit of the redemption moneys in the Bond Fund available for payment
pursuant to Section 6.02(b) not later than the redemption date, and such notice
shall be of no effect unless such moneys are so deposited.
Section 9.03. PAYMENT OF REDEMPTION PRICE. If (a) unconditional notice
of redemption has been duly given or duly waived by the Owners of all Bonds
called for redemption or (b) conditional notice of redemption has been so given
or waived and the redemption moneys have been duly deposited with the Tender
Agent, then in either such case the Bonds called for redemption shall be payable
on the redemption date at the applicable redemption price. Payment of the
redemption price together with accrued interest shall be made by the Tender
Agent, out of Available Moneys for so long as the Letter of Credit is held by
the Tender Agent and otherwise out of Revenues or other funds deposited for such
purpose, to or upon the order of the owners of the Bonds called for redemption
upon surrender of such Bonds. Upon the payment of the redemption price of Bonds
being redeemed, each check or other transfer of funds issued for such purpose
shall bear the CUSIP number identifying, by issue and maturity, the Bonds being
redeemed with the proceeds of such check or other transfer. So long as a Letter
of Credit is held by the Tender Agent, upon redemption of less than all of the
Bonds pursuant to this Indenture, the Tender Agent shall furnish to the Bank a
notice in the form required by the terms of the Letter of Credit for reducing
the amount available thereunder with respect to the Bonds which have been
redeemed as required by Section 7.03, and, upon a redemption of all of the Bonds
pursuant to this Indenture, shall surrender the Letter of Credit to the Bank for
cancellation.
Section 9.04. BONDS REDEEMED IN PART. Any Bond which is to be redeemed
only in part shall be surrendered at a place stated for the surrender of Bonds
called for redemption in the notice provided for in Section 9.02 (with due
endorsement by, or a written instrument of transfer in form satisfactory to the
Tender Agent duly executed by, the Owner thereof or his attorney duly authorized
in writing and with guaranty of signature satisfactory to the Tender Agent) and
the Issuer shall execute and the Tender Agent shall authenticate and deliver to
the Owner of such Bond without service charge, a new Bond or Bonds, of any
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authorized denomination as requested by such Owner in aggregate principal amount
equal to and in exchange for the unredeemed portion of the principal of the Bond
so surrendered.
Section 9.05. SPECIAL MANDATORY REDEMPTION. The Bonds shall be redeemed
if a Determination of Taxability (such term being used herein as defined in the
form of Bond recited in this Indenture) occurs, the date and price for such
redemption to be determined in accordance with the provisions therefor contained
in the form of Bond recited in this Indenture. The Company shall be deemed to
have been given the "opportunity to contest" for purposes of a special mandatory
redemption of the Bonds if it has been given (i) written notice by any owner or
former owner of a Bond or the Trustee of the receipt by any such owner from the
Internal Revenue Service of a statutory notice of deficiency or similar notice
(a copy of which shall be delivered to the Company with such written notice)
which claims in effect that interest on such Bond is includible in such owner's
gross income for federal income tax purposes and (2) 120 days after receipt of
such notice to notify such owner in writing of the Company's election to
contest, which, if exercised, shall be accompanied by (i) an opinion of
nationally recognized bond counsel to the effect that there is a reasonable
basis for such contest and (ii) a written agreement of the Company to pay on
demand all costs and expenses (including reasonable attorneys' fees) which such
owner may incur in such contest. If such election is not so made within 120 days
as aforesaid, the Company's right to contest shall terminate. If the Trustee
receives written notice from any source that a Determination of Taxability has
occurred or that circumstances exist which might reasonably be expected to
result in a Determination of Taxability, the Trustee shall forthwith consult
with the Issuer and the Company and thereafter (in the case of an occurrence of
a Determination of Taxability) proceed to enforce payments under the Financing
Agreement in respect of the necessary redemption price and to redeem the Bonds
as soon as practicable after the date the Trustee first receives written notice
of the Determination of Taxability. In making any determination in respect of
the occurrence of a Determination of Taxability or a redemption relating
thereto, the Trustee may rely on an opinion of Counsel.
Section 9.06. EXTRAORDINARY MANDATORY REDEMPTION. If the rate of
interest on the Bonds has been converted to a Fixed Rate and in connection with
such conversion a Fixed Rate Letter of Credit has been delivered to the Tender
Agent, then the Bonds shall be redeemed, at a price equal to the principal
amount thereof plus accrued interest to the redemption date, on the Interest
Payment Date immediately preceding the expiration date of the Fixed Rate Letter
of Credit then in effect, if such Letter of Credit shall not have been extended
or replaced in accordance with Section 7.06 or Section 7.07(b) and (c).
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Section 9.07. [Intentionally Omitted.]
Section 9.08. OPTIONAL REDEMPTION AFTER FIXED RATE CONVERSION DATE.
After the rate of interest on the Bonds has been converted to a Fixed Rate, the
Bonds shall not be subject to optional redemption upon each Interest Payment
Date, but shall be subject to redemption prior to maturity at the option of the
Issuer, upon the direction of the Company, in whole or in part, on and after the
dates and at the redemption prices set forth below:
<TABLE>
<CAPTION>
Redemption Price as
Commencement of percentage of principal
Redemption Period (plus accrued interest)
----------------- -----------------------
<S> <C>
Tenth anniversary of 103%
Fixed Rate Conversion Date
Eleventh anniversary of 102%
Fixed Rate Conversion Date
Twelfth anniversary of 101%
Fixed Rate Conversion Date
Thirteenth anniversary of 100%
Fixed Rate Conversion Date
</TABLE>
ARTICLE X
Covenants of the Issuer
-----------------------
Section 10.01. PAYMENT OF PRINCIPAL OF AND INTEREST ON BONDS. The
Issuer shall promptly pay or cause to be paid the principal or redemption price
of, and the interest on, every Bond issued hereunder according to the terms
thereof, but shall be required to make such payment or cause such payment to be
made only out of Revenues.
Section 10.02. EXISTENCE; COMPLIANCE WITH LAWS. The Issuer shall
maintain its existence; shall use its best efforts to maintain and renew all its
rights, powers, privileges and franchises; and shall comply with all valid and
applicable laws, acts, rules, regulations, permits, orders, requirements and
directions of any legislative, executive, administrative or judicial body
relating to the Issuer s participation in the Project or the issuance of the
Bonds.
Section 10.03. ENFORCEMENT OF FINANCING AGREEMENT; PROHIBITION AGAINST
AMENDMENTS; NOTICE OF DEFAULT. The Issuer shall require the Company to perform
its obligations under the Financing Agreement. So long as no Event of Default
hereunder
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shall have occurred and be continuing, the Issuer may exercise all its rights
under the Financing Agreement, including the right to amend the same pursuant to
Section 16.03. The Issuer shall give prompt notice to the Trustee of any default
known to the Issuer under the Financing Agreement.
Section 10.04. FURTHER ASSURANCES. Except to the extent otherwise
provided in this Indenture, the Issuer shall not enter into any contract or take
any action by which the rights of the Trustee or the Bondholders may be impaired
and shall, from time to time, execute and deliver such further instruments and
take such further action as may be required to carry out the purposes of this
Indenture.
Section 10.05. BONDS NOT TO BECOME ARBITRAGE BONDS. The Issuer
covenants to the holders of the Bonds that, notwithstanding any other provision
of this Indenture or any other instrument, it will neither make nor permit to be
made any investment or other use of the proceeds of the Bonds which, if such
investment or use had been reasonably expected on the date of issue of the
Bonds, would have caused the Bonds to be arbitrage bonds under Section 148 of
the Code and the rules and regulations thereunder, and it further covenants that
it will comply with the requirements of such Section, rules and regulations. The
foregoing covenants shall extend throughout the term of the Bonds, to all funds
created under this Indenture and all moneys on deposit to the credit of any such
fund, and to any other amounts which are Bond proceeds for purposes of Section
148 of the Code and the rules and regulations thereunder.
Section 10.06. ARBITRAGE REBATE CERTIFICATE. The Issuer shall cause the
Company, within 30 days after the end of such Bond Year, to determine the Excess
Investment Earnings and deliver to the Trustee (i) a certificate stating the
Excess Investment Earnings for the preceding Bond Year and (ii) moneys for
deposit into the Rebate Fund (or instructions for the Trustee to transfer to the
Rebate Fund moneys representing available arbitrage earnings, if any, in the
Construction Fund or the Bond fund) in an aggregate amount equal to the Excess
Investment Earnings, if any. The Issuer shall cause the Company to instruct the
Trustee to withdraw from the Rebate Fund and pay over to the United States (1)
not less frequently than once each five years after the date of original
delivery and payment for the Bonds, an amount equal to 90% of the net aggregate
amount of Excess Investment Earnings deposited into the Rebate Fund during such
period, plus all investment earnings on amounts on deposit in the Rebate Fund
during such period (and not theretofore paid to the United States), and (2) not
later than 30 days after the redemption, payment at maturity or other retirement
of the last Bond, 100% of all moneys in the Rebate Fund.
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Section 10.07. FINANCING STATEMENTS. The Issuer shall cause this
Indenture or financing statements relating hereto to be filed, in such manner
and at such places as may be required by law to protect the security of the
holders of the Bonds and the right, title and interest of the Trustee in and to
the Trust Estate or any part thereof. From time to time, the Trustee may, but
shall not be required to, obtain an opinion of Counsel setting forth what, if
any, actions by the Issuer or Trustee should be taken to preserve such security.
The Issuer shall execute or cause to be executed any and all further instruments
as may be required by law or as shall reasonably be requested by the Trustee for
such protection of the interests of the Bondholders, and shall furnish
satisfactory evidence to the Trustee of filing and refiling of such instruments
and of every additional instrument which shall be necessary to preserve the lien
of the Indenture upon the Trust Estate or any part thereof until the principal
of and interest on the Bonds issued hereunder shall have been paid. The Trustee
shall execute or join in the execution of any such further or additional
instrument and file or join in the filing thereof at such time or times and in
such place or places as it may be advised by an opinion of Counsel will preserve
the lien of this Indenture upon the trust estate or any part thereof until the
aforesaid principal and interest shall have been paid.
ARTICLE XI
Events of Default and Remedies
------------------------------
Section 11.01. EVENTS OF DEFAULT. Each of the following shall be an
"Event of Default" hereunder:
A. If payment of the principal or redemption price of any Bond is not
made when it becomes due and payable at maturity or upon call for redemption; or
B. If payment of any interest on any Bond is not made within three (3)
Business Days of the date when it becomes due and payable; or
C. If payment of the purchase price of any Bond tendered pursuant to
Article IV is not made within three (3) Business Days of the date when it
becomes due and payable; or
D. If the Issuer shall fail or refuse to comply with the provisions of
the Act relating to the Bonds or the Project or with any of its covenants
hereunder and such failure or refusal shall continue for a period of 30 days
after notice thereof has been given to the Issuer and the Company by the
Trustee, unless such failure is of such nature that it can be corrected but not
within 30 days, and provided that the Issuer shall have commenced to cure such
default within such 30 day period and shall complete
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such cure as quickly as reasonably possible with the exercise of due diligence.
E. If an Event of Default as defined in the Financing Agreement occurs;
or
F. If the Trustee and the Tender Agent receive notice from the Bank (i)
that an Event of Default as defined in the Reimbursement Agreement has occurred
and is continuing and (ii) requesting the Trustee to declare the principal of
the Outstanding Bonds immediately due and payable; or
G. If the Trustee and the Tender Agent receive notice from the Bank
prior to the 10th day following a drawing under the Letter of Credit for payment
of interest on Bonds which remain Outstanding after the application of the
proceeds of such drawing, that the Letter of Credit will not be reinstated with
respect to such interest.
Section 11.02. ACCELERATION AND ANNULMENT THEREOF.
(a) ACCELERATION AND DRAW ON LETTER OF CREDIT. If any Event of Default
occurs, the Trustee may, and upon request of the Owners of a majority (100% in
the case of an Event of Default under Section 11.01(D)) in principal amount of
all Bonds then Outstanding or upon the occurrence of an Event of Default
described in Section 11.01(F) or 11.01(G) the Trustee shall, by notice in
writing to the Issuer, the Company, the Tender Agent and the Bank, declare the
principal of all Bonds then Outstanding to be immediately due and payable;
provided that the Trustee shall not declare the principal of Bonds or the
payments under the Financing Agreement immediately due and payable as a result
of an Event of Default described in Section 11.01(E) without the prior written
consent of the Bank. Upon such declaration the said principal, together with
interest accrued thereon, shall become due and payable immediately at the place
of payment provided therein, anything in the Indenture or in the Bonds to the
contrary notwithstanding. Upon any declaration of acceleration hereunder, the
Trustee shall immediately exercise such rights as it may have under the
Financing Agreement to declare all payments thereunder to be due and payable
immediately, and direct the Tender Agent to draw immediately upon the Letter of
Credit to the extent permitted by the terms thereof (such drawing to include
amounts in respect of interest accruing on the Bonds through the date payment of
such drawing by the Bank is due). Upon receipt by the Tender Agent of payment of
the full amount drawn on the Letter of Credit and provided sufficient moneys are
available in the Bond Fund to pay pursuant to Section 6.02(b) all sums due on
the Bonds, (i) interest on the Bonds shall cease to accrue as provided in
Section 17.03 and (ii) the Bank shall be subrogated to the right, title and
interest of the Trustee and the Tender Agent and the Bondholders in and to the
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Financing Agreement, all funds held under this Indenture (except any funds held
in the Bond Fund which are identified for the payment of the Bonds and any funds
held in the Rebate Fund) and any other security held for the payment of the
Bonds, all of which, upon payment of any fees and expenses due and payable to
the Trustee, the Tender Agent and the Remarketing Agent pursuant to the
Financing Agreement or this Indenture, shall be assigned by the Trustee to the
Bank for the account of the Company.
(b) ANNULMENT. If, after the principal of the Bonds has been so
declared to be due and payable, all arrears of principal of and interest on the
Bonds Outstanding are paid by the Issuer, and the Issuer also performs all other
things in respect of which it may have been in default hereunder and pays the
reasonable charges of the Trustee, the Tender Agent, the Bondholders and any
trustee appointed under the Act, including reasonable attorneys' fees, then, and
in every such case, the Owners of a majority in principal amount of the Bonds
then Outstanding, by notice to the Issuer and to the Trustee, may annul such
declaration and its consequences, and such annulment shall be binding upon the
Trustee and the Tender Agent and upon all Owners of the Bonds; provided that the
Trustee shall not annul any declaration resulting from (a) any Event of Default
specified in Section 11.01(F) or 11.01(G) without the prior written consent of
the Bank or (b) any Event of Default which has resulted in a drawing under the
Letter of Credit unless the Tender Agent has received written confirmation from
the Bank that the amount available under the Letter of Credit has been
reinstated (i) prior to the Fixed Rate Conversion Date, to an amount equal to
the principal of the Bonds Outstanding, plus 53 days' interest thereon at 15%
per annum, and (ii) after the Fixed Rate Conversion Date, to an amount equal to
the principal of the Bonds Outstanding, plus 225 days' interest thereon at the
Fixed Rate. No such annulment shall extend to or affect any subsequent default
or impair any right or remedy consequent thereon. The Trustee shall forward a
copy of any notice from Bondholders received by it pursuant to this paragraph to
the Company.
Section 11.03. OTHER REMEDIES. If any Event of Default occurs and is
continuing, the Trustee, before or after declaring the principal of the Bonds
immediately due and payable, may enforce each and every right granted to it
under the Financing Agreement and any supplements or amendments thereto and may
apply any Revenues or moneys in the Construction Fund held by the Trustee to the
payment of the principal of or interest on the Bonds. In exercising such rights
and the rights given the Trustee under this Article, the Trustee shall take such
action as, in the judgment of the Trustee applying the standards described in
Section 12.06, would best serve the interests of the Bondholders.
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Section 11.04. LEGAL PROCEEDINGS BY TRUSTEE. If any Event of Default
has occurred and is continuing, the Trustee in its discretion may, and upon the
written request of Owners of a majority in principal amount of all Bonds then
Outstanding and receipt of indemnity to its satisfaction shall, in its own name:
(a) By mandamus, or other suit, action or proceeding at law or in
equity, enforce all rights of the Bondholders, including the right to require
the Issuer to enforce any rights under the Financing Agreement and to require
the Issuer to carry out any other provisions of this Indenture for the benefit
of the Bondholders and to perform its duties under the Act;
(b) Bring suit upon the Bonds;
(c) By action or suit in equity require the Issuer to account as if it
were the trustee of an express trust for the Bondholders; and
(d) By action or suit in equity enjoin any acts or things which may be
unlawful or in violation of the rights of the Bondholders.
If an Event of Default under Section 11.OlE occurs and is continuing, the
Trustee in its discretion may, and (i) upon the written request of Owners of a
majority in principal amount of all Bonds Outstanding, receipt of indemnity to
its satisfaction and (if the Letter of Credit is held by the Tender Agent on
such date) the consent of the Bank, or (ii) (if the Letter of Credit is held by
the Tender Agent on such date) at the direction of the Bank, shall, enforce each
and every right granted to it as assignee of the Financing Agreement.
Section 11.05. DISCONTINUANCE OF PROCEEDINGS BY TRUSTEE. If any
proceeding commenced by the Trustee on account of any default is discontinued or
is determined adversely to the Trustee, then the Issuer, the Trustee, the Tender
Agent, the Bondholders, the Company and the Bank shall be restored to their
former positions and rights hereunder as though no such proceedings had been
commenced.
Section 11.06. BONDHOLDERS MAY DIRECT PROCEEDINGS. The Owners of a
Majority in principal amount of the Bonds Outstanding hereunder shall have the
right, after furnishing indemnity satisfactory to the Trustee, to direct the
method and place of conducting all remedial proceedings by the Trustee
hereunder, provided that such direction shall not be in conflict with any rule
of law or with this Indenture or unduly prejudice the rights of minority
Bondholders.
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Section 11.07. LIMITATIONS ON ACTIONS BY BONDHOLDERS. No Bondholder
shall have any right to pursue any remedy hereunder or under the Financing
Agreement unless:
(a) the Trustee shall have been given written notice of an Event of
Default,
(b) Owners of at least a Majority in principal amount of all Bonds then
Outstanding shall have requested the Trustee, in writing, to exercise the powers
hereinabove granted or to pursue such remedy in its or their name or names,
(c) the Trustee shall have been offered indemnity satisfactory to it
against costs, expenses and liabilities, and
(d) the Trustee shall have failed to comply with such request within a
reasonable time.
Notwithstanding the foregoing provisions of this Section or any other provision
of this Indenture, the obligation of the Issuer shall be absolute and
unconditional to pay hereunder, but solely from the Revenues and other funds
pledged under this Indenture, the principal or redemption price of, and interest
on, the Bonds to the respective Owners thereof on the respective due dates
thereof, and nothing herein shall affect or impair the right of action, which is
absolute and unconditional, of such owners to enforce such payment.
Section 11.08. TRUSTEE MAY ENFORCE RIGHTS WITHOUT POSSESSION OF BONDS.
All rights under the Indenture and the Bonds may be enforced by the Trustee
without the possession of any Bonds or the production thereof at the trial or
other proceedings relative thereto, and any proceeding instituted by the Trustee
shall be brought in its name for the ratable benefit of the holders of the
Bonds.
Section 11.09. REMEDIES NOT EXCLUSIVE. No remedy herein conferred is
intended to be exclusive of any other remedy or remedies, and each remedy is in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute, including the right of the Bondholders to have a
receiver appointed pursuant to the lien created by Section 103.250 of the
Kentucky Revised Statutes.
Section 11. 10. DELAYS AND OMISSIONS NOT TO IMPAIR RIGHTS. No delays or
omission in respect of exercising any right or power accruing upon any default
shall impair such right or power or be a waiver of such default, and every
remedy given by this Article may be exercised from time to time and as often as
may be deemed expedient.
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Section 11.11. APPLICATION OF MONEYS IN EVENT OF DEFAULT. Any moneys
received by the Trustee under this Article shall be applied in the following
order (provided that any moneys received by the Trustee from a drawing on the
Letter of Credit shall be applied to the extent permitted by the terms thereof
only as provided in clause (c) below with respect to Bonds other than Custody
Bonds or Company Bonds):
(a) To the payment of any amount required pursuant to Section 6.05;
(b) To the payment of the costs of the Trustee and the Tender Agent,
including counsel fees, any disbursements of the Trustee and the Tender Agent
with interest thereon and their reasonable compensation;
(c) To the payment of principal or redemption price (as the case may
be) and interest then owing on the Bonds, and in case such moneys shall be
insufficient to pay the same in full, then to the payment of principal or
redemption price and interest ratably, without preference or priority of one
over another or of any installment of interest over any other installment of
interest; and
(d) To the payment of costs and expenses of the Issuer, including
counsel fees, incurred in connection with the Event of Default.
The surplus, if any, remaining after the application of the moneys as set forth
above shall, to the extent of any unreimbursed drawing under the Letter of
Credit, or other obligations owing by the Company to the Bank under the
Reimbursement Agreement, be paid to the Bank. Any remaining moneys shall be paid
to the Company or the person lawfully entitled to receive the same as a court of
competent jurisdiction may direct.
Section 11.12. TRUSTEE'S RIGHT TO APPOINT RECEIVER; COMPLIANCE WITH
ACT. As provided by the Act, the Trustee shall be entitled as of right to the
appointment of a receiver; and the Trustee, the Bondholders and any receiver so
appointed shall have such rights and powers and be subject to such limitations
and restrictions as are contained in the Act.
Section 11.13. TRUSTEE AND BONDHOLDERS ENTITLED TO ALL REMEDIES UNDER
ACT. It is the purpose of this Article to provide such remedies to the Trustee
and the Bondholders as may be lawfully granted under the provisions of the Act
(subject to the rights of the Bank), but should any remedy herein granted be
held unlawful, the Trustee and the Bondholders shall nevertheless be entitled to
every remedy provided by the Act (subject to the rights of the Bank). It is
further intended that, insofar as
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lawfully possible, the provisions of this Article shall apply to and be binding
upon any trustee or receiver appointed under the Act.
Section 11.14. TRUSTEE'S OBLIGATION UPON PAYMENT OF ALL AMOUNTS DUE
BONDHOLDERS. Once the principal or redemption price (as the case may be) of, and
interest on, all Bonds issued hereunder has been paid, or provision has been
made for payment of the same and any tender purchase price payable pursuant to
Article IV, the Trustee's sole obligation hereunder shall be to promptly assign
and turn over to the Bank, as subrogee or otherwise, all of the Trustee's right,
title and interest under this Indenture, all balances held hereunder not
required for the payment of the Bonds (except the Rebate Fund) and the Trustee's
right, title and interest in, to and under the Financing Agreement.
ARTICLE XII
The Trustee
-----------
Section 12.01. ACCEPTANCE OF TRUST. The Trustee accepts and agrees to
execute the trusts hereby created, but only upon the additional terms set forth
in this Article, to all of which the parties hereto and the Bondholders agree.
No duties or obligations other than as set forth in this Article shall be
implied to the Trustee, and the right of the Trustee to perform any
discretionary act shall not be construed as a duty.
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 or in the exercise of its rights or powers, if it shall
determine in its sole discretion that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. The
Trustee shall have no obligation to the Owners of Bonds for the payment of
interest or premium, if any, on or principal or purchase price of the Bonds, but
rather, the Trustee's sole obligations are to administer, for the benefit of the
Owners of the Bonds and the Company, the various accounts established under the
Indenture and to pay over to the Owners moneys deposited therein.
Section 12.02. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals,
statements and representations in the Indenture or in the Bonds, save only the
Tender Agent's Certificate of Authentication upon the Bonds, have been made by
the Issuer and not by the Trustee; and the Trustee shall be under no
responsibility for the correctness thereof. The Trustee shall not be responsible
for the validity, priority, recording or filing of this Indenture, the Financing
Agreement or any financing statements, amendments thereto or continuation
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statements, or for insuring the Project Facilities or collecting any insurance
moneys, or for the validity of the execution by the Issuer of this Indenture or
of any supplements thereto or instruments of further assurance, or for the
sufficiency of the security for the Bonds issued hereunder or intended to be
secured hereby, or for the value or title of the Project Facilities or as to the
maintenance of the security hereof, except as otherwise provided in Section
10.06.
Section 12.03. TRUSTEE MAY ACT THROUGH AGENTS; ANSWERABLE ONLY FOR
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE. The Trustee may exercise any powers
hereunder and perform any duties required of it through attorneys, agents,
officers or employees, and shall be entitled to advice of Counsel concerning all
questions hereunder. The Trustee shall not be responsible for any loss or damage
resulting from any action or inaction taken in good faith in reliance upon an
opinion of Counsel. Except as otherwise provided herein, the Trustee shall not
be answerable for the exercise of any discretion or power under this Indenture
nor for anything whatever in connection with the trust hereunder, except only
its own willful misconduct or gross negligence. Without limiting the generality
of the foregoing, the Trustee shall have no liability for any act or omission to
act of any separate or co-trustee appointed pursuant to this Article XII.
Section 12.04. COMPENSATION AND INDEMNITY. Pursuant to Sections 5.3 and
5.5 of the Financing Agreement, the Issuer shall cause the Company (i) to pay
the Trustee reasonable compensation for its services hereunder (as set forth in
a letter of even date herewith from the Trustee to the Company and accepted by
the Company), and also all its reasonable expenses and disbursements, including
reasonable compensation for all attorneys and agents engaged by it (provided
that the Company will pay any fees agreed upon between the Company and any
Co-Trustee appointed by the Trustee pursuant to Section 12.19 directly to such
Co-Trustee), and (ii) to indemnify the Trustee, including its officers,
directors, employees and agents, against liabilities which it may incur in the
exercise and performance of its powers and duties hereunder, except with respect
to its willful misconduct or gross negligence. The foregoing indemnity shall
survive (i) the resignation or removal of the Trustee hereunder, (ii) the
termination of this Indenture, and (iii) the payment in full of all Bonds.
Section 12.05. NOTICE OF DEFAULT; RIGHT TO INVESTIGATE. The Trustee
shall, within 30 days after the occurrence thereof, give written notice by first
class mail to the Bank and the registered owners of the Bonds of all defaults
known to the Trustee, unless such defaults have been remedied (the term
"defaults" for purpose of this Section and Section 12.06 being defined to
include the events specified in clauses A through G of Section 11.01, not
including any notice or periods
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of grace provided for therein); provided that, in the case of a default under
clause D or E of Section 11.01, the Trustee may withhold such notice so long as
it determines that such withholding does not adversely affect the interests of
the Bondholders or the Bank. The Trustee shall not be deemed to have notice of
any default under clause D or E of Section 11.01 unless notified in writing of
such default by Owners of at least a majority in principal amount of all Bonds
then Outstanding. The Trustee may, however, at any time require of the Issuer
full information as to the performance of any covenant hereunder; and, if
information satisfactory to it is not forthcoming, the Trustee may make or cause
to be made, at the expense of the Company, an investigation into the affairs of
the Issuer related to this Indenture. Nothing in this Section shall limit the
Trustee's obligation under Section 11.02 to declare the principal of all Bonds,
together with interest accrued thereon, immediately due and payable when
required by the terms of such Section.
Section 12.06. OBLIGATION TO ACT ON DEFAULTS. If any Event of Default
shall have occurred and be continuing, the Trustee shall exercise such of the
rights and remedies vested in it by this Indenture and shall use the same degree
of care in their exercise as a prudent man would exercise or use in the
circumstances in the conduct of his own affairs; provided that if in the opinion
of the Trustee such action may tend to involve expense or liability, it shall
not be obligated to take such action unless it is furnished with indemnity
satisfactory to it. Nothing in this Section shall limit the Trustee's obligation
to cause a draw on the Letter of Credit when required by the terms of Section
11.02.
Section 12.07. RELIANCE; EVIDENCE. The Trustee may act on any
requisition, resolution, notice, telegram, request, consent, waiver,
certificate, statement, affidavit, voucher, bond, opinion of Counsel or other
paper or document which it in good faith believes to be genuine and to have been
passed or signed by the proper persons or to have been prepared and furnished
pursuant to any of the provisions of this Indenture, or any certificate
purportedly signed by a duly authorized representative of the Issuer, the
Company, the Bank, the Tender Agent or any separate or co-trustee appointed
pursuant to this Article XII; and the Trustee shall be under no duty to make any
investigation as to any statement contained in any such instrument, but may
accept the same as conclusive evidence of the accuracy of such statement. The
Trustee may in its discretion, but shall not be obligated to, demand such
further evidence of the occurrence or non-occurrence of an event, condition or
fact as it deems necessary or advisable before releasing any property or taking
or omitting to take any other action under this Indenture.
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Section 12.08. TRUSTEE MAY DEAL IN BONDS. The Trustee may in good faith
buy, sell, own, hold and deal in any of the Bonds and may join in any action
which any Bondholders may be entitled to take with like effect as if the Trustee
were not a party to this Indenture. The Trustee may be, or be affiliated with,
the Tender Agent, the Remarketing Agent and the Bank. The Trustee may also
engage in or be interested in any financial or other transaction with the
Issuer, the Company or any related party; provided that if the Trustee
determines that any such relation is in conflict with its duties under this
Indenture, it shall eliminate the conflict or resign as Trustee.
Section 12.09. ALLOWANCE OF INTEREST. Upon request of the Issuer or the
Company, the Trustee shall, to the extent permitted by law, allow interest upon
any moneys which it holds under the Indenture at such rate as it customarily
allows upon funds deposited under similar conditions. Except as the Trustee may
agree with the Company or the Issuer with the consent of the Company, the
Trustee shall not be liable for interest on any cash held by it.
Section 12.10. CONSTRUCTION OF AMBIGUOUS PROVISIONS. The Trustee may
construe any ambiguous or inconsistent provisions of the Indenture, and any
construction by the Trustee shall be binding upon the Bondholders.
Section 12.11. RESIGNATION OF TRUSTEE. The Trustee may resign and be
discharged of the trusts created by the Indenture by written resignation filed
with the Issuer (and a copy to the Company and the Bank) not less than 60 days
before the date when it is to take effect; provided notice of such resignation
is mailed to the Owners of the Bonds and to Moody's (if the Bonds are then rated
by Moody's) and to S & P (if the Bonds are then rated by S & P) not less than
three weeks prior to the date when the resignation is to take effect. Such
resignation shall take effect only upon the appointment of a successor trustee.
Section 12.12. REMOVAL OF TRUSTEE. Any Trustee hereunder may be removed
at any time by an instrument appointing a successor to the Trustee so removed,
executed by Owners of a majority in principal amount of the Bonds then
Outstanding and filed with the Trustee and the Issuer. Such removal shall take
effect only upon the appointment of a successor trustee.
Section 12.13. APPOINTMENT OF SUCCESSOR TRUSTEE. If the Trustee or any
successor trustee resigns or is removed or dissolved, or if its property or
business is taken under the control of any state or federal court or
administrative body, a vacancy shall forthwith exist in the office of the
Trustee, and the Issuer at direction of the Company shall appoint a successor
and shall mail notice of such appointment to the Owners of the
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Bonds and to Moody's (if the' Bonds are then rated by Moody's) and S & P (if the
Bonds are then rated by S & P). If the Issuer fails to make such appointment
promptly, the Owners of a majority in principal amount of the Bonds then
Outstanding may do so.
Section 12.14. QUALIFICATION OF SUCCESSOR TRUSTEE. Any successor
trustee shall be a national banking association with trust powers or a bank and
trust company or a trust company having capital and surplus of at least
$50,000,000, if there be one able and willing to accept the trust on reasonable
and customary terms.
Section 12.15. INSTRUMENTS OF SUCCESSION. Any successor trustee shall
execute, acknowledge and deliver to the Issuer an instrument accepting such
appointment hereunder; and thereupon such successor trustee, without any further
act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its predecessor in
the trust hereunder, with like effect as if originally named Trustee herein. The
Trustee ceasing to act hereunder shall pay over to the successor trustee all
moneys held by it hereunder; and, upon request of the successor trustee, the
Trustee ceasing to act and the Issuer shall execute and deliver an instrument
transferring to the successor trustee all the estates, properties, rights,
powers and trusts hereunder of the Trustee ceasing to act.
Section 12.16. MERGER OF TRUSTEE. Any corporation into which any
Trustee hereunder may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which any Trustee
hereunder shall be a party, shall be the successor trustee under the Indenture,
without the execution or filing of any paper or any further act on the part of
the parties hereto, anything herein to the contrary notwithstanding.
Section 12.17. FUNDS HELD IN TRUST. All moneys received by the Trustee
shall, until used, applied or invested as herein provided, be held in trust for
the purposes for which they were received but need not be segregated from other
funds, except to the extent required by law or by this Indenture.
Section 12.18. INTERVENTION BY TRUSTEE. The Trustee may intervene, and
upon the written request of Owners of at least a Majority in aggregate principal
amount of Bonds then Outstanding and receipt of indemnity satisfactory to the
Trustee shall intervene, on behalf of Bondholders in any judicial proceeding to
which the Issuer or the Company is a party and which in the opinion of the
Trustee and its attorneys has a substantial bearing on the interests of holders
of the Bonds. The rights and obligations of the Trustee under this Section are
subject to the approval of a court of competent jurisdiction.
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Section 12.19. APPOINTMENT OF CO-TRUSTEE. It is the purpose of this
Indenture that there shall be no violation of the law of any jurisdiction
(including particularly the law of the State) denying or restricting the right
of banking corporations or associations to transact business as trustee in such
jurisdiction. It is recognized that in case of litigation under this Indenture,
the Financing Agreement or the Letter of Credit, and in particular in case of
the enforcement thereof on any default or Event of Default, or in the case the
Trustee deems that by reason of any present or future law of any jurisdiction it
may not exercise any of the powers, rights or remedies herein granted to the
Trustee or hold title to the properties, in trust, as herein granted, or take
any action which may be desirable or necessary in connection therewith, it may
be necessary that the Trustee appoint an additional individual or institution as
a separate or co-trustee. The following provisions of this Section are adapted
to these ends.
The Trustee is hereby authorized to appoint one or more separate or
co-trustees if the Trustee deems it advisable or necessary under the
circumstances, including but not limited to the circumstances described in the
immediately preceding paragraph. In the event that the Trustee appoints an
additional individual or institution as a separate or co-trustee, each and every
remedy, power, right, claim, demand, cause of action, immunity, estate, title,
interest and lien expressed or intended by this Indenture to be exercised by or
vested in or conveyed to the Trustee with respect thereto shall be exercisable
by and vest in such separate or co-trustee but only to the extent necessary to
enable such separate or co-trustee to exercise such powers, rights and remedies,
and every covenant and obligation necessary to the exercise thereof by such
separate or co-trustee shall run to and be enforceable by either of them.
Should any instrument in writing from the Issuer be required by the
separate or co-trustee so appointed by the Trustee for more fully and certainly
vesting in and confirming to him or it such properties, rights, powers, trusts,
duties and obligations, any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the Issuer. In case any
separate or co-trustee or a successor to either shall die, become incapable of
acting, resign or be removed, all the estates, properties, rights, powers,
trusts, duties and obligations of such separate or co-trustee, so far as
permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a new trustee or successor to such separate or co-trustee.
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ARTICLE XIII
The Tender Agent
----------------
Section 13.01. APPOINTMENT, CAPACITIES AND DUTIES. The Issuer shall
appoint the Tender Agent for the purpose of acting as paying agent, Bond
registrar, transfer agent, authenticating agent, tender agent and the
beneficiary of the Letter of Credit, as provided by this Indenture, provided
that in its capacities as authenticating agent, tender agent and beneficiary of
the Letter of Credit, the Tender Agent shall act as agent for the Trustee. The
Tender Agent shall be a national banking association, a bank and trust company
or a trust company. The Issuer hereby appoints Dai-Ichi Kangyo Trust Company of
New York, as Tender Agent and designates the Principal Office of the Tender
Agent as a place of payment, such appointment and designation to remain in
effect until notice of change pursuant to this Article is filed with the
Trustee. The Tender Agent shall act as paying agent, Bond registrar, transfer
agent, authenticating agent and tender agent as provided in this Indenture. In
its capacities as authenticating agent, tender agent and the beneficiary of the
Letter of Credit, the Tender Agent is acting as agent for the Trustee. The
Tender Agent shall signify its acceptance of the duties and obligations imposed
upon it hereunder by its written instrument of acceptance addressed to the
Issuer, the Trustee and the Company and delivered to such persons and to the
Trustee, the Remarketing Agent and the Bank, under which the Tender Agent shall
agree to:
(a) hold all sums delivered to it by the Trustee (or the Bank under the
Letter of Credit) for the payment of principal or redemption price of, premium,
if any, and interest on the Bonds in trust for the benefit of the respective
Owners until such sums shall be paid to such Owners or otherwise disposed of as
herein provided;
(b) hold all Bonds tendered to it hereunder in trust for the benefit of
the respective Owners until moneys representing the purchase price of such Bonds
shall have been delivered to or for the account of or to the order of such
Owners;
(c) hold all moneys delivered to it hereunder for the purchase of Bonds
in trust for the benefit of the person which shall have so delivered such moneys
until the Bonds purchased with such moneys shall have been delivered to or for
the account of such person; and
(d) act as pledge agent for the Bank with respect to Custody Bonds; and
(e) keep such books and records as shall be consistent with prudent
industry practice and make such books and records
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available for inspection by the Trustee, the Remarketing Agent, the Issuer, the
Company and the Bank at all reasonable times.
Section 13.02. TENDER AGENT MAY ACT THROUGH AGENTS; ANSWERABLE ONLY FOR
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE. The Tender Agent may exercise any powers
hereunder and perform any duties required of it through attorneys, agents,
officers or employees, and shall be entitled to advice of Counsel concerning all
questions hereunder. The Tender Agent shall not be responsible for any loss or
damage resulting from any action or inaction taken in good faith in reliance
upon an opinion of Counsel. The Tender Agent shall not be answerable for the
exercise of any discretion or power under this Indenture, except only its own
willful misconduct or gross negligence.
Section 13.03. COMPENSATION AND INDEMNITY. Pursuant to Sections 5.3 and
5.5 of the Financing Agreement, the Issuer shall cause the Company (i) to pay
the Tender Agent reasonable compensation for its services hereunder, and also
all its reasonable expenses and disbursements, including reasonable compensation
for all attorneys and agents engaged by it, and (ii) to indemnify the Tender
Agent, including its officers, directors, employees and agents, against
liabilities which it may incur in the exercise and performance of its powers and
duties hereunder, except with respect to its willful misconduct or gross
negligence.
Section 13.04. RELIANCE. The Tender Agent may act on any requisition,
resolution, notice, telegram, request, consent, waiver, certificate, statement,
affidavit, voucher, bond, opinion of Counsel or other paper or document which it
in good faith believes to be genuine and to have been passed or signed by the
proper persons or to have been prepared and furnished pursuant to any of the
provisions of this Indenture; and the Tender Agent shall be under no duty to
make any investigation as to any statement contained in any such instrument, but
may accept the same as conclusive evidence of the accuracy of such statement.
Section 13.05. TENDER AGENT MAY DEAL IN BONDS. The Tender Agent may in
good faith buy, sell, own, hold and deal in any of the Bonds and may join in any
action which any Bondholders may be entitled to take. The Tender Agent may be,
or be affiliated with, the Trustee, the Remarketing Agent and the Bank. The
Tender Agent may also engage in or be interested in any financial or other
transaction with the Issuer, the Company or any related party; provided that if
the Tender Agent determines that any such relation is in conflict with its
duties under this Indenture, it shall eliminate the conflict or resign as Tender
Agent.
Section 13.06. REMOVAL OR RESIGNATION OF TENDER AGENT. The Issuer, at
the direction of the Company, may discharge the
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Tender Agent from time to time and appoint a successor. The Issuer, at the
direction of the Company, shall also designate a successor if the Tender Agent
resigns or becomes ineligible. If no Event of Default under the Financing
Agreement has occurred and is continuing, the Company may, with the written
consent of the Bank, remove the Tender Agent and appoint a successor by an
instrument filed with the Trustee, the Remarketing Agent, the Bank and the
Issuer. The Tender Agent may resign by giving at least 60 days written notice to
the Trustee, the Remarketing Agent, the Company and the Bank. Each successor
Tender Agent shall be a bank or trust company having a capital and surplus of
not less than $50,000,000, shall be registered as a transfer agent with the
Securities and Exchange Commission, and shall be capable of performing the
duties prescribed for it herein. The Tender Agent may but need not be the same
person as the Trustee. The Issuer shall direct the Trustee to give notice of the
appointment of a successor Tender Agent in writing fifteen days prior to such
appointment taking effect to each Owner, as well as to Moody's (if the Bonds are
then rated by Moody's) and S & P (if the Bonds are then rated by S & P). The
Trustee will promptly certify to the Issuer that it has mailed such notice to
all Owners and such certificate will be conclusive evidence that such notice was
given in the manner required hereby. In the event of the resignation or removal
of the Tender Agent, the Tender Agent shall pay over, assign and deliver any
moneys and Bonds, including unauthenticated Bonds, held by it and the Bond
Register maintained by it in such capacity to its successor, and shall take all
necessary action to cause the Letter of Credit to be transferred to its
successor as of the effective date of such succession. Such resignation or
removal shall take effect only upon the appointment of a successor Tender Agent.
Section 13.07. SUCCESSOR TENDER AGENTS. Any corporation, association,
partnership or firm which succeeds to the business of the Tender Agent as a
whole or substantially as a whole, whether by sale, merger, consolidation or
otherwise, shall thereby become vested with all the property, rights and powers
of such Tender Agent under this Indenture. In case any Bonds shall have been
authenticated, but not delivered, by the Tender Agent then in office, any
successor by merger, conversion or consolidation to such authenticating Tender
Agent may adopt such authentication and deliver the Bonds, so authenticated with
the same effect as if such successor Tender Agent had itself authenticated such
Bonds. In the event that the Tender Agent shall resign or be removed, or be
dissolved, or if the property or affairs of the Tender Agent shall be taken
under the control of any state or federal court or administrative body because
of bankruptcy or insolvency, or for any other reason, and the Issuer shall not
have appointed its successor, the Trustee shall ipso facto be deemed to be the
successor Tender Agent for all purposes until another successor is appointed.
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Section 13.08. NOTICE TO TRUSTEE. The Tender Agent shall immediately
notify the Trustee upon receiving notice from the Bank pursuant to Sections
11.01(F) and 11.01(G).
ARTICLE XIV
The Remarketing Agent
---------------------
Section 14.01. APPOINTMENT. The Issuer hereby appoints Manufacturers
Hanover Securities Corporation, a New York corporation, as Remarketing Agent
under this Indenture. The Remarketing Agent and any successor Remarketing Agent,
by written instrument delivered to the Issuer, the Trustee, the Tender Agent and
the Company, shall accept the duties and obligations imposed on it under this
Indenture.
Section 14.02. DUTIES. In addition to the other obligations imposed on
the Remarketing Agent hereunder, the Remarketing Agent shall agree to:
(i) hold all Bonds delivered to it by the Tender Agent hereunder for
delivery to the Owners thereof;
(ii) hold all moneys representing the purchase price of Bonds for
delivery to the Tender Agent pursuant hereto for the benefit of the persons
entitled to receive the payment of such purchase price; and
(iii) keep such books and records as shall be consistent with prudent
industry practice and make such books and records available for inspection by
the Issuer, the Trustee, the Tender Agent and the Company at all reasonable
times.
Section 14.03. QUALIFICATION. The Remarketing Agent shall at all times
be registered as a Municipal Securities Dealer under the Securities Exchange Act
of 1934, as amended, and authorized by law to perform its obligations hereunder;
and the Remarketing Agent or its parent corporation shall have net capital of at
least $50,000,000 and a rating assigned to its long-term unsecured debt by
Moody's at least equal to "Baa3" if the Bonds are then rated by Moody's, or by S
& P at least equal to "BBB-" if the Bonds are then rated by S & P.
Section 14.04. RESIGNATION; REMOVAL. If at any time the Remarketing
Agent is unable or unwilling to act as, Remarketing Agent, the Remarketing
Agent, upon 60 days prior written notice to the Issuer, the Trustee, the Tender
Agent, the Bank and the Company, may resign. The Remarketing Agent may be
removed at any time by the Issuer for any reason or upon the direction of the
Company upon 30 days written notice delivered to the Trustee, the Tender Agent,
the Remarketing Agent and the Bank; provided that, if the Issuer fails to
deliver such notice within 10 days of the date the Company delivers to the
Issuer a
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written direction to do so (with copies to the Remarketing Agent, the Trustee,
the Tender Agent and the Bank), then such written notice may be signed and
delivered by the Company on its own behalf and an agent for the Issuer. Upon
resignation or removal of the Remarketing Agent, the Issuer, at the direction of
the Company, shall appoint a successor Remarketing Agent meeting the
qualifications of Section 14.03. Upon the resignation or removal of the
Remarketing Agent, the Remarketing Agent shall pay over, assign and deliver any
moneys and Bonds held by it in trust pursuant to Section 14.02 to its successor.
In the event that the Issuer shall fail to appoint a successor Remarketing
Agent, upon the resignation or removal of the Remarketing Agent or upon its
dissolution, insolvency or bankruptcy, the Trustee shall promptly appoint a
Remarketing Agent at the direction of the Company.
Section 14.05. NOTICES. The Trustee shall, within 30 days of the
resignation or removal of the Remarketing Agent or the appointment of a
successor Remarketing Agent, give notice thereof by mail to each Owner and to
Moody's (if the Bonds are then rated by Moody's) and S & P (if the Bonds are
then rated by S & P).
ARTICLE XV
Acts of Bondholders; Evidence of Ownership of Bonds
---------------------------------------------------
Section 15.01. ACTS OF BONDHOLDERS; EVIDENCE OF OWNERSHIP OF BONDS. Any
action to be taken by Bondholders may be evidenced by one or more concurrent
written instruments of similar tenor signed or executed by such Bondholders in
person or by agent appointed in writing. The fact and date of the execution by
any person of any such instrument may be proved by acknowledgment before a
notary public or other officer empowered to take acknowledgments or by an
affidavit of a witness to such execution. Where such execution is by an officer
of a corporation or a member of a partnership, on behalf of such corporation or
partnership, such certificate or affidavit shall also constitute sufficient
proof of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the person executing the same, may
also be proved in any other manner which the Trustee or the Tender Agent deems
sufficient. The ownership of Bonds shall be proved by the Bond Register. Any
action by the owner of any Bond shall bind all future owners of the same Bond in
respect of anything done or suffered by the Issuer, the Trustee or the Tender
Agent in pursuance thereof.
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ARTICLE XVI
Amendments and Supplements
--------------------------
Section 16.01. AMENDMENTS AND SUPPLEMENTS WITHOUT BONDHOLDERS' CONSENT.
This Indenture may be amended or supplemented at any time and from time to time,
without the consent of the Bondholders, by a supplemental indenture authorized
by a resolution of the Issuer filed with the Trustee for one or more of the
following purposes:
(a) to cure any formal defect, omission, inconsistency or ambiguity in
this Indenture;
(b) to add covenants and agreements of the Issuer in this Indenture, or
to surrender any right or power reserved or conferred upon the Issuer, and which
is not materially adverse to the interests of the Bondholders;
(c) to confirm, as further assurance, any pledge of or lien on the
Revenues of the Issuer from the Financing Agreement or of any other moneys,
securities or funds subject to the lien of this Indenture;
(d) to comply with the requirements of the Trust Indenture Act of 1939,
as amended;
(e) to modify, alter, amend or supplement this Indenture in any other
respect which in the judgment of the Trustee is not materially adverse to the
interests of the Bondholders;
(f) to implement the Fixed Rate or to evidence or give effect to the
delivery of a replacement Letter of Credit; and
(g) to make any other change required by Moody's or S & P as a
condition of rating the Bonds, provided such change is not materially adverse to
the interests of the Bondholders.
Before the Issuer and the Trustee shall enter into any supplemental indenture
pursuant to this Section, there shall have been delivered to the Trustee, the
Tender Agent, the Issuer, the Company and the Bank an opinion of nationally
recognized bond counsel stating that such supplemental indenture is authorized
or permitted by this Indenture and the Act, complies with their respective
terms, will, upon the execution and delivery thereof, be valid and binding upon
the Issuer in accordance with its terms and will not adversely affect the
exemption from federal income taxation of interest on the Bonds.
Section 16.02. AMENDMENTS AND SUPPLEMENTS WITH BONDHOLDERS' CONSENT.
This Indenture may be amended or supplemented from time to time, except with
respect to (1) the
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principal or redemption price or interest payable upon any Bonds, (2) the
Interest Payment Dates, the dates of maturity or the redemption or purchase
provisions of any Bonds, and (3) this Article XVI, by a supplemental indenture
consented to by the Company and approved by Owners of a Majority in aggregate
principal amount of the Bonds then Outstanding. This Indenture may be amended
with respect to the matters enumerated in clauses (1) to (3) of the preceding
sentence only with the unanimous consent of all Bondholders. Before the Issuer
and the Trustee may enter into such supplemental indenture, there shall have
first been delivered to the Trustee (i) the required consents, in writing, of
Bondholders and (ii) a Favorable Opinion stating that such supplemental
indenture is authorized or permitted by this Indenture and the Act, complies
with their respective terms and, upon the execution and delivery thereof, will
be valid and binding upon the Issuer in accordance with its terms and will not
adversely affect the exemption from federal income taxation of interest on the
Bonds.
Section 16.03. AMENDMENT OF FINANCING AGREEMENT. If the Issuer and the
Company propose to amend the Financing Agreement, the Trustee may consent
thereto; provided that if such proposal would amend the Financing Agreement in
such a way as would materially adversely affect the interests of the
Bondholders, the Trustee shall notify Bondholders of the proposed amendment and
may consent thereto with the consent of Owners of a majority in aggregate
principal amount of the Bonds then Outstanding; provided that no amendment shall
be consented to by the Trustee without the unanimous consent of all Bondholders
which would (1) decrease the amounts payable under the Financing Agreement, (2)
change the date of payment or prepayment provisions under the Financing
Agreement, or (3) change any provisions with respect to amendment. Before the
Issuer shall enter into, and the Trustee shall consent to, any modification,
alteration, amendment or supplement to the Financing Agreement, pursuant to this
Section, there shall have been delivered to the Issuer and the Trustee a
Favorable Opinion.
Section 16.04. AMENDMENT OF LETTER OF CREDIT. If the Bank proposes to
amend the Letter of Credit, the Tender Agent may consent thereto, provided that
(i) if such proposal would amend the Letter of Credit in such a way as would
materially adversely affect the interests of the Bondholders, the Tender Agent
shall notify the Bondholders of the proposed amendment and may consent thereto
only with the prior written consent of Owners of a majority in aggregate
principal amount of the Bonds then Outstanding; and (ii) that the Tender Agent
shall not, without the unanimous consent of all Bondholders, consent to any
amendment which would decrease the amounts payable under the Letter of Credit in
respect of Outstanding Bonds on any Interest Payment Date or on the date of
redemption, acceleration, payment at maturity or purchase of the Bonds, or
advance the stated
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expiration date of the Letter of Credit to an earlier date; no consent of the
Bondholders shall be required for amendments to the Letter of Credit which are
provided for and contemplated by this Indenture,
Section 16.05. TRUSTEE AUTHORIZED TO JOIN IN AMENDMENTS AND
SUPPLEMENTS; RELIANCE ON COUNSEL. The Trustee is authorized to join with the
Issuer in the execution and delivery of any supplemental indenture or amendment
permitted by this Article and in so doing shall be fully protected by an opinion
of Counsel that such supplemental indenture or amendment is so permitted and has
been duly authorized by the Issuer and that all things necessary to make it a
valid and binding agreement have been done.
Section 16.06. BANK CONSENT. Notwithstanding anything herein contained,
so long as a Letter of Credit is held by the Tender Agent, no amendment shall be
made to the Indenture or the Financing Agreement without the prior written
consent of the Bank.
Section 16.07. NOTICE TO RATING AGENCIES. The Trustee shall promptly
notify Moody's (if the Bonds are then rated by Moody's) and S & P (if the Bonds
are then rated by S & P) of any material amendment or supplement to this
Indenture (except for amendments or supplements pursuant to Section 16.01
hereof), the Financing Agreement, the Remarketing Agreement or the Letter of
Credit.
ARTICLE XVII
Defeasance
----------
Section 17.01. DEFEASANCE. When the principal or redemption price (as
the case may be) of, and interest on, all Bonds issued hereunder have been paid,
or provision has been made for payment of the same and any tender purchase price
payable pursuant to Article IV, together with the compensation and expenses of
the Trustee and the Tender Agent and all other sums payable hereunder by the
Issuer, the right, title and interest of the Trustee in the Trust Estate shall
thereupon cease and the Trustee, on demand of the Issuer, shall release this
Indenture and shall execute such documents to evidence such release as may be
reasonably required by the Issuer and shall turn over, and direct the Tender
Agent to turn over, to the Company or to such person, body or authority as may
be entitled to receive the same all balances then held by it or the Tender Agent
hereunder not required for the payment of the Bonds and such other sums;
provided that in the event there has been a drawing under the Letter of Credit
for which the Bank has not been fully reimbursed pursuant to the Reimbursement
Agreement or any other obligations are then due and owing to the Bank under the
Reimbursement
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Agreement, the Trustee and the Tender Agent shall assign and turn over to the
Bank, as subrogee or otherwise, all of the Trustee's right, title and interest
under this Indenture, all balances held hereunder not required for the payment
of the Bonds and such other sums and the Trustee's right, title and interest in,
to and under the Financing Agreement and any other property comprising the Trust
Estate. If payment or provision therefor is made with respect to less than all
of the Bonds, the particular Bonds (or portion thereof) for which provision for
payment shall have been considered made shall be selected by lot by the Tender
Agent, and thereupon the Trustee shall take similar action for the release of
this Indenture with respect to such Bonds.
Section 17.02. PROVISION FOR PAYMENT.
(a) Provision for the payment of Bonds shall be deemed to have been
made when the Trustee and the Tender Agent hold in the Bond Fund (i) cash in an
amount sufficient to make all payments (including principal, premium, if any,
interest and tender purchase price payments, if any) specified above with
respect to such Bonds, or (ii) noncallable, direct obligations issued by the
United States of America, maturing on or before the date or dates when the
payments specified above shall become due, the principal amount of which and the
interest thereon, when due, is or will be, in the aggregate, sufficient without
reinvestment to make all such payments, or (iii) any combination of cash and
such obligations the amounts of which and interest thereon, when due, are or
will be, in the aggregate, sufficient without reinvestment to make all such
payments; provided that (1) such amount on deposit shall be deemed sufficient
only if (A) it provides for payment of interest on any Bonds, the interest rate
on which may vary, at the maximum rate then applicable thereto and the Issuer
shall have surrendered any power hereunder to thereafter change the maximum rate
applicable to such Bonds, or (B) the Fixed Rate Conversion Date has occurred and
the amount is sufficient for the payment of any Bonds at the Fixed Rate; (2) the
Trustee shall have received an opinion of Bond Counsel to the effect that a
deposit of obligations described in clause (ii) or (iii) above will not affect
the tax-exempt status of the interest on any of the Bonds or cause any of the
Bonds to be classified as "arbitrage bonds" within the meaning of Section 148 of
the Code and (3) so long as a Letter of Credit is held by the Tender Agent,
provision for payment of Bonds shall be deemed to be made only if (x) the
Trustee and the Tender Agent hold in the Bond Fund cash constituting Available
Moneys and/or such obligations purchased with Available Moneys for payment of
such Bonds pursuant to Section 6.02(b) in amounts sufficient to make all
payments specified above with respect to such Bonds, and (y) if provision is to
be made for the payment of less than 100% of the Bonds Outstanding, the Trustee
shall have received written confirmation from S & P (if the Bonds are then rated
by S & P) or Moody's (if the Bonds are then rated by Moody's) that any ratings
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on the Bonds for which payment provision is not to be made will remain
unaffected by such provision.
(b) Neither the moneys nor the obligations deposited shall be withdrawn
or used for any purpose other than, and such obligations and moneys shall be
segregated and held in trust for, the payment of the principal or redemption
price of, premium, if any, on and interest on, the Bonds (or portions thereof)
to be no longer entitled to the lien of this Indenture, or for the payment of
the purchase price of such Bonds in accordance with Article IV; provided that,
prior to the Fixed Rate Conversion Date, such moneys, if not then needed for
such purpose, shall, to the extent practicable, be invested and reinvested in
direct obligations issued by the United States of America maturing on or prior
to the earlier of (i) the date moneys may be required for the purchase of Bonds
pursuant to Article IV and (ii) the Interest Payment Date next succeeding the
date of investment or reinvestment.
(c) Whenever moneys or obligations shall be deposited with the Trustee
or the Tender Agent for the payment or redemption of Bonds more than 60 days
prior to the date that such Bonds are to mature or be redeemed, the Tender Agent
shall mail a notice to the Owners of Bonds for the payment of which such moneys
or obligations are being held at their registered addresses stating that such
moneys or obligations have been deposited; such notice shall also be sent by the
Tender Agent to Moody's and S & P (if the Bonds are then rated by such rating
agency). Notwithstanding the foregoing, no delivery to the Trustee under this
Section shall be deemed a payment of any Bonds which are to be redeemed prior to
their stated maturity until such Bonds shall have been irrevocably called or
designated for redemption on a date thereafter on which such Bonds may be
redeemed in accordance with the provisions of this Indenture and proper notice
of such redemption shall have been given in accordance with Article IX or the
Issuer shall have given the Trustee and the Tender Agent, in form satisfactory
to the Trustee and the Tender Agent, irrevocable instructions to give, in the
manner and at the times prescribed by Article IX, notice of redemption.
ARTICLE XVIII
Miscellaneous Provisions
------------------------
Section 18.01. NO PERSONAL RECOURSE. This Indenture does not pledge the
general credit nor the taxing power of the Commonwealth of Kentucky or the
County of Carroll. The liability of the undersigned shall be limited to the
proceeds resulting from the lease of the Project Facilities and the rents,
issues and profits therefrom.
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No covenant or agreement contained in this Indenture shall be deemed to
be the covenant or agreement of any member, officer, attorney, agent or employee
of the Issuer in an individual capacity. No recourse shall be had for the
payment of the principal, the interest thereon, or the premium, if any, payable
upon the redemption of this Indenture or any claim based thereon against any
officer, member, agent, attorney or employee of the Issuer past, present or
future, or its successors or assigns, as such, either directly or through the
Issuer, or any such successor corporation, whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise, all of such liability of such members,
officers, agents, attorneys or employees being hereby released as a condition of
and as a consideration for the execution and delivery of this Indenture.
Section 18.02. NO RIGHTS CONFERRED ON OTHERS. Except as provided in
Section 18.09, nothing herein contained shall confer any right upon any person
other than the parties hereto and the Owners of the Bonds.
Section 18.03. ILLEGAL, ETC. PROVISIONS DISREGARDED. In case any
provision in this Indenture or the Bonds shall for any reason be held invalid,
illegal or unenforceable in any respect, this Indenture shall be construed as if
such provision had never been contained herein.
Section 18.04. NOTICES. All notices and other communications provided
for hereunder shall be in writing and sent by United States certified or
registered mail, return receipt requested, or by telegraph, telex, telecopier or
private delivery service or personal service, addressed as follows:
If to the Issuer:
County of Carroll, Kentucky
County Courthouse
Carrollton, Kentucky 40008
Attention: County Judge/Executive
If to the Trustee or the Tender Agent:
Dai-Ichi Kangyo Trust Company of New York
One World Trade Center
Suite 5031
New York, New York 10048
Attention: Corporate Trust Department
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If to the Remarketing Agent:
Manufacturers Hanover Securities Corporation
270 Park Avenue, 4th Floor
New York, New York 10017
Municipal Sales Department
Attention: Brian Sullivan
If to the Company:
Kentucky Ladder Company
93 Werner Road
Greenville, Pennsylvania 16125
Attention: Eric J. Werner, Esquire
Corporate Counsel
If to the Bank:
The Dai-Ichi Kangyo Bank, Limited, New York Branch
One World Trade Center
Suite 4911
New York, New York 10048
Attention: Assistant General Manager
Corporate Finance Dept.
with a copy to: Assistant General Manager,
Loan Administration Dept.
Either party hereto and the Tender Agent, the Remarketing Agent, the Company and
the Bank may change the address to which notices to it are to be sent by written
notice given to the other persons listed in this Section. All notices shall,
when mailed as aforesaid, be effective on the date indicated on the return
receipt, and all notices given by other means shall be effective when received.
Section 18.05. SUCCESSORS AND ASSIGNS. All the covenants, promises and
agreements in this Indenture contained by or on behalf of the Issuer, or by or
on behalf of the Trustee, shall bind and inure to the benefit of their
respective successors and assigns, whether so expressed or not.
Section 18.06. HEADINGS FOR CONVENIENCE ONLY. The descriptive headings
in this Indenture are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
Section 18.07. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original; but such
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counterparts shall together constitute but one and the same instrument.
Section 18.08. APPLICABLE LAW. This Indenture shall be governed by and
construed in accordance with the laws of the State.
Section 18.09. BANK'S RIGHTS. The Bank is hereby explicitly recognized
as a third party beneficiary to this Indenture and shall be entitled to enforce
the obligations of the Trustee, the Tender Agent, the Remarketing Agent and the
Issuer hereunder. In the event the Letter of Credit shall have terminated
without being replaced by another Letter of Credit and the Company shall have
paid and performed all of its obligations under the Reimbursement Agreement, and
the Letter of Credit shall have been returned to the Bank for cancellation, then
no further action with respect to the Letter of Credit or notice to or consent
of the Bank shall there after be required under the terms of this Indenture and
the Bank shall cease to be a third party beneficiary of this Indenture.
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IN WITNESS WHEREOF, County of Carroll, Kentucky has caused this
Indenture to be executed by its County Judge/Executive and its official seal to
be hereunto affixed and attested by its County Clerk and Dai-Ichi Kangyo Trust
Company of New York has caused this Indenture to be executed by one of its Vice
Presidents and its corporate seal to be hereunto affixed and attested by one of
its duly authorized officers, all as of the day and year first above written.
(SEAL] COUNTY OF CARROLL, KENTUCKY
Attest /s/ ????????? By /s/ Harold "Shorty" Tomlinson
-------------------------- -------------------------------
Title: Carroll County Clerk Title: County Judge/Executive
[CORPORATE SEAL] DAI-ICHI KANGYO TRUST COMPANY
OF NEW YORK
Attest /s/ ??????????? By /s/ ?????????????
---------------------------- --------------------------------
Title: Second Vice President Title: Senior Vice President
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COUNTY OF CARROLL )
): ss.
COMMONWEALTH OF KENTUCKY )
On this, the ____ day of _______________, 1990, before me, the
undersigned notary public, appeared ______________________, who acknowledged
himself (herself) to be the ________________ of COUNTY OF CARROLL, KENTUCKY, and
that he (she) as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of said Issuer
by himself (herself) as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janice Carlton Monk
-------------------------------
NOTARY PUBLIC
[NOTARIAL SEAL] My Commission Expires:
12/1/93
COUNTY OF _________ )
) : ss.
STATE OF __________ ) )
On this, the ____ day of _______________ , 1990, before me, the
undersigned notary public, appeared _______________________, who acknowledged
himself (herself) to be an authorized officer of DAI-ICHI KANGYO TRUST COMPANY
OF NEW YORK, a New York trust company, and that he (she) as such officer, being
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of said association by himself (herself) as such
officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-------------------------
Notary public
[NOTARIAL SEAL] My Commission Expires:
This instrument prepared by:
- -----------------------------------
Charles R. Brodbeck
COHEN & GRIGSBY, A Professional
Corporation
2900 CNG Tower
Pittsburgh, PA 15222
<PAGE> 103
COUNTY OF CARROLL )
) : ss.
COMMONWEALTH OF KENTUCKY )
On this, the _____ day of _________________ , 1990, before me, the
undersigned notary public, appeared ____________________ , who acknowledged
himself (herself) to be the ________________ of COUNTY OF CARROLL, KENTUCKY, and
that he (she) as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of said Issuer
by himself (herself) as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-----------------------------------
Notary public
[NOTARIAL SEAL] My Commission Expires:
COUNTY OF NEW YORK )
-------- ) : ss.
STATE OF NEW YORK ) )
--------
On this, the 19th day of September __, 1990, before me, the undersigned
notary public, appeared Ruth H. Sekinger who acknowledged himself (herself) to
be an authorized officer of DAI-ICHI KANGYO TRUST COMPANY OF NEW YORK, a New
York trust company, and that he (she) as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of said association by himself (herself) as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Regina Kwawer
-------------------------
Notary public
(NOTARIAL SEAL] My Commission Expires:
Regina Kwawer
This instrument prepared by: Notary Public, State of New York
No. 41-3688496
/s/ Charles R. Brodbeck Qualified In Queens County
- ---------------------------- Commission Expires Feb. 28, 1992
Charles R. Brodbeck
COHEN & GRIGSBY, A Professional
Corporation
2900 CNG Tower
Pittsburgh, PA 15222
<PAGE> 104
Exhibit A
NOTICE OF TENDER
$5,000,000
COUNTY OF CARROLL, KENTUCKY
VARIABLE RATE DEMAND INDUSTRIAL
BUILDING REVENUE BONDS
(KENTUCKY LADDER COMPANY PROJECT)
DESCRIPTION OF BONDS TO BE TENDERED
(Please complete the following information. Attach an additional list if
necessary.)
Portion of
Name and Address Serial Numbers of Principal Amount
of Owner Bonds Tendered
- ---------------- ----------------- -----------------
R- $
- --------------------- ---------------- -------------------
- ---------------------
Tender Date:
---------
Payment Instructions:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
The undersigned Bondholder of the above-listed Bonds hereby irrevocably
demands the purchase of the above-listed Bonds in the Principal Amount(s)
Tendered shown above (which Principal Amount(s) Tendered is either the principal
amount of such Bond or a whole multiple of $100,000), on the Tender Date
specified above.
The undersigned hereby agrees to deliver the above-listed Bonds to the
Tender Agent at its principal office located at One World Trade Center, Suite
5031, New York, New York 10048, Telecopy (212) 912-1039 on or prior to 11:00
a.m. (New York City Time) on the Tender Date with an appropriate endorsement for
transfer or accompanied by a bond power endorsed in blank and if such Bond is to
be purchased prior to the next succeeding Interest Payment Date and after the
Record Date (which is two Business Days prior to such Interest Payment Date), a
non-recourse due-bill, for interest due from the preceding Interest Payment Date
to the next succeeding Interest Payment Date. Further, the undersigned
acknowledges that this Notice of
-A-1-
<PAGE> 105
Tender constitutes (i) an irrevocable offer to sell the Bond (or portion of the
Principal Amount thereof) to which this Notice relates on the Tender Date to any
purchaser selected by the Remarketing Agent, at a price equal to the principal
amount of such Bond (or portion of the Principal Amount thereof) plus any
interest thereon accrued and unpaid as of the Tender Date, if the Tender Date is
not an Interest Payment Date, (ii) an irrevocable authorization and instruction
to the Tender Agent to effect the transfer of such Bond (or portion of the
Principal Amount thereof) upon payment of such price to the Tender Agent on the
Tender Date, (iii) an irrevocable authorization and instruction to the Tender
Agent to effect the exchange of this Bond to be purchased in whole or in part
for other Bonds in an equal aggregate principal amount so as to facilitate the
sale of such Bond (or portion of the Principal Amount thereof to be purchased),
and (iv) an acknowledgment that the Bondholder will have no further rights with
respect to such Bond (or portion of the Principal Amount thereof) upon payment
of the Tender Price thereof to the Tender Agent on the Tender Date, except for
the right of such holder to receive such Tender Price upon surrender of such
Bond to the Tender Agent endorsed for transfer in blank, with the appropriate
guaranty of signature as the Tender Agent may require.
Please contact Dai-Ichi Kangyo Trust Company of New York, Tender Agent,
telephone (212) 466-6640, or Manufacturers Hanover Securities Corporation,
Remarketing Agent, telephone (212) 270-2458, with questions regarding this
Notice of Tender.
Capitalized terms not otherwise defined herein shall have the meanings
given such terms in the Trust Indenture under which the above-listed Bonds were
issued.
SIGN HERE
Dated:
- ---------------------------- -------------------------------------------
(Must be signed by Bondholder exactly as name appears on Bonds or by
the attorney of such Bondholder duly authorized in writing by certificates and
documents transmitted herewith. If signature is by trustee, executor,
administrator, guardian, attorney-in-fact, officer or corporation or others
acting in a fiduciary or representative capacity, please set forth full title.)
-A-2-
<PAGE> 106
Name(s)
------------------------------------------------------------------------
(Please Print)
Capacity
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
(Including Zip Code)
Area Code and Tel. No.
---------------------------------------------------------
Tax Identification Number
------------------------------------------------------
-A-3-
<PAGE> 1
Exhibit 10.7
[CERTIFICATE]
UNITED STATES OF AMERICA
COMMONWEALTH OF KENTUCKY
NUMBER
R- COUNTY OF CARROLL, KENTUCKY $
VARIABLE RATE DEMAND
INDUSTRIAL BUILDING REVENUE BOND
INDUSTRIAL BUILDING REVENUE BOND
(Kentucky Ladder Company Project)
DATED MATURITY DATE ISSUE DATE CUSIP
- ----- ------------- ---------- -----
September 1, 2015 September 19, 1990 144836 AA 1
REGISTERED OWNER:
NON-NEGOTIABLE
PRINCIPAL AMOUNT:
The County of Carroll, Kentucky (the "Issuer"), a county and political
subdivision of the Commonwealth of Kentucky, for value received, hereby promises
to pay (but only out of the sources hereinafter mentioned) to the registered
owner specified above, or registered assigns, on the maturity date specified
above, unless this Bond shall have been called for redemption in whole or in
part and payment of the redemption price shall have been duly made or provided
for, upon surrender hereof, the principal amount specified above and to pay (but
only out of the sources hereinafter mentioned) interest thereon on each interest
Payment Date (as hereinafter defined) from the dated date hereof specified
above, until payment of said principal amount has been made or provided for,
at the rates determined as provided in this Bond, commencing on the first
Interest Payment Date after the dated date hereof specified above.
So long as this Bond bears interest at a variable Weekly Rate (as
hereinafter defined), this Bond shall be purchased on demand of the registered
owner hereof as hereinafter described.
The principal or redemption price of this Bond shall be paid upon
presentation and surrender hereof at the principal corporate trust office of
Del-Ichi Kangyo Trust Company of New York, as Tender Agent (in such capacity,
the "Tender Agent") or at the duly designated office of any duly appointed
alternate or successor tender agent. The interest on this Bond shall be
payable by check mailed to the registered owner of this Bond at such owner's
address as it appears on the Bond Register of the Issuer maintained by the
Tender Agent, or, at the request of any registered owner of at least $1,000,000
aggregate principal amount of Bonds, by wire transfer within the continental
United States to the bank account number of such owner appearing on the Bond
Register. The principal or redemption price of and interest on this Bond shall
be paid in any coin or currency of the United States of America which, at the
time of payment, is legal tender for the payment of public and private debts.
The interest payable as provided in this Bond on any Interest Payment Date,
and duly provided for, will be paid to the person in whose name ownership of
this Bond is registered at the close of business on the Regular Record Date for
such interest, which shall be the day two Business Days prior to the Interest
Payment Date; provided that if this Bond bears interest at a Fixed Rate (as
hereinafter defined), then the Regular Record Date shall be the 15th day of the
month immediately preceding the month in which the Interest Payment Date occurs.
Any such interest not so paid or duly provided for on such Interest Payment
Date, or within three Business Days thereafter, shall forthwith cease to be
payable to the person in whose name this Bond is registered on such Regular
Record Date, and shall be paid to the person in whose name this Bond is
registered at the close of business on a Special Record Date for the payment of
such defaulted interest to be fixed by the Trustee referred to below, notice of
which shall be given to such person not less than ten days prior to such Special
Record Date, or may be paid, at any time in any other lawful manner, all as more
fully provided in the Indenture (as defined on the reverse hereof). This Bond
shall bear interest on overdue principal at the rate borne by this Bond during
such time.
THIS BOND IS ISSUED UNDER THE PROVISIONS OF KENTUCKY REVISED STATUTES
103.200 THROUGH 103.286, INCLUSIVE, AND DOES NOT CONSTITUTE AN INDEBTEDNESS OF
THE ISSUER, THE COMMONWEALTH OF KENTUCKY, OR ANY POLITICAL SUBDIVISION THEREOF,
WITHIN THE MEANING OF THE CONSTITUTION OF THE COMMONWEALTH OF KENTUCKY.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET
FORTH ON THE REVERSE SIDE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF FULLY SET FORTH IN THE TEXT OF THIS BOND
WRITTEN ABOVE.
This Bond is not valid unless the Certificate of Authentication
endorsed hereon is duly executed by the Tender Agent.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in
its name by the manual or facsimile signature of its County Judge/Executive and
its official seal or a facsimile thereof to be affixed, imprinted, lithographed
or reproduced hereon and attested by the manual or facsimile signature of its
County Clerk.
FORM OF CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture. Printed hereon is the complete text of the opinion of Cohen, Grigsby,
A Professional Corporation, of Pittsburgh, Pennsylvania, Bond Counsel, a signed
original of which is on file with the Trustee.
<TABLE>
<S> <C> <C> <C>
DAI-ICHI KANGYO TRUST COMPANY ATTEST: COUNTY OF CARROLL, KENTUCKY
OF NEW YORK, as Tender Agent
By: /s/ By: /s/ Harold "Shorty" Tomlinson
--------------------------- ------------------ -------------------------------
Authorized Signature Carrol County Clerk County Judge/Executive
</TABLE>
[SEAL-COUNTY COURT - CARROLL COUNTY, KY]
<PAGE> 2
This bond is one of a duly authorized series (the "Bonds") limited in aggregate
principal amount to $5,000,000 issued under and secured by a Trust Indenture
dated as of September 1, 1990 (the "Indenture") between the Issuer and Dai-Ichi
Kangyo Trust Company of New York, as Trustee (in such capacity, the "Trustee")
to accomplish the public purposes of Chapter 103 of the Kentucky Revised
Statutes, as amended (the "Act") by undertaking the financing of a project for
Kentucky Ladder Company (the "Company") involving the acquisition and
construction of a manufacturing facility consisting of 193,000 square foot
building to be located on a parcel of land in Carroll County, Kentucky (the
"Project Facilities") for use as a manufacturing facility in the manufacture,
processing and assembly of climbing ladder products and related products,
together with storage, warehousing and distribution facilities with respect
thereto. The Issuer has entered into a Lease Agreement dated as of September 1,
1990 with the Company (the "Financing Agreement") providing for the use of the
proceeds of the Bonds to finance the acquisition and construction of the Project
Facilities and providing for lease payments by the Company in amounts sufficient
to pay, when due, the principal of, premium, if any, on and interest on the
Bonds. As security for the Bonds, the Issuer has assigned to the Trustee under
and pursuant to the Indenture all of the Issuer's right, title and interest in
and to the Financing Agreement and all amounts payable thereunder (except for
payments with respect to certain fees and expenses, indemnification payments to
the Issuer and excess investment earnings).
The Bonds are issued under the provisions of Kentucky Revised Statutes 103.200
through 103.286 inclusive, and do not constitute an indebtedness of the Issuer,
the Commonwealth of Kentucky or any political subdivision thereof within the
meaning of the Constitution of the Commonwealth of Kentucky, and are limited
obligations of the Issuer payable solely from lease payments to be made by the
Company to the Trustee pursuant to the Financing Agreement and from any other
moneys pledged to or held by or on behalf of the Trustee or the Tender Agent
under the Indenture for such purpose, including, but not limited to, proceeds of
drawings on the Letter of Credit described below, and there shall be no other
recourse against the Issuer or any other property now or hereafter owned by it.
Except as otherwise specified in the Indenture, this Bond is entitled to the
benefits of the Indenture equally and natably both as to principal (and
redemption price) and interest with all other Bonds issued under the Indenture.
No additional Bonds may be issued under the Indenture. Reference is made to the
Indenture and the Financing Agreement for a description of the rights of the
Owners of the Bonds; the rights and obligations of the Issuer and the Company;
the rights, duties and obligations of the Trustee and the Tender Agent; and the
provisions relating to amendments and modifications thereof. The acceptance of
the terms and conditions of such documents and the Letter of Credit described
below (including amplifications and qualifications of the provisions thereof),
copies of which or copies of forms of which are on file at the principal
corporate trust office of the Trustee, is an explicit and material part of the
consideration of the Issuer's issuance hereof, and each owner hereof by
acceptance of this Bond accepts and assents to all such terms and conditions as
if fully set forth herein. The owner of this Bond shall have the right to
enforce the provisions of the Indenture, the Financing Agreement or the Letter
of Credit or the rights and remedies thereunder, except as provided in the
Indenture. Capitalized terms used in this Bond which are not defined herein but
which are defined in the Indenture shall have the respective meanings set forth
in the Indenture.
The Company has caused an irrevocable Letter of Credit to be issued by The
Dai-Ichi Kangyo Bank, Limited, New York Branch, a Japanese banking corporation,
to be delivered to the Tender Agent. Such irrevocable Letter of Credit or any
replacement letter of credit or similar credit facility delivered to the Tender
Agent in accordance with the terms of the Indenture is herein called the "Letter
of Credit." As used herein, the term "Bank" shall mean The Dai-Ichi Kangyo Bank,
Limited, New York Branch, as issuer of the Letter of Credit or the bank or
financial institution or insurance company issuing any replacement Letter of
Credit or similar credit facility. The Tender Agent shall be authorized under
the Letter of Credit, subject to the terms and conditions thereof, to draw up to
(a) an amount equal to the principal of the outstanding Bonds (i) to pay the
principal of the Bonds when due at maturity or upon redemption or acceleration
or (ii) to pay the portion of the purchase price of Bonds corresponding to the
principal of Bonds tendered for purchase pursuant to the Indenture to the extent
remarketing proceeds are not available for such purpose, plus (b) an amount
equal to 53 days' accrued interest on the outstanding Bonds (computed at the
maximum rate of 15% per annum) (i) to pay interest on the Bonds when due or (ii)
to pay the portion of the purchase price of Bonds tendered for purchase pursuant
to the Indenture corresponding to the accrued interest, if any, on such Bonds to
the extent remarketing proceeds are not available for such purpose. The Letter
of Credit expires on September 19, 1993, unless terminated earlier pursuant to
its terms or extended. Subject to the provisions of the Indenture, the Company
may, but is not required to, cause the Letter of Credit to be extended or
replaced with another Letter or Credit or similar credit facility having
substantially similar terms. The Bank is under no obligation to extend the
Letter of Credit. Unless the Letter of Credit is extended or replaced in
accordance with the terms of the Indenture, this Bond will become subject to
mandatory tender, as described below. After a mandatory purchase of Bonds in
anticipation of expiration of a Letter of Credit, the Company shall have the
right to provide other credit enhancement as security for the Bonds or no
credit enhancement thereon. The Letter of Credit is being issued pursuant to a
Reimbursement Agreement dated as of September 1, 1990 (the "Reimbursement
Agreement") between the Company and the Bank, under which the Company will be
obligated, among other things, to reimburse the Bank, with interest, for any
draws under the Letter of Credit.
INTEREST ON BONDS
GENERAL. The Bonds shall bear interest at an initial fixed rate based
on a 365-day year (as set forth in the Indenture) from the issue date hereof
until October 2, 1990, and thereafter at a Variable Weekly Rate, subject to
conversion to a Fixed Rate, as described herein. All computations of interest
at Variable Weekly Rates shall be based on a year of 365 or 366 days, as
appropriate; and all computations of interest at a Fixed Rate shall be based on
a 360-day year of twelve 30-day months. As used in this Bond, the term
"Interest Payment Date" means (i) on or prior to the Fixed Rate Conversion
Date, the first Business Day of each calendar month and (ii) after the Fixed
Rate Conversion Date, each March 1 and September 1. As used in this Bond, the
term "Fixed Rate Conversion Date" means the effective date of a conversion of
the interest rate on the Bonds from a Variable Weekly rate to a Fixed Rate.
Variable Weekly Rate. A Variable Weekly Rate shall be determined for
each Weekly Rate Period as described below. Weekly Rate Periods shall
commence on Wednesday of each week and end at the close of business on Tuesday
of the following week; except that in the case of conversion to a Fixed Rate,
the last Weekly Rate Period prior to such conversion shall end on the last day
immediately preceding the Fixed Rate Conversion Date. The Weekly Rate for each
Weekly Rate Period shall be effective from and including the commencement date
of such period and shall remain in effect through and including the last day
thereof. Each such Weekly Rate shall be determined by the Remarketing Agent
(described below) on the Tuesday, or, if such Tuesday is not a Business Day, on
the Business Day next preceding the commencement date of the Weekly Rate Period
to which it relates and provided by the Remarketing Agent to the Tender Agent
by the close of business on that same day. The Weekly Rate so to be determined
shall be the lowest rate of interest which, in the judgment of the Remarketing
Agent, would cause the Bonds to have a market value equal to the principal
amount thereof, plus accrued interest, taking into account Prevailing Market
Conditions as of the date of determination; provided that (i) if the
Remarketing Agent fails for any reason to determine or notify the Tender Agent
of the Weekly Rate for any Weekly Rate Period, the Weekly Rate shall be the
same as the Weekly Rate in effect for the immediately preceding Weekly Rate
Period, except that if such failure continues for more than one consecutive
Weekly Rate Period, the Weekly Rate shall be equal to 80% of the average of the
annual bond equivalent yield evaluations at par of 13-week United States
Treasury obligations at the most recent Treasury auction and (ii) in no event
shall the Weekly Rate for any Weekly Rate Period exceed 15% per annum. No
notice of Weekly Rates will be given to the registered owners of the Bonds;
however, such owners may obtain Weekly Rates from the Tender Agent or the
Remarketing Agent. All determinations of Weekly Rates pursuant to the Indenture
shall be conclusive and binding upon the Issuer, the Company, the Bank, the
Trustee, the Tender Agent and the registered owners of the Bonds to which such
rates are applicable. The Issuer, the Company, the Bank, the Trustee, the
Tender Agent and the Remarketing Agent shall not be liable to any registered
owner for failure to give any notice required with respect to Weekly Rates or
for the failure of any registered owner to receive any such notice.
FIXED RATE. The Indenture provides that the Company, with the provision
of a Favorable Opinion of nationally recognized bond counsel and upon
compliance with certain other conditions, has the right to convert the interest
rate on this Bond to a Fixed Rate to maturity. In the event of such conversion,
this Bond shall be subject to mandatory tender for purchase on the Fixed Rate
Conversion Date, unless the registered owner elects to retain this Bond. After
the Fixed Rate Conversion Date (i) the rate borne on the Bonds shall be a Fixed
Rate, (ii) the registered owner of this Bond shall have no right to tender this
Bond for purchase, and (iii) the original Letter of Credit shall be terminated.
In the event the Bonds are converted to a Fixed Rate, the Company may provide
for a Fixed Rate Letter of Credit or other credit enhancement.
OPTIONAL TENDER
While this Bond bears interest at the Variable Weekly Rate, the registered owner
of this Bond has the right to tender this Bond (or a portion hereof equal to a
whole multiple of $100,000 in principal amount for purchase, at a price equal to
the principal amount hereof (or of such portion) plus accrued interest, on any
Business Day upon written notice to the Tender Agent and the Remarketing Agent
on any Business Day at least seven (7) days prior to the Business Day on which
such purchase is to be made.
Each notice of tender shall (1) be delivered to the Tender Agent at
its principal corporate trust office and to the Remarketing Agent at its
principal office and be substantially in the form prescribed by the Indenture or
in other form satisfactory to the Tender Agent; (2) state (A) the principal
amount of this Bond to which the notice relates, (B) the serial number of this
Bond, (C) that the registered owner irrevocably demands purchase of this Bond
(or a specified portion hereof in an amount equal to a whole multiple of
$100,000), (D) the date on which this Bond (or such specified portion) is to be
purchased, and (E) payment instructions with respect to the purchase price; and
(3) automatically constitute (A) an irrevocable offer to sell this Bond (or such
specified portion) on the purchase date at a price equal to the principal amount
of this Bond (or such specified portion) plus any interest thereon accrued and
unpaid as of the purchase date, (B) an irrevocable authorization and instruction
to the Tender Agent to effect transfer of this Bond (or such portion specified
upon payment of such price to the Tender Agent on the purchase date (C) an
authorization and instruction to the Tender Agent to effect the exchange of
this Bond in whole or in part for other Bonds in an equal aggregate principal
amount so as to facilitate the sale of this Bond (or such specified portion),
and (D) an acknowledgement that such registered owner will have no further
rights with respect to this Bond (or such specified portion) upon payment of
the purchase price thereof to the Tender Agent on the purchase date, except for
the right of such registered owner to receive such purchase price upon
surrender of this Bond to the Tender Agent endorsed for transfer in blank and
with guaranty of signature satisfactory to the Tender Agent. The determination
of the Tender Agent as to whether a notice of tender has been properly
delivered pursuant to the foregoing shall be conclusive and binding upon the
registered owner.
All Bonds tendered for redemption must be delivered to the principal
corporate trust office of the Tender Agent at or before 11:00 a.m. on the
purchase date, and if such Bond is to be purchased prior to the next succeeding
interest payment date and after the Record Date in respect thereof (which is two
Business Days prior to such Interest Payment Date), a non-recourse due-bill for
interest due from the preceding Interest Payment Date to the next succeeding
Interest Payment Date. Any owner who fails to deliver such Bond for purchase on
or before the purchase date shall have no further rights thereunder except the
right to receive the purchase price thereof upon presentation and surrender of
such Bond (or portion thereof) to the Tender Agent property endorsed for
transfer in blank.
MANDATORY TENDER
While this Bond bears interest at a Variable Weekly Rate, this Bond is
subject to mandatory tender for purchase, at a price equal to the principal
amount hereof plus accrued interest (the "purchase price"), on (i) the Fixed
Rate Conversion Date in the event of a conversion of the interest rate on this
Bond to a Fixed Rate and (ii) on the Interest Payment Date immediately preceding
the expiration date of the Letter of Credit then in effect in the event such
Letter of Credit shall not have been extended or replaced in accordance with the
terms of the Indenture if the Fixed Rate Conversion Date coincides with the
Interest Payment Date immediately preceding the expiration date of the Letter of
Credit, it shall be a Fixed Rate Conversion Date for the purpose of mandatory
tender.
Any Bond which the registered owner has not elected to continue to own
after a mandatory tender date in accordance with the procedure and conditions
for such election described in the Indenture and which is not surrendered on the
mandatory tender date, but for which there has been irrevocably deposited with
the Tender Agent an amount sufficient to pay the purchase price thereof, shall
be deemed to have been tendered on the mandatory tender date and interest on
such Bond shall cease to accrue on the mandatory tender date. Thereafter, the
registered owner of such Bond shall not be entitled to any payment other than
the purchase price for such Bond upon surrender thereof to the Tender Agent
endorsed for transfer in blank and with guaranty of signature satisfactory to
the Tender Agent. Except for payment of such purchase price from moneys held by
the Tender Agent for such purpose, such Bond shall no longer be outstanding and
entitled to the benefits of the Indenture. On the mandatory tender date the
Tender Agent shall authenticate and deliver to the new purchasers thereof
substitute Bonds in lieu of such un-surrendered Bonds.
OPTIONAL REDEMPTION
So long as the rate of interest on the Bonds has not been converted to a
Fixed Rate, the Bonds are subject to redemption prior to maturity at the option
of the Issuer, upon the direction of the Company, on any Interest Payment Date
in whole or in part by lot, at a redemption price equal to 100% of the principal
amount thereof plus interest accrued to the redemption date.
After the rate of interest on the Bonds has been converted to a Fixed Rate,
the Bonds shall not be subject to optional redemption upon any Interest Payment
Date as provided in the immediately preceding paragraph, but shall be subject to
redemption prior to maturity at the option of the Issuer, upon the direction of
the Company. in whole or in part, at any time during the applicable redemption
periods and at the redemption prices set forth in the Indenture.
EXTRAORDINARY OPTIONAL REDEMPTION
The Bonds are subject to redemption prior to maturity at the option of the
Issuer, upon direction of the Company, in whole on any date, at a redemption
price equal to 100% of the principal amount thereof plus interest accrued to the
redemption date following the occurrence of any of the following events: (a) the
Project Facilities (or the manufacturing facilities of which they are a part)
shall have been damaged or destroyed to such extent that, in the Company's
judgment, (i) they cannot be reasonably restored when a period of six months to
substantially the same condition thereof immediately preceding such damage or
destruction, (ii) the normal operation of such facilities will thereby be
prevented for a period of six months or more, or (iii) the cost of restoration
of such facilities would exceed by $100,000 the net proceeds of insurance
carried thereon, plus amounts deductible under such insurance; or (b) title to,
or the temporary use of, the Project Facilities (or the manufacturing facilities
of which they are a part) or a part thereof shall have been taken under the
power of eminent domain by any governmental body or by any person, firm or
corporation acting under governmental authority for a bona fide sale in lieu of
such taking shall have occurred) to such an extent that, in the Company's
judgment, the normal operation of such facilities will thereby be prevented for
a period of six months or more; or (b) any Federal, state or local body
exercising governmental or judicial authority shall have taken any action which
results in unreasonable burdens or excessive liabilities, including without
limitation taxes not presently levied, with respect to the Project Facilities
(or the manufacturing facilities of which they are a part) or the ownership or
operation thereof, which in the company's judgment render such facilities or the
operation thereof impractical or uneconomic.
SPECIAL MANDATORY REDEMPTION
The Bonds are subject to mandatory redemption prior to maturity in whole
following the occurrence of a Determination of Taxability (as hereinafter
defined), such mandatory redemption to be made as soon as practicable after the
date on which the Trustee first receives written notice of the Determination of
Taxability, at a redemption price equal to 100% of the principal amount thereof,
plus accrued interest to the redemption date. As used herein and in the
Indenture, a "Determination of Taxability" shall mean one of the following
determinations, made in regard to Section 103 of the Internal Revenue Code of
1986 and the rules and regulations thereunder (including any amendments and
successor provisions thereto, the "Code"), to the effect that the interest
payable on the Bonds is includable in the gross income of the owners of the
Bonds (other than an owner who is a "substantial user" or "related person" as
such terms are used in the Code): (i) a final determination, decision or decree
by the Commissioner or any District Director of Internal Revenue, or by any
court of competent jurisdiction, which is not subject to further review, in a
proceeding in which the Company was afforded the opportunity to contest the
issues involving Federal income tax treatment of interest on the Bonds, either
directly or in the name of the owner of the Bonds, at the Company's expense, as
described in the Indenture, or (ii) a determination that the
$10,000,000 limitation set forth in Section 144(a)(4)(A) of the Code or the
$40,000,000 limitation set forth in Section 144(a)(10) of the Code has been
exceeded, which determination shall be deemed to have been made on the date
which the Company or any principal user of the Project Facilities files any tax
schedule, return or document with the Internal Revenue Service and the Trustee
which expressly discloses that either of such limits has been exceeded, or (iii)
an opinion of nationally recognized bond counsel furnished by the Company to the
Trustee.
EXTRAORDINARY MANDATORY REDEMPTION
If the rate of interest on the Bonds has been converted to a Fixed Rate and
in connection with such conversion a Fixed Rate Letter of Credit has been
delivered to the Tender Agent, then the Bonds are subject to mandatory
redemption, at a price equal to the principal amount thereof plus accrued
interest to the redemption date, on the Interest Payment Date immediately
preceding the expiration date of the Fixed Rate Letter of Credit then in effect
in the event such Fixed Rate Letter of Credit shall not have been extended or
replaced in accordance with the terms of the Indenture.
REDEMPTION NOTICE
Any notice of redemption shall be given not more than 60 and not less than
30 days prior to the redemption date, by mailing a copy of the redemption notice
by first class mail, postage prepaid, to the registered owner of each Bond to be
redeemed in whole or in part at the address shown on the Bond Register. Notice
of optional redemption may be conditioned upon the deposit of moneys in the Bond
Fund established under the Indenture before the date fixed for redemption and
such notice shall be of no effect and the redemption shall be deemed cancelled
unless such moneys are so deposited. All Bonds or portions thereof so called for
redemption will cease to bear interest on the specified redemption date provided
funds for their redemption will cease to bear interest on the specified
redemption date provided funds for their redemption are on deposit at the
principal place of payment at that time.
DEFAULT ACCELERATION
If an Event of Default as defined in the Indenture occurs, the principal of
all Bonds issued under the Indenture may be declared due and payable upon the
conditions and in the manner and with the effect provided in the Indenture.
DENOMINATIONS, TRANSFER, OWNERSHIP
Subject to the provisions of the Indenture, the Bonds are issuable as
registered Bonds in the denomination of $100,000 or any whole multiple thereof,
except that if the interest rate borne by the Bonds is converted to a Fixed
Rate, replacement Bonds shall be in the denomination of $5,000 or any whole
multiple thereof. Subject to the limitations provided in the Indenture and upon
payment of any tax or governmental charge, Bonds may be exchanged for a like
aggregate principal amount of Bonds of authorized denominations.
This Bond is transferable by the registered owner hereof or his duly
authorized attorney at the principal corporate trust office of Dai-Ichi Kangyo
Trust Company of New York, as Tender Agent, or at the duly designated office of
any duly appointed alternate or successor bond registrar, upon surrender of this
Bond, accompanied by a duly executed instrument of transfer in form and with
guaranty of signature satisfactory to the Tender Agent, subject to such
reasonable regulations as the Issuer, the Trustee or the Tender Agent may
prescribe, and upon payment of any tax or other governmental charge incident to
such transfer. Upon any such transfer a new Bond or Bonds in the same aggregate
principal amount will be issued to the transferee. Except as provided in the
Indenture, the person in whose name this Bond is registered on the Bond Register
shall be deemed the owner hereof for all purposes, and the Issuer, the Trustee,
the Tender Agent and the Remarketing Agent shall not be affected by any notice
to the contrary.
THIS BOND IS A LIMITED OBLIGATION OF THE ISSUER AND IS PAYABLE SOLELY FROM
THE SOURCES REFERRED TO HEREIN. NEITHER THE GENERAL CREDIT NOR THE TAXING POWER
OF THE COUNTY OF CARROLL, THE COMMONWEALTH OF KENTUCKY OR ANY POLITICAL
SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THIS BOND, AND THIS BOND SHALL
NOT BE OR BE DEEMED AN OBLIGATION OF THE COUNTY OF CARROLL, THE COMMONWEALTH OF
KENTUCKY OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF THE
CONSTITUTION OF THE COMMONWEALTH OF KENTUCKY.
The liability of the undersigned shall be limited to the proceeds resulting
from the lease of the Project Facilities and the payments, revenues, rents and
receipts receivable by the Issuer therefrom.
No covenant or agreement contained in this Bond shall be deemed to be the
covenant or agreement of any member, officer, attorney, agent or employee of the
Issuer in an individual capacity. No recourse shall be had for the payment of
the principal, the interest thereon, or the premium, if any, payable upon the
redemption of this Bond or any claim based thereon against any officer, member,
agent, attorney or employee of the Issuer past or future, or its successors or
assigns, as such, either directly or through the issuer or any such successor
whether by virtue of any constitutional provision, statute or rule of law, or
by the enforcement of any assessment or penalty, or otherwise, all of such
liability of such members, officers, agents, attorneys or employees being hereby
released as a condition of and and as a consideration for the execution and
delivery of this Bond.
All acts, conditions and things required by the laws of the Commonwealth of
Kentucky and by the Indenture to exist, to have happened and to have been
performed prior to or in connection with the issuance of this Bond do exist,
have happened, and have been performed.
FORM OF ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
the within Bond, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with the
right of survivorship and
not as tenants in common
under Uniform Gift to Minors
UNIFORM GIFT MIN ACT - Custodian Act
------------------------- ------------------------ ------------------------
(Cust) (Minor) (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto _________________________________________________________________________
the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints ___________________________________, attorney to transfer the said
Bond on the Bond Register, with full power of substitution in the premises.
Assignor's Signature: Social Security Number or
Date: Employer Identification
Signature guaranteed: Number of Transferee:
------------ ----------------------
NOTE: The assignor's signature to this
Assignment must correspond with the name
as it appears on the face of the within
Bond in every particular without
alteration or any change whatsoever.
To the Purchasers of the Below Referenced Bonds
Re: $5,000,000 County of Carroll, Kentucky Variable
Rate Demand Industrial Building Revenue Bonds
(Kentucky Ladder Company Project)
------------------------------------------------
Ladies and Gentlemen:
We have acted as Bond Counsel in connection with the issuance by the County
of Carroll, Kentucky (the "Issuer") of $5,000,000 aggregate principal amount of
its Variable Rate Demand Industrial Building Revenue Bonds (Kentucky Ladder
Company Project) (the "Bonds"). The Bonds are being issued to finance a project
(the "Project") for Kentucky Ladder Company (the "Company") consisting of the
acquisition and construction of a manufacturing facility. The Project has been
undertaken by the Issuer to accomplish the public purposes of Chapter 103 of the
Kentucky Revised Statutes, as amended (the "Act").
The Bonds are being issued under and are secured by a Trust Indenture (the
"Indenture") dated as of September 1, 1990 between the Issuer and Dai-Ichi
Kangyo Trust Company of New York as Trustee (the "Trustee"). Under the terms of
a Lease Agreement dated as of September 1, 1990 (the "Financing Agreement")
between the Issuer and the Company, the Company has agreed to make lease
payments to be used to pay when due the principal of, and premium, if any, and
interest on the Bonds, and such payments and other revenues under the Financing
Agreement (collectively, the "Revenues") and the rights of the Issuer under the
Financing Agreement (except rights to payments with respect to certain fees and
expenses, indemnification, and excess investment earnings) are pledged and
assigned by the Issuer as security for the Bonds. As additional security for the
Bonds, the Company has caused the Bonds to be secured by an irrevocable letter
of credit (the "Letter of Credit") issued by The Dai-Ichi Kangyo Bank, Limited,
New York Branch (the "Bank"). The Letter of Credit has a stated expiration date
of September 19, 1993, but may be terminated earlier or extended pursuant to its
terms.
In our capacity as Bond Counsel, we have examined such documents, records
of the Issuer and other instruments as we deemed necessary to enable us to
express the opinions set forth below, including the Act, the Code (as
hereinafter defined) and original counterparts or certified copies of the
Indenture, the Financing Agreement, the Letter of Credit, the Reimbursement
Agreement and the application to the Kentucky Private Activity Bond Allocation
Committee and the approval of that application. With respect to matters
pertaining to the Company, including the due authorization, execution and
delivery of the Financing Agreement and the Company's power to enter into and
perform its obligations thereunder, we have relied on the opinion of Eric J.
Werner, Esq., Corporate Counsel for the Company, a copy of which opinion has
been filed with the Trustee. With respect to the validity of the Letter of
Credit, we have relied on the opinion of Winthrop, Stimson, Putnam & Roberts,
counsel for the Bank, a copy of which opinion has been filed by the Trustee.
With respect to matters of Kentucky law, we have relied on the opinion of
Stites & Harbinson, local bond counsel, a copy of which opinion has been filed
with the Trustee.
In addition, we have assumed (i) the genuineness of the signatures, and the
authority, of persons signing all documents in connection with which this
opinion is rendered, (ii) the authenticity of all documents submitted to us as
originals, (iii) the conformity to authentic original documents of all documents
submitted to us as copies and the authenticity of the originals of said copies,
and (iv) in the case of documents submitted to us as forms or drafts, that such
documents have been duly executed and delivered on behalf of the parties thereto
in the form examined by us and are in full force and effect on the date hereof.
Based on the foregoing, it is our opinion that, under existing law and as
of the date hereof:
1. The Issuer is duly created and validly existing as a county and
political subdivision of the Commonwealth of Kentucky, organized and existing
under the laws of the Commonwealth of Kentucky, with full power and authority to
undertake the Project, to execute, deliver and perform the Financing Agreement
and the Indenture and to issue and sell the Bonds.
2. The Financing Agreement and the indenture have been duly authorized,
executed and delivered by the Issuer and constitute the legal, valid and binding
obligations of the Issuer in accordance with their respective terms. The
Agreement creates a valid lien on the Revenues and on the rights of the Issuer
under the Financing Agreement (except rights to payments with respect to certain
fees and expenses, indemnification and excess investment earnings).
3. All right, title and interest of the Issuer in and to the Financing
Agreement (except for payments with respect to certain fees and expenses.
Indemnification and excess investment earnings) have been validly assigned to
the Trustee.
4. The issuance and sale of the Bonds have been duly authorized by the
Issuer; the Bonds have been duly executed and delivered by the Issuer and the
authenticated by the Tender Agent; and the Bonds are legal, valid and binding
limited obligations of the Issuer in accordance with their terms and are
entitled to the benefit and security of the Indenture.
5. The interest to be paid on the Bonds will be excludable from gross
income for federal income tax purposes, except for any period during which a
Bond is held by a "substantial user" of the facilities financed by the Bonds or
a "related person" within the meaning of Section 147(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and except that the Company or another
person, by taking action after the date hereof that causes the $10,000,000
limitation set forth in Section 144(a)(4)(A) of the Code or the $40,000,000
limit set forth in Section 144(a)(10) of the Code to be exceeded, may cause
interest on the Bonds to become included in gross income (retroactive to the
date of their issuance, in the case of $40,000,000 limitation) for federal
income tax purposes. It should be noted, however, that interest on the Bonds is
an item of tax preference for purposes of the federal alternative minimum tax
imposed on individuals and corporations. In addition to the foregoing
exceptions, the opinion set forth in the first sentence of this paragraph is
subject to the condition that the Issuer and the Company comply with all
requirements of the Code that must be satisfied subsequent to the issuance of
the Bonds in order that interest thereon be, or continue to be, excluded from
gross income for federal income tax purposes. The Issuer and the Company have
covenanted to comply with each such requirement. Failure to comply with certain
of such requirements may cause the inclusion of interest on the Bonds in gross
income for federal income tax purposes to be retroactive to the date of issuance
of the Bonds. We express no opinion regarding other federal tax consequences
arising with respect to the Bonds.
6. Interest to be paid on the Bonds is exempt from taxation by the
Commonwealth of Kentucky and the Bonds are exempt from ad valorem taxation
(except inheritance taxes) by the Commonwealth of Kentucky and all of its
political subdivisions.
It is to be understood that the rights of the holders of the Bonds and the
enforceability of the Bonds and the Financing Agreement may be subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights heretofore or hereafter enacted to the extent
constitutionally applicable and that their enforcement may also be subject to
the exercise of judicial discretion in appropriate cases.
Ownership of the Bonds may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, financial
institutions, property and casualty insurance companies, individual recipients
of Social Security or Railroad Retirement benefits and taxpayers who may be
deemed to have incurred or continued indebtedness to purchase or carry the
Bonds. We express no opinion as to such collateral income tax consequences.
We express no opinion herein with respect to the adequacy or accuracy of
any placement memorandum or other information pertaining to the offering for
sale of the Bonds.
We call your attention to the fact that the Bonds are limited obligations
of the Issuer payable only out of payments to be made by the Company pursuant to
the Financing Agreement, drawings under the Letter of Credit and certain other
moneys available therefor, and that the Bonds do not pledge the credit or taxing
power of the County of Carroll, the Commonwealth of Kentucky or any political
subdivision thereof.
Also, we do not render any opinion with respect to title to the Project
facilities or the priority of any liens of any document.
Very truly yours,
COHEN & GRIGSBY
A Profesional Corporation
<PAGE> 1
Exhibit 10.8
EXECUTION DRAFT
Closing Item No. 1
AGREEMENT
Between
COUNTY OF CARROLL, KENTUCKY
and
KENTUCKY LADDER COMPANY
Dated as of September 1, 1990
The interest of the County of Carroll, Kentucky under the Lease Agreement has
been assigned to Dal-Ichi Kangyo Trust Company of New York, as Trustee (the
"Trustee") in Section 4.7, hereof and in a Trust Indenture dated as of
September 1, 1990 between the County and the Trustee.
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
I. Background, Representations and Findings ..........................1
Section 1.1 Background ................................................1
Section 1.2 Definitions ...............................................1
Section 1.3 Company Representations ...................................4
Section 1.4 Issuer Representations and Findings .......................5
II. Leasing of Premises and Construction of Project
Facilities ........................................................6
Section 2.1 Acquisition and Transfer of Land; Possession
and Quiet Enjoyment by Company ............................6
Section 2.2 Contracts for Project Facilities ..........................6
Section 2.3 Provisions with Respect to Title ..........................7
Section 2.4 Description of Project Facilities .........................7
Section 2.5 Administration of Contracts ...............................7
Section 2.6 Notices and Permits .......................................7
Section 2.7 Additions and Changes to Project Facilities ...............7
III. Financing of Project ..............................................7
Section 3.1 Issuance of Bonds .........................................7
Section 3.2 Construction Fund .........................................8
Section 3.3 Bonds Not to Become Arbitrage Bonds; Fixed Rate ...........8
Section 3.4 Restriction on Use of Construction Fund ...................8
Section 3.5 Three-Year Expenditure Requirements .......................9
Section 3.6 Completion of Project Facilities; Excess Bond Proceeds ....9
Section 3.7 No "Same Issue" Bonds .....................................9
IV. Lease of Project Facilities .......................................9
Section 4.1 Lease of Project Facilities ...............................9
Section 4.2 Security Interest .........................................9
Section 4.3 Payment of Rent ..........................................10
Section 4.4 Letter of Credit .........................................10
Section 4.5 Acceleration of Payment to Redeem Bonds ..................11
Section 4.6 No Defense or Set-Off ....................................11
Section 4.7 Assignment of Issuer's Rights ............................11
Section 4.8 Adjustments ..............................................11
V. Covenants of Company .............................................12
Section 5.1 Maintenance and Operation of Project Facilities ..........12
Section 5.2 Maintenance of Existence .................................12
Section 5.3 Payment of Compensation and Expenses of Trustee,
Remarketing Agent and Tender Agent .......................12
Section 5.4 Payment of Issuer's Fees and Expenses ....................12
Section 5.5 Indemnity Against Claims .................................13
Section 5.6 Damage to or Condemnation of Project Facilities ..........14
<PAGE> 3
Section 5.7 Taxes, Other Governmental Charges and
Utility Charges ..........................................14
Section 5.8 Insurance ................................................15
Section 5.9 Prohibition of Liens .....................................15
Section 5.10 Company's Sublease of Project Facilities .................16
Section 5.11 Granting of Easements ....................................17
Section 5.12 Compliance with Laws .....................................17
Section 5.13 Financing Statements .....................................17
Section 5.14 Limitation on Capital Expenditures .......................18
Section 5.15 Restricted and Prohibited Activities .....................18
Section 5.16 $40,000,000 Limit ........................................18
Section 5.17 Arbitrage Rebate .........................................19
VI. Events of Defaults and Remedies ..................................19
Section 6.1 Events of Default; Acceleration ..........................19
Section 6.2 Payment of Rental on Default; Suit Therefor ..............21
Section 6.3 Other Remedies ...........................................21
Section 6.4 Cumulative Rights ........................................22
VII. Options of Company ...............................................22
Section 7.1 Option to Prepay .........................................22
Section 7.2 Option to Purchase .......................................22
VIII. Miscellaneous ....................................................23
Section 8.1 Limitation of Liability of Issuer ........................23
Section 8.2 Notices ..................................................23
Section 8.3 Severability .............................................24
Section 8.4 Applicable Law ...........................................24
Section 8.5 Assignment; Successors and Assigns .......................24
Section 8.6 Enforcement of Certain Provisions by the Bank ............25
Section 8.7 Amendments ...............................................25
Section 8.8 Term of Agreement ........................................25
Section 8.9 No Warranty by issuer of Condition, Suitability
or Zoning of Project .....................................25
Section 8.10 Company's Federal Income Taxation ........................25
Section 8.11 Amounts Remaining in Bond Fund or
Construction Fund ........................................26
Section 8.12 Survival of Covenants, Conditions and
Representations ..........................................26
Section 8.13 Receipt of indenture .....................................26
Section 8.14 Headings .................................................26
----------
Exhibit A - Real Estate Description
Exhibit B - Description of Project Facilities
<PAGE> 4
LEASE AGREEMENT dated as of September 1, 1990 (the "Lease") between
COUNTY OF CARROLL, KENTUCKY (the "Issuer") and KENTUCKY LADDER COMPANY, a
Pennsylvania corporation qualified to do business in Kentucky (the "Company").
I. Background, Representations and Findings.
Section 1.1 BACKGROUND.
(a) The Issuer is a county and political subdivision of the
Commonwealth of Kentucky (the "State") under the laws of the Commonwealth of
Kentucky. Under Chapter 103 of the Kentucky Revised Statutes, as amended (the
"Act"), the Issuer is authorized to enter into agreements providing for the
acquisition, construction and equipping of industrial building projects and the
sale or lease thereof to industrial occupants for the public purposes of
alleviating conditions of unemployment, maintaining employment at a high level,
and creating and developing business opportunities by the acquisition,
construction, improvement and financing of industrial and manufacturing
enterprises.
(b) The Issuer has undertaken the financing of the costs of a
project (the "Project") consisting of (1) the financing of the acquisition and
construction on a parcel of land located in the Carroll County Industrial Park
in Carroll County, Kentucky (the "Premises") of an approximately 193,000 square
foot facility (the Premises and facilities being herein collectively called the
"Project Facilities") and (2) the lease of the Project Facilities to the
Company. The Premises are more fully described in Exhibit A attached hereto and
made a part hereof, or such other tract of land located in the County as the
Company may substitute for the tract so described (in which case a metes and
bounds description for such tract shall be substituted and shall be the
"Premises"). The Project Facilities shall be used by the Company in the
manufacturing, processing and assembly of climbing ladder and related products,
together with storage, warehousing and distribution facilities with respect
thereto. A more complete description of the Project Facilities to be financed as
part of the Project and the estimated costs thereof is set forth in Exhibit B
attached to this Lease. The Issuer and the Company intend that the Issuer's
bonds issued to finance the Project will constitute an exempt small issue for
the purposes of Section 144(a)(4)(A) of the Internal Revenue Code of 1986
(including any amendments and successor provisions thereto and the rules and
regulations thereunder, the "Code"), so that interest on such bonds will not be
included in the gross income of tine recipients thereof under the Code.
Section 1.2 DEFINITIONS. In this Lease (except as otherwise expressly
provided or unless the context otherwise requires) defined terms may be used in
the singular or the
<PAGE> 5
plural, the use of any gender includes all other genders, and the following
terms shall have the meanings specified in the foregoing recitals:
Act Premises
Code Project
Lease Project Facilities
Issuer State
In addition, the following terms shall have the meanings specified in this
Section, unless the context otherwise requires:
"Bank" means The Dai-Ichi Kangyo Bank, Limited, New York Branch, as
issuer of the original Letter of Credit and any bank or financial institution
issuing any replacement Letter of Credit.
"Bond" or "Bonds" means the Variable Rate Demand Industrial Building
Revenue Bonds (Kentucky Ladder Company) issued under the Indenture in the
original aggregate principal amount of $5,000,000.
"Condemnation Award" means any award or payment (less any expenses,
including attorneys' fees, incurred by the Issuer, the Trustee, the Bank or the
Company in connection therewith) which may be made with respect to the Project
Facilities as a result of (i) the taking of all or a portion of the Project
Facilities by the exercise of the right of eminent domain by any governmental
body, or by any person, firm or corporation acting under governmental
authority (or a bona fide sale in lieu of such taking) or (ii) the alteration of
the grade of any street.
"Contracts" means the contracts and purchase orders awarded by the
Company pursuant to Section 2.2.
"Cost" or "Costs" means any cost of the Project or in respect of the
Project Facilities now or hereafter permitted under the Act. Without limiting
the generality of the foregoing; such costs may include: (i) amounts payable to
contractors and suppliers (including fees for designing Project Facilities where
the designs are provided by the contractor or supplier); (ii) costs of labor,
services, materials, supplies and equipment furnished by the Company (including
shipping costs), (iii) architectural, engineering, legal and other professional
fees, marketing costs and brokerage commissions; (iv) interest on the Bonds to
the extent permitted by the Act; and (v) costs of financing, including but not
limited to bond discount, printing expense, recording fees, Trustee, Tender
Agent, Co-Trustee and Remarketing Agent fees, Letter of Credit issuance fees and
expenses and legal and accounting fees.
"County" means the County of Carroll, located within the Commonwealth
of Kentucky.
-2-
<PAGE> 6
"Event of Default" means any of the events described in Section 6.1
hereof.
"Force Majeure" means any cause, circumstance or event not reasonably
within the control of the Company, including, without limitation, the following:
acts of God; strikes, lock-outs or other industrial disturbances; acts of public
enemies; orders or restraints of any kind of the government of the United States
or of the State or any of their departments, agencies, political subdivisions
or officials, or any civil disturbances; riots; epidemics; landslides;
lightning; earthquakes; fires; hurricanes; storms; droughts; floods; washouts;
arrests; restraint of government and people; explosions; breakage, malfunction
or accident to facilities, machinery, transmission pipes or canals; partial or
entire failure of utilities; and shortages of labor, materials, supplies or
transportation; provided that lack of funds on the part of the Company shall not
be deemed to be a Force Majeure.
"Indenture" means the Issuer's Trust Indenture dated as of the date
hereof to the Trustee, as amended or supplemented at the time in question.
"Leasehold Mortgage" means the Leasehold Mortgage and Security Agreement
dated as of September 1, 1990 from the Company to the Bank.
"Letter of Credit" means the Bank's original Letter of Credit in favor
of the Tender Agent or any substitute therefor or any replacement letter of
credit or similar credit facility delivered to the Tender Agent pursuant to
Section 7.05 or 7.07 of the Indenture or any Fixed Rate Letter of Credit.
"Placement Agreement" means the Placement Agreement dated as of August
24, 1990 between the Company and Manufacturers Hanover Securities Corporation,
as Placement Agent.
"Reimbursement Agreement" means the Reimbursement Agreement dated as of
September 1, 1990 between the Company and the Bank, as the same may be amended
from time to time and filed with the Trustee and the Tender Agent, and any
agreement of the Company with the Bank issuing a replacement Letter of Credit
setting forth the obligations of the Company to such Bank arising out of any
payments under the replacement Letter of Credit and which provides that it shall
be deemed to be a Reimbursement Agreement for the purpose of the Indenture.
"Remarketing Agent" means Manufacturers Hanover Securities Corporation
and its successors in such capacity as provided in Section 14.01 of the
Indenture.
"Rental" means the aggregate rental payments to be paid by the Company
for the lease of the Project Facilities pursuant to Section 4.3.
-3-
<PAGE> 7
"Tender Agent" means the entity appointed as such by the Issuer and
accepting such appointment for the time being pursuant to Article XIII of the
Indenture.
"Trustee" means Dai-Ichi Kangyo Trust Company of New York, having its
principal corporate trust office in New York, New York, and its successors in
the trust under the Indenture.
The words "hereof," "herein," "hereto," "hereby" and "hereunder" refer
to this entire Lease. Unless otherwise indicated, all references to particular
Articles or Sections are references to the Articles or Sections of this Lease.
All capitalized terms used but not otherwise defined in this Lease shall have
the meanings ascribed to them in the Indenture.
Section 1.3 COMPANY REPRESENTATIONS. The Company represents that:
(a) It is a corporation, duly organized and existing under the laws of
the Commonwealth of Pennsylvania, and has been duly qualified to conduct its
business under the laws of the State. The making and performance of this Lease
on the Company's part have been duly authorized in accordance with the terms and
provisions of the Company's bylaws and will not violate or conflict with any
governmental rule or regulation of the United States or of the state in which
the Company is incorporated, or with any agreement, instrument or document by
which the Company or any of its properties is bound.
(b) The Project Facilities consist of land or property of a character
subject to allowance for depreciation under Section 167 of the Code.
(c) The acquisition, construction, renovation and equipping of the
Project Facilities, as provided under this Lease, will tend to promote the
employment and general welfare of the residents of the County and the State by
promoting the continuation and expansion of gainful employment opportunities for
such residents. The availability of financial assistance by the Issuer makes it
possible for the Company to undertake the acquisition and construction of the
Project Facilities.
(d) The proceeds of the Bonds will not exceed the Costs of the Project.
(e) The Company has acquired or will acquire before they are needed all
material permits and licenses and has satisfied or will satisfy other
requirements necessary for the acquisition, construction and operation of the
Project Facilities.
(f) The Company intends to lease and operate the Project Facilities as a
manufacturing facility and as a
-4-
<PAGE> 8
"building" or "industrial building" within the meaning of the Act.
Section 1.4 ISSUER REPRESENTATIONS AND FINDINGS. The Issuer hereby
confirms its findings and represents that:
(a) The Issuer is a county and political subdivision duly organized and
existing under the constitution and laws of the State (including the Act) and is
authorized and empowered by the constitution and laws of the State and its
ordinance dated September 11, 1990 to enter into the transactions contemplated
by this Lease and to carry out its obligations hereunder. The Project
constitutes and will constitute an industrial building project within the
meaning of the Act.
(b) Based on representations and information furnished to the Issuer by
or on behalf of the Company, the Issuer has found that the Company is engaged
in industrial activities in the State requiring substantial capital and creating
substantial employment opportunities, that its operations contribute to
economic growth and the creation of employment opportunities in the State,
and that the Company is financially responsible to assume its obligations
prescribed by this Lease and the Act.
(c) Based on representations and information furnished to the Issuer by
or on behalf of the Company, the Issuer has found that the Project will promote
the health, safety and general welfare of the people of the State and the
public purposes of the Act by alleviating conditions of unemployment and by
maintaining employment at a high level and creating and developing business
opportunities in the State.
(d) The Project Facilities are, and will be, located wholly within the
boundaries of the County.
(e) The Project has been approved by a publicly elected local official
as required by the Code, after a public hearing held upon at least two weeks
public notice.
(f) The issuance of the Bonds and the execution of this Lease and the
Indenture have been approved by the Issuer at a duly constituted meeting.
(g) Except as otherwise permitted by this Lease, the Issuer covenants
that it has not and will not pledge the income and revenues derived from this
Lease other than to secure the Bonds or the related obligations of the Company
to the Bank under the Reimbursement Agreement.
-5-
<PAGE> 9
II. Leasing of Premises and Construction of Project Facilities.
Section 2.1 ACQUISITION AND TRANSFER OF LAND; POSSESSION AND QUIET
ENJOYMENT BY COMPANY. The Company has caused the acquisition of the Premises by
the Issuer. Upon acquisition of the Premises by the Issuer, the Company will pay
all expenses of such transfer, including any and all applicable real estate
transfer and other taxes and legal, recording, notary and other similar fees
and charges. The Company agrees to pay all charges and costs including but
not limited to legal fees, recording fees, notary fees and any other similar
fees and charges. Acquisition of or work on certain portions of the Project
Facilities may have been commenced or completed on or before the date the
Issuer issues the Bonds under this Lease. The Company by deed, bill of sale or
other appropriate instrument agrees to grant, convey and assign to the Issuer
all of its right, title and interest in and to the Project Facilities (other
than portions thereof which are not purchased with proceeds of the Bonds).
Upon request of the Issuer, the Company will grant, convey and assign or cause
to be granted, conveyed and assigned, to the Issuer, by deed, bill of sale,
lease, assignment, license, grant of easements or other appropriate instrument,
such interests as it may have in the Project Facilities and such additional
rights as the Issuer shall require in order to comply with the Act. The Issuer
agrees that so long as no Event of Default hereunder or under the Indenture has
occurred and is continuing, the Company, on performing the covenants and
conditions contained herein, shall and may peaceably and quietly have, hold,
enjoy and possess the Project Facilities, including such land and existing
buildings, free from molestation, eviction or disturbance by the Issuer or by
any other person or persons claiming the same, by, through or under the Issuer.
The Issuer agrees that it will not create any lien, encumbrance or charge upon
the Project Facilities other than the security intended to be given under the
Indenture or the security intended to be given to the Bank to secure the
Company's obligations under the Reimbursement Agreement, and that it will not
grant any easement, license, right of way or other rights or privileges in the
nature of easements with respect to the Project Facilities, or otherwise
encumber the Project Facilities, without the prior written consent of the
Company. Pursuant to Article VII hereof, upon payment in full of all amounts due
as Rental under this Lease, the Issuer shall convey the Premises and the Project
Facilities to the Company.
Section 2.2 CONTRACTS FOR PROJECT FACILITIES. The Company has awarded or
will award contracts and purchase orders (collectively, the "Contracts")
covering the acquisition and construction of the Project Facilities. Each
Contract for construction and/or renovation will contain a valid waiver by the
contractor of the right to file and maintain any mechanic's liens on the Project
Facilities, which waiver shall be filed before
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commencement of work by such contractor in the appropriate office of the County.
Subject to Force Majeure, the Company will proceed diligently with the
acquisition and construction of the Project Facilities to completion. The
Company will pay all sums required to complete the same to the extent that the
cost thereof is not provided pursuant to the Indenture.
Section 2.3 PROVISIONS WITH RESPECT TO TITLE. Title to the improvements
and related equipment included in the Project Facilities shall be deemed to vest
in the Issuer as the materials and equipment constituting the same are
delivered, erected, installed and/or put in place and immediately thereafter
shall be deemed to be leased to the Company without any further action required
of the Issuer or the Company, except that title to property not financed with
any part of the proceeds of the Bonds shall not vest in the Issuer but shall
remain in the Company.
Section 2.4 DESCRIPTION OF PROJECT FACILITIES. The Company will revise
Exhibit B and such supplemental information to reflect material additions to,
deletions from and changes in the Project Facilities and will notify the Trustee
of such modifications.
Section 2.5 ADMINISTRATION OF CONTRACTS. The Company will have full
responsibility for preparing, administering, amending and enforcing the
Contracts and litigating or settling claims thereunder, and will be entitled to
all warranties, guaranties and indemnities provided under the Contracts and by
law.
Section 2.6 NOTICES AND PERMITS. The Company shall give or cause to be
given all notices and comply or cause compliance with all laws, ordinances,
municipal rules and regulations and requirements of public authorities applying
to or affecting the conduct of the work on the Project Facilities, and the
Company will defend and save the Issuer, its members, officers, agents and
employees, harmless from all fines due to failure to comply therewith. The
Company shall procure or cause to be procured all material permits and licenses
necessary for the prosecution of the work.
Section 2.7 ADDITIONS AND CHANGES TO PROJECT FACILITIES. Subject to
Section 5.14, the Company may, at its option and at its own cost and expense, at
any time and from time to time, make such improvements, additions and changes to
the Project Facilities as it may deem to be desirable.
III. Financing of Project.
Section 3.1 ISSUANCE OF BONDS. In order to finance the Project
Facilities, the Issuer, upon request of the Company, will issue and sell the
Bonds up to the maximum aggregate principal amount of $5,000,000. The Bonds will
be issued under
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and secured by the Indenture. The Bonds will be payable solely from payments
made by the Company pursuant to the terms hereof, or from other moneys available
for such purpose under the terms of the Indenture. The net proceeds of the Bonds
shall be applied pursuant to Article III hereof and Section 2.11 of the
Indenture.
Section 3.2 CONSTRUCTION FUND. The net proceeds of the Bonds (exclusive
of accrued interest, if any) will be deposited in the Construction Fund
established under the Indenture for payment of Costs of the Project upon
requisition by the Company as provided in Section 5.02 of the Indenture. The
Company agrees that the sums so requisitioned from the Construction Fund will
be used only for the Costs of the Project, and will not be used for any other
purpose. The Company shall have the right to enforce payments from the
Construction Fund upon compliance with the procedures set forth in this Section
and Section 5.02 of the Indenture; provided that during the continuance of an
Event of Default as defined in the Indenture, the Construction Fund shall be
held for the benefit of holders of the Bonds in accordance with the provisions
of the Indenture.
Section 3.3 BONDS NOT TO BECOME ARBITRAGE BONDS; FIXED RATE. As provided
in Article VIII of the Indenture, the Trustee will invest moneys held by or on
behalf of the Trustee as directed by the Company except as otherwise provided in
the Indenture. The Issuer and the Company hereby covenant to each other and to
the holders of the Bonds that, notwithstanding any other provision of this Lease
or any other instrument, they will neither make nor instruct the Trustee to make
any investment or other use of the Construction Fund or other proceeds of the
Bonds which would cause the Bonds to be arbitrage bonds under Section 148(a) or
103(b)(2) of the Code and the regulations thereunder, and that they will comply
with the requirements of such Section and regulations throughout the term of the
Bonds. The Company shall not elect to establish a Fixed Rate for the Bonds,
unless it shall have first delivered to the Trustee the Favorable Opinion
required by Section 3.03 of the Indenture.
Section 3.4 RESTRICTION ON USE OF CONSTRUCTION FUND. The Company (i)
shall not use or direct the use of moneys from the Construction Fund in any way,
or take or omit to take any other action, so as to cause the interest on any
Bonds to become subject to Federal income tax, (ii) shall not use more than 2%
of the proceeds of the Bonds for costs of issuance thereof, (iii) shall use at
least 95% of the proceeds of the Bonds for Costs constituting land or property
of a character subject to an allowance for depreciation for federal tax purposes
within the meaning of Section 167 of the Code, and (iii) shall not use the
proceeds of the Bonds to acquire, construct or install facilities, the nature
of which would cause the interest on the Bonds to become subject to federal
income tax.
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Section 3.5 THREE-YEAR EXPENDITURE REQUIREMENTS. Except to the extent
otherwise approved by a Favorable Opinion furnished by the Company to the
Trustee, within three years of the date of original delivery and payment for the
Bonds, the Company shall have completed the Project Facilities and caused all of
the proceeds of the Bonds to be expended for Costs of the Project or to be
transferred from the Construction Fund to the Bond Fund as described in Section
3.6.
Section 3.6 COMPLETION OF PROJECT FACILITIES; EXCESS BOND PROCEEDS. When
the Company certifies to the Trustee and the Issuer, in the manner provided in
Section 5.03 of the Indenture, that the Project Facilities are complete, any
amounts remaining in the Construction Fund will be transferred to the
Construction Fund Surplus Account in the Bond Fund and applied by the Trustee in
accordance with Section 5.03 of the Indenture. Such application shall constitute
payment of a portion of, and shall be credited against, the Purchase Price due
from the Company to the Issuer. If for any reason the amount in the Construction
Fund proves insufficient to pay all Costs of the Project, the Company will pay
the remainder of such Costs.
Section 3.7 NO "SAME ISSUE" BONDS. Neither the Company nor any other
principal user of the Project Facilities, nor any related person, within the
meaning of Section 144(a)(3) of the Code, has participated, or will participate,
in the offering for sale or sale of any issue of private activity bonds within
the meaning of Section 141 of the Code, which are or will be required to be
aggregated with the Bonds as part of the "same issue" within the meaning of
Revenue Rulings 81-216, 1981-2, C.B. 21.
IV. Lease of Project Facilities.
Section 4.1 LEASE OF PROJECT FACILITIES. The Issuer hereby leases and
rents to the Company, and the Company hereby accepts and does hereby lease and
rent from the Issuer, the Project Facilities, under and subject to all
easements, covenants, reversions, conditions and restrictions existing at the
time of settlement pursuant to Section 4.7, for the Rental set forth in Section
4.3.
Section 4.2 SECURITY INTEREST.
(a) In order to secure its obligations hereunder, the Company agrees
that the issuer shall have a security interest, which shall be second in
priority to the security interest of the Bank in "Funds Collateral" pursuant to
the Reimbursement Agreement, subject only to the rights of the Trustee and the
holders of the Bonds in all the Company's right, title and interest in and to
all funds and investments thereof now or hereafter held by or on behalf of the
Trustee or the Tender Agent under the Indenture as security for the payment of
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the Bonds, including without limitation any and all construction funds, debt
service funds and other funds and securities and other instruments comprising
investments thereof and interest and other income derived therefrom held as
security for the payment of the Bonds. The terms of this Section shall
constitute a security agreement within the meaning of the State Uniform
Commercial Code.
(b) The Company agrees that its interest in the Project Facilities and
its rights hereunder are and shall be subordinate to the rights of the Trustee
under the Indenture, except for its right to prepay all of the amounts due
hereunder and to cancel and terminate this Lease at any time, and agrees to
comply with and be bound by all of the provisions thereof that are binding upon
the Issuer.
Section 4.3 PAYMENT OF RENT. The Rental to be paid by the Company for
the lease of the Project Facilities will be an amount equal to the principal or
applicable redemption price of, premium, if any, on and interest on the Bonds.
The Rental shall be payable by the Company in monthly installments which as to
amounts and due dates correspond to the payments of the principal or applicable
redemption price of, premium (if any) on and interest on the Bonds. In addition
to its obligation hereunder to pay the Rental, the Company also agrees to pay or
cause to be paid to the Trustee any amount necessary to enable the Tender Agent
to effect the purchase of Bonds for purchase pursuant to Article IV of the
Indenture to the extent that moneys are not otherwise available therefor from
the proceeds of the remarketing of such Bonds and/or from drawings on any Letter
of Credit then held by the Tender Agent. Such Rental and other payment
obligations shall be reduced to the extent that other moneys are available for
such purpose in funds available for payment by the Trustee or the Tender Agent
and a credit in respect thereof has been granted pursuant to the terms hereof or
the terms of the Indenture. It Is the intention of the Issuer and the Company
that, notwithstanding any other provision of this Agreement, the Trustee, as
assignee of the Issuer, shall receive funds from or on behalf of the Company at
such times and in such amounts as will enable the Issuer to meet all of its
obligations under the Bonds, including any such obligations surviving the
payment of the Bonds.
Section 4.4 LETTER OF CREDIT. Concurrently with the issuance by the
Issuer of the Bonds, the Company shall cause the Letter of Credit to be
delivered to the Tender Agent. The Company may also from time to time cause the
extension of the Letter of Credit or the delivery of another Letter of Credit in
replacement therefor, to the extent permitted by the terms of the Indenture. It
is anticipated that so long as any Letter of Credit is held by the Tender Agent,
all payments of principal and interest on the Bonds will be funded from draws on
the Letter of Credit.
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Section 4.5 ACCELERATION OF PAYMENT TO REDEEM BONDS. Whenever the Bonds
are subject to optional redemption pursuant to the Indenture, the Issuer will be
deemed, but only upon request of the Company to the Trustee, to have, directed
the Trustee to call the same for redemption as provided in the Indenture.
Whenever the Bonds are subject to mandatory redemption pursuant to the
Indenture, the Company will cooperate with the Issuer and the Trustee in
effecting such redemption. In the event of any mandatory or optional redemption
of the Bonds, the Company will pay or cause to be paid on or before the date of
redemption an amount equal to the applicable redemption price as a prepayment of
that portion of the Rental corresponding to the Bonds to be redeemed, together
with applicable premium (if any) and interest accrued to the date of redemption.
Section 4.6 NO DEFENSE OR SET-OFF. The obligations of the Company to
make or cause to be made payments of the Rental shall be absolute and
unconditional without defense or set-off by reason of any default by the
contractors under the Contracts or by the Issuer under this Lease or under any
other agreement between the Company and the Issuer or for any other reason,
including without limitation, failure to complete the Project Facilities, any
acts or circumstances that may constitute failure of consideration, destruction
of or damage to the Project Facilities, commercial frustration of purpose, or
failure of the Issuer to perform and observe any agreement, whether express or
implied, or any duty, liability or obligation arising out of or connected with
this Agreement, it being the intention of the parties that the payments required
of the Company hereunder will be paid in full when due without any delay or
diminution whatsoever. Payments of the Rental and additional sums required to be
paid by or on behalf of the Company hereunder shall be received by the Issuer or
the Trustee as net sums and the Company agrees to pay or cause to be paid all
charges against or which might diminish such net sums.
Section 4.7 ASSIGNMENT OF ISSUER'S RIGHTS. As security for the payment
of the Bonds, the Issuer will assign in the Indenture and does hereby assign to
the Trustee all the Issuer's rights under this Lease (except the rights of the
Issuer to receive payments under Sections 5.4 and 5.5). The Company consents to
such assignment and agrees to make or cause to be made payments of the Rental
under Sections 4.3 and 4.5 directly to the Trustee without defense or set-off by
reason of any dispute between the Company and the Trustee.
Section 4.8 ADJUSTMENTS. The Company agrees to pay all charges and costs
which are required and whenever required in connection with the Issuer's
acquisition of the Project Facilities and in connection with the conveyance of
the Project Facilities from the Issuer to the Company. The Company agrees that
the Issuer shall not be responsible for any inaccuracies in any settlement sheet
in connection with the foregoing.
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V. Covenants of Company.
Section 5.1 MAINTENANCE AND OPERATION OF PROJECT FACILITIES.
(a) During the term of this Lease, the Company will at its own cost and
expense keep and maintain, or cause to be kept and maintained, in good repair
and condition (excepting reasonable wear and tear) the Project Facilities and
all additions and improvements thereto; provided that this covenant shall not
prevent the Company from selling its interest in the Project Facilities pursuant
to Section 7.5.
(b) The Company will maintain and use the Project Facilities as a
manufacturing facility with warehousing and distribution facilities related
thereto, as set forth in the Company's Use of Bond Proceeds Certificate to be
executed and delivered on the Closing Date, or, subject to the provisions of
Section 5.10, lease them to tenants for industrial use. The Company will not use
or permit the use of the Project Facilities in any manner which would result in
a violation of Section 144(a)(8) or Section 147(e) of the Code.
(c) The Company agrees to timely pay, or cause to be paid, for any
improvements to the Project Facilities lawfully done or lawfully ordered to be
done by any municipal, state or Federal authority and to comply in all material
respects at its own cost and expense with all lawful and enforceable notices
received from public authorities from and after the date hereof, which affect
the Project Facilities and the use and operation thereof, other than those
improvements, orders and notices, the amount, validity or application of which
is at the time being contested, in whole or in part, in good faith by
appropriate proceedings.
Section 5.2 MAINTENANCE OF EXISTENCE. The Company will maintain its
existence and its qualification to do business in the State, subject to the
provisions of the Reimbursement Agreement.
Section 5.3 PAYMENT OF COMPENSATION AND EXPENSES OF TRUSTEE, REMARKETING
AGENT AND TENDER AGENT. Except to the extent payment is provided from the
Construction Fund, the Company will pay the Trustee's and Tender Agent's
reasonable compensation and expenses under the Indenture (including any such
amounts payable to a separate or co-trustee appointed by the Trustee pursuant to
the Indenture), including all costs of redeeming Bonds thereunder. The Company
will also pay the reasonable compensation of the Remarketing Agent for the
performance of its duties and services under the Indenture.
Section 5.4 PAYMENT OF ISSUER'S FEES AND EXPENSES. Except to the extent
payment is provided from the Construction
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Fund, the Company will pay the Issuer's standard administration fees (if any)
and all reasonable expenses, including legal and accounting fees, incurred by
the Issuer in connection with the issuance of the Bonds and the performance by
the Issuer of its functions and duties under this Lease and the Indenture, plus
advertising costs and all other out-of-pocket costs (including fees and expenses
payable (and not subject to refund) at the end of each Bond Year thereafter so
long any Bonds remain Outstanding).
Section 5.5 INDEMNITY AGAINST CLAIMS. In the exercise of the powers of
the Issuer, the Trustee or the Tender Agent under the Indenture or hereunder,
including without limiting the foregoing the application of moneys, the
investment of funds and the letting or other disposition of the Project
Facilities upon the occurrence of an Event of Default, neither the Issuer, the
Trustee, the Tender Agent nor their members, directors, officers, employees or
agents shall be accountable to the Company for any action taken or omitted by
any of them in good faith and with the belief that it is authorized or within
the discretion or rights or powers conferred. The Issuer, the Trustee, the
Tender Agent and their members, directors, officers, employees and agents shall
be protected in acting upon any paper or document believed to be genuine, and
any of them may conclusively rely upon the advice of counsel and may (but need
not) require further evidence of any fact or matter before taking any action. No
recourse shall be had by the Company for any claims based herein or on the
Indenture against any member, director, officer, employee or agent of the
Issuer, the Trustee or the Tender Agent alleging personal liability on the part
of such person unless such claims are based upon the gross negligence, bad
faith, fraud or deceit of such person. The Company will indemnify and hold
harmless the Issuer, the Trustee, the Tender Agent and each member, director,
officer, employee and agent of the Issuer, the Trustee or the Tender Agent
against any and all claims, losses, damages or liabilities, joint and several,
to which the Issuer, the Trustee, the Tender Agent or any member, director,
officer, employee or agent of the Issuer, the Trustee or the Tender Agent may
become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise directly or indirectly out of the Project or
are based upon any other act or omission in connection with the Project by the
Issuer, the Trustee or the Tender Agent, unless the losses, damages or
liabilities arise from the gross negligence or willful misconduct of the person
to be indemnified. In the event any claim is made or action brought against the
Issuer, the Trustee, the Tender Agent or any member, director, officer, employee
or agent of the Issuer, the Trustee or the Tender Agent, except for claims or
actions brought which arise from the gross negligence or willful misconduct of
such person, the Issuer, the Trustee or the Tender Agent may direct the Company
to assume the defense of the claim and any action brought thereon and pay all
reasonable expenses (including attorney's fees) incurred therein; or the Issuer,
the Trustee or
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the Tender Agent, after notice to the Company and the Company's failure to
defend, may assume the defense of any such claim or action, the reasonable cost
(including attorney's fees) of which shall be paid by the Company upon written
request of the Issuer, the Trustee or the Tender Agent to the Company. The
counsel selected by the Issuer, the Trustee or the Tender Agent to conduct such
defense shall be approved by the Company, which approval shall not be
unreasonably withheld. The Company may engage its own counsel to participate in
the defense of any such action. The defense of any such claim shall include the
taking of all actions necessary or appropriate thereto.
Section 5.6 DAMAGE TO OR CONDEMNATION OF PROJECT FACILITIES. Damage to,
destruction of or condemnation of all or a portion of the Project Facilities
shall not terminate this Lease, or cause any abatement of or reduction in the
payments to be made by the Company or otherwise affect the respective
obligations of the Issuer or the Company, except as set forth in this Agreement.
Section 5.7 TAXES, OTHER GOVERNMENTAL CHARGES AND UTILITY CHARGES. The
Company shall pay, or cause to be paid before the same become delinquent, all
taxes, assessments, whether general or special, and governmental charges of any
kind whatsoever that may at any time be lawfully assessed or levied against or
with respect to the Project Facilities, including any equipment or related
property installed or brought by the Company therein or thereon (including,
without limiting the generality of the foregoing, any taxes levied upon or with
respect to the revenues or income of the Issuer with respect to the sale of the
Project Facilities), and all utility and other charges incurred in the
operation, maintenance, use, occupancy and upkeep of the Project Facilities.
With respect to special assessments or other governmental charges that lawfully
may be paid in installments over a period of years, the Company shall be
obligated to pay only such installments as are required to be paid during the
term hereof. The Company may, at its expense, in good faith contest any such
taxes, assessments and other charges and, in the event of any such contest, may
permit the taxes, assessments or other charges so contested to remain unpaid
during the period of such contest and any appeal therefrom. The Company agrees
that it will not use, as a basis for contesting or adjudicating any taxes or
assessments upon the Project Facilities, the fact that the Issuer has an
ownership interest therein. The Company also agrees to comply at its own cost
and expense with all notices received from public authorities from and after the
date hereof.
The Company and the Issuer acknowledge that during the period in which
title to the Project is held by the Issuer the Project will be exempt from
certain real property taxes which would otherwise be payable by the Company to
the Issuer in respect of the Project Facilities. The Company and the Issuer
agree that during such period the Company shall make payments in
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lieu of taxes to the Issuer at the then current school rate plus .05 cents per
$100 per annum on the value of the Project Facilities as improved (provided that
in no event shall the assessed value of the Project Facilities for purposes of
determining the amount of such payments exceed $3,500,000).
Section 5.8 INSURANCE.
(a) The Company shall at its own cost and expense obtain or cause be be
obtained insurance policies naming the Company, the Issuer and the Bank as
insureds, insuring against such risks, and in such amounts as are customarily
insured against by entities owning facilities of like size and type to the
Project Facilities, paying as the same become due and payable, all premiums in
respect thereof, including but not necessarily limited to:
(i) until the completion of the construction of the Project
Facilities, builders' "all risk" insurance;
(ii) from and after the completion of the construction of the
Project Facilities, fire insurance with uniform standard extended
coverage endorsements, and vandalism and malicious mischief insurance;
(iii) comprehensive general liability insurance with minimum
limits of $500,000 per person and $500,000 per occurrence, and property
damage coverage with a minimum limit of $100,000; and
(iv) workers' compensation coverage and any other type of
insurance required by the laws of the State.
(b) The Company shall require that any contractor employed for
construction of the Project Facilities provide comprehensive general liability
coverage and workers' compensation coverage in amounts customarily carried by
contractors with respect to such construction.
(c) The insurance policies or endorsements shall cover the entire
Project Facilities and, if obtainable, shall provide that the coverage will not
be reduced or cancelled without 30 days prior written notice to the Trustee and
the Bank. The Company shall provide the Issuer, the Trustee and the Bank with
certificates from the insurers at such times as may be necessary (but in no
event less than once every three years) to show that insurance is being
maintained as required by this Section.
Section 5.9 PROHIBITION OF LIENS. The Company shall not create or suffer
to be created by any other person any lien or charge upon the Construction Fund
or the Project Facilities or any part thereof or upon the rents, contributions,
charges,
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receipts or revenues therefrom, other than any easement, license, other right or
privilege as permitted under Section 5.11 hereof or the Leasehold Mortgage;
provided that nothing in this Lease shall limit the right of the Company to
enforce payments from the Construction Fund pursuant to Section 5.02 of the
Indenture. The Company further agrees to pay or cause to be discharged or make
adequate provision to satisfy and discharge, within 90 days after the same shall
become due, any such lien or charge and also all lawful claims or demands for
labor, materials, supplies or other charges which, if unpaid, might be or become
a lien upon the Construction Fund, the Project Facilities or any part thereof or
the revenues or income therefrom. Nothing in this Section shall require the
Company to pay or cause to be discharged or make provision for any such lien or
charge so long as the validity thereof shall be contested in good faith and so
long as the Construction Fund, the Project Facilities or any part thereof are
not subject to loss or forfeiture. The Issuer shall cooperate with the Company
in any such contest and shall cooperate with the Company with respect to
obtaining any necessary releases of liens or other encumbrances on the Project
Facilities.
Section 5.10 COMPANY'S SUBLEASE OF PROJECT FACILITIES. The Company may
sublease any portion of the Project Facilities, but only subject to the
following conditions:
(a) No such sublease shall relieve the Company of its obligation
to make the payments required under Sections 4.3 and 4.5 or to perform
all other covenants hereunder, for which the Company shall remain
primarily liable;
(b) If the tenant would be deemed a "principal user" or "test
period beneficiary" of the Project Facilities within the meaning of
Section 103 of the Code, the Company shall have obtained and submitted
to the Trustee a Favorable Opinion that the proposed lease will not have
an adverse effect on the tax-exempt status of the Bonds;
(c) Not more than an aggregate of 25% of the rentable space of
the Project Facilities shall be leased to provide facilities the primary
purpose of which is provision of retail food and beverage service,
automobile sales or service, recreation or entertainment, nor shall such
facilities furnish more than 25% of the rental revenues produced by the
Project Facilities; and
(d) Such lease shall contain covenants (i) forbidding any use of
the leased premises which would constitute a violation of Section
144(a)(8) or Section 147(e) of the Code and (ii) if and as appropriate
in the Favorable Opinion, with respect to the $10,000,000 limit of
Section 144(a)(4)(A) of the Code and the $40,000,000 limit of Section
144(a)(10) of the Code.
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Section 5.11 GRANTING OF EASEMENTS. If no Event of Default under this
Lease has occurred and is continuing, the Company may, notwithstanding anything
contained in this Lease to the contrary, at any time or times, grant easements,
licenses, rights of way and other rights or privileges with respect to any
property included in the Project Facilities, free from the lien of this Lease,
or release existing easements, licenses, rights of way and other rights or
privileges, all with or without consideration and upon such terms and
conditions as the Company shall determine. The Issuer agrees that it will
execute and deliver or will cause the execution and delivery of, and will cause
and direct the Trustee to execute and deliver, any instrument necessary or
appropriate to confirm and grant or release any such easement, license, right of
way or other right or privilege. If no Event of Default has occurred and is
continuing, any payments or other consideration received by the Company for any
such grant shall be and remain the property of the Company but, if an Event of
Default has occurred and is continuing, all rights then existing of the Company
with respect to or under such grant, shall inure to the benefit of the Trustee.
Section 5.12 COMPLIANCE WITH LAWS. With respect to the Project
Facilities and any additions, alterations or improvements thereto, the Company
will at all times comply in all material respects with all applicable
requirements of federal, state and local laws and with all applicable lawful
requirements of any agency, board or commission created under the laws of the
State or of any other duly constituted public authority, and will use, and
permit the use of, the Project Facilities only for such purposes as are lawful
under the Act; provided that the Company shall be deemed in compliance with this
Section so long as it is contesting in good faith any such requirement by
appropriate legal proceedings.
Section 5.13 FINANCING STATEMENTS. The Company shall at the request of
the Trustee and at the Company's own expense cause financing statements under
the State Uniform Commercial Code to be filed in the places required by law in
order to perfect the security interests created by Section 4.2 naming the Issuer
as first secured party and the Trustee as assignee. From time to time, as
reasonably requested by the Trustee, the Company shall furnish to the Trustee an
opinion of counsel setting forth what actions, if any, should be taken by the
Company or the Trustee to preserve such security interest in favor of the
Trustee, and the right, title and interest of the Trustee in and to the trust
estate created under the Indenture. The Company shall execute and file or cause
to be executed and filed all further instruments as shall be required by law to
preserve such security interest, and shall furnish satisfactory evidence to the
Company of the filing and refiling of such instruments.
-17-
<PAGE> 21
Section 5.14 LIMITATION ON CAPITAL EXPENDITURES. Without having first
obtained a Favorable Opinion, the Company will not make or permit to be made any
capital expenditures, within the meaning of Section 144(a)(4)(A) of the Code,
with respect to the Project Facilities or any other facilities in the County or
with respect to any facilities contiguous or integrated with any such facilities
within the meaning of Sections 1.103-l0(b)(2)(ii)(e) and 1.103-10(d)(2) of the
Treasury Regulations (in this Section, "integrated facilities"), of which the
Company, any other person who is a principal user of the Project Facilities or
any related person is the owner, occupant or other principal user (in this
Section, "capital expenditures"), which, when added to (i) the face amount of
the Bonds and (ii) the outstanding amount of any other governmental obligations
described in Section 144(a) of the Code issued with respect to any facilities
located in Carroll County, Kentucky or with respect to any integrated
facilities, of which the Company, any other person who is a principal user of
the Project Facilities or any related person is the owner, occupant or other
principal user, would make the total of such face amount, such outstanding
amount and all capital expenditures for the six-year period beginning three
years before the date of issuance of the Bonds, exceed $10,000,000, or such
other limit as may, in the opinion of nationally recognized bond counsel, be
permitted under the Code.
SECTION 5.15 RESTRICTED AND PROHIBITED ACTIVITIES.
(a) The Company covenants that not more than 25% of the proceeds of the
Bonds shall be used (directly or indirectly) to provide any facilities the
primary purposes of which is to provide retail food or beverage services, or the
provision of recreation or entertainment, within the meaning of Section
144(a)(8) of the Code.
(b) The Company covenants that no portion of the proceeds of the Bonds
shall be used (directly or indirectly) to provide any facilities to be used for
a private or commercial golf course, country club, massage parlor, tennis club,
skating facility (including roller skating, skateboard and ice skating), racquet
sports facility (including any handball or racquetball court), hot tub facility,
suntan facility, racetrack, airplane, skybox or luxury box, health club
facility, facility primarily used for gambling or store, the principal business
of which is the sale of alcoholic beverages for consumption off premises, within
the meaning of Section 144(a)(8) or Section 147(e) of the Code.
Section 5.16 $40,000,000 LIMIT. The Company will not permit any person
to become a principal user of the Project Facilities or a related person, and
will not become a principal user or permit any related person to become a
principal user of any other facilities, within the meaning of Section 144(a) of
the
-18-
<PAGE> 22
Code, within the three-year period following the date that the Project
Facilities are first placed in service if, as a result thereof the $40,000,000
limit of Section 144(a)(l0) of the Code would be violated with respect to the
Bonds.
Section 5.17 ARBITRAGE REBATE. Within 30 days after the end of each Bond
Year, the Company shall determine the Excess Investment Earnings and deliver
moneys to the Trustee for deposit into the Rebate Fund (or instruct the Trustee
to transfer to the Rebate Fund moneys representing available arbitrage earnings,
if any, in the Construction Fund or the Bond Fund) in an aggregate amount equal
to the Excess Investment Earnings, if any. The Company shall instruct the
Trustee to withdraw from the Rebate Fund and pay over to the United States (1)
not less frequently than once each five years after the date of original
delivery and payment for the Bonds, an amount equal to 90% of the net aggregate
amount of Excess Investment Earnings deposited into the Rebate Fund during such
period, plus all investment earnings on amounts on deposit in the Rebate Fund
during such period (and not theretofore paid to the United States), and (2) not
later than 30 days after the redemption, payment at maturity or other retirement
of the last Bond, 100% of all moneys in the Rebate Fund. Because the Company's
present intent is that all funds held under the Indenture shall be invested in
investments the earnings on which are tax-exempt, the Issuer and the Company do
not expect any such payments to be required.
VI. Events of Defaults and Remedies.
Section 6.1 EVENTS OF DEFAULT; ACCELERATION. Each of the following
events is hereby defined as, and is declared to be and to constitute, an "Event
of Default" hereunder:
(a) Failure by the Company to make or cause to be made any payment
required to be made under Section 4.3 or 4.5 on or before the date the same is
due; or
(b) Failure or refusal by the Company to comply with any of its other
covenants hereunder and such failure or refusal shall continue for a period of
60 days after written notice thereof has been given to the Company and the Bank
by the Issuer or the Trustee; provided that if such failure is of such nature
that it can be corrected but not within 60 days, it will not be an Event of
Default so long as prompt corrective action is instituted and is diligently
pursued; or
(c) The Company shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian or the like of itself or of its
property, or (ii) admit in writing its inability to pay its debts generally as
they become due, or (iii) make a general assignment for the benefit of
creditors, or (iv) be adjudicated a bankrupt or insolvent, or (v) commence a
voluntary case under the United States Bankruptcy
-19-
<PAGE> 23
Code, or file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief, or seeking to take advantage
of any insolvency law or file an answer admitting the material allegations of a
petition filed against it in any bankruptcy, reorganization, or insolvency
proceeding, or action shall be taken by it for the purpose of effecting any of
the foregoing, or (vi) if without the application, approval or consent of the
Company, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking in respect of the Company an order for relief or
an adjudication in bankruptcy, reorganization, dissolution, winding up,
liquidation, a composition or arrangement with creditors, a readjustment of
debts, the appointment of a trustee, receiver, liquidator or custodian or the
like of the Company or of all or any substantial part of its assets, or other
like relief in respect thereof under any bankruptcy or insolvency law, and, if
such proceeding is being contested by the Company in good faith, the same shall
(A) result in the entry of an order for relief or any such adjudication or
appointment or (B) remain unvacated, undismissed and undischarged for a period
of 90 days; or
(d) If for any reason the Bonds are declared due and payable by
acceleration in accordance with Section 11.02 of the Indenture; or
(e) If the Trustee and the Tender Agent receive notice from the Bank (i)
that an Event of Default as defined in the Reimbursement Agreement has occurred
and is continuing arid (ii) requesting the Trustee to declare the principal of
the outstanding Bonds immediately due and payable; or
(f) If the Trustee and the Tender Agent receive notice from the Bank
prior to the 10th day following a drawing under the Letter of Credit for
interest on Bonds which remain outstanding after the application of the proceeds
of such drawing, that the Letter of Credit will not be reinstated with respect
to such interest;
then and in each and every such case the Trustee, by notice in writing to the
Company, may, if such Event of Default has not been cured, declare all sums
which the Company is obligated to pay under this Lease to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Lease contained to the contrary
notwithstanding. In case the Trustee shall have proceeded to enforce any right
under this Lease and such proceedings shall have been discontinued or abandoned
for any reason or shall have been determined adversely to the Trustee, then and
in every such case the Company, the Issuer and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the
-20-
<PAGE> 24
Company, the Issuer and its assignee or the Trustee shall continue as though no
proceeding had been taken.
Section 6.2 PAYMENT OF RENTAL ON DEFAULT; SUIT THEREFOR.
(a) The Company covenants that, in case it shall fail to pay or cause to
be paid any sum payable by or on behalf of the Company under Section 4.3 or 4.5
as and when the same shall become due and payable whether at maturity or by
acceleration or otherwise, then, upon demand of the Trustee, the Company will
pay to the Trustee the whole amount of the Rental that then shall have become
due and payable under such Sections; and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including a reasonable compensation to the Issuer, the Trustee and Tender Agent,
their agents and counsel, and any expenses or liabilities incurred by the
issuer, the Trustee or the Tender Agent. In case the Company shall fail
forthwith to pay such amounts upon such demand, the Trustee shall be entitled
and empowered to institute any actions or proceedings at law or in equity for
the collection of the sums so due and unpaid, and may prosecute any such action
or proceeding to judgment or final decree, and may enforce any such judgment or
final decree against the Company and collect in the manner provided by law out
of the property of the Company the moneys adjudged or decreed to be payable.
(b) In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company under the Federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the benefit of the creditors or the property of the Company, the Trustee shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of the Rental, including
interest owing and unpaid in respect thereof, and, in case of any judicial
proceedings, to 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 allowed in
such judicial proceedings relative to the Company, its creditors, or its
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses. Any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized to make such payments to Issuer or the
Trustee, and to pay to the Issuer or the Trustee any amount due it for
compensation and expenses, including counsel fees incurred by it up to the date
of such distribution.
Section 6.3 OTHER REMEDIES. Whenever all sums which the Company is
obligated to pay under this Lease shall have been declared to be immediately due
and payable, the Trustee may take
-21-
<PAGE> 25
whatever action may be available at law or in equity as may appear necessary or
desirable to collect the Rental and any other amounts payable by the Company
hereunder, or to enforce performance and observance of any obligation, agreement
or covenant of the Company under this Lease.
If any statute or rule of law shall validly limit the amount of damages
to be paid under this Section to less than the amount provided in this Section,
the Trustee shall be entitled to the maximum amount allowable under such statute
or rule of law.
Section 6.4 CUMULATIVE RIGHTS. No remedy conferred upon or reserved to
the Issuer or the Trustee by this Lease is intended to be exclusive of any other
available remedy, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Agreement or now or
hereafter existing at law or in equity or by statute. No waiver by the Issuer or
the Trustee of any breach by the Company of any of its obligations, agreements
or covenants hereunder shall be a waiver of any subsequent breach, and no delay
or omission to exercise any right or power shall impair any such right or power
or shall be construed to be a waiver thereof, but any such right and power may
be exercised from time to time and as often as may be deemed expedient.
VII. Options of Company
Section 7.1 OPTION TO PREPAY. There is expressly reserved to the Company
the right, and the Company is authorized and permitted, to prepay all or any
part of the Rental payable hereunder on any installment payment date as set
forth in the Indenture, but no partial prepayment shall alter the order or
amount of periodic Rental payments otherwise required hereunder; and the Issuer
agrees that the Trustee may accept such prepayment of the Bonds when the same is
tendered by the Company. If the Company prepays the Bonds in full this Lease
shall terminate.
Section 7.2 OPTION TO PURCHASE. The Company shall have, and is hereby
granted, the option to purchase the Project for a price equal to an amount of
money sufficient to pay in full the principal amount of, premium, if any on and
interest on the Bonds then outstanding, together with accrued interest, if any,
to the date of such purchase arid any other amounts owed to the Trustee, the
Bank or the Issuer under this Lease or the Indenture, and such payment together
with written notice delivered by the Company to the Issuer will be deemed to be
the exercise of such option.
Upon payment in full of the Bonds as provided in the preceding paragraph
and payment by the Company to the Issuer of consideration in the amount of Ten
Dollars ($10.00), the Issuer shall execute, acknowledge and deliver such deed,
bill of sale and/or other instrument or instruments as the Company may
-22-
<PAGE> 26
reasonably request or as may be necessary or appropriate to vest title to the
Project in the Company or its assignee.
Any conveyance, reconveyance or transfer of the Project by the Issuer to
the Company or its assignee pursuant to this Section shall be by deed of special
warranty, and the same shall be free and clear of all liens and encumbrances
except such as exist on the date hereof, such as are created by the Issuer with
the Company's approval arid such as are created by the Company. Costs of such
conveyance, reconveyance or transfer, including the cost of state and local
realty transfer taxes, shall be paid by the Company or its assignee.
VIII. Miscellaneous
Section 8.1 LIMITATION OF LIABILITY OF ISSUER. This Lease does not
pledge the general credit nor the taxing power of the Commonwealth of Kentucky
or any political subdivision thereof or the County of Carroll. The liability of
the undersigned shall be limited to the proceeds resulting from the sale of the
Project Facilities and the rents, issues and profits therefrom.
No covenant or agreement contained in this Lease shall be deemed to be
the covenant or agreement of any member, officer, attorney, agent or employee of
the Issuer in an individual capacity. No recourse shall be had for the payment
of the principal, the interest thereon, the premium, if any, payable upon the
redemption of the Bonds or for any amounts due under this Lease or any claim
based thereon against any officer, member, agent, attorney or employee of the
Issuer, past, present or future, or its successors or assigns, as such, either
directly or through the Issuer, or any such successor, whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise, all of such liability of such members,
officers, agents, attorneys or employees being hereby released as a condition of
and as a consideration for the execution and delivery of this Lease.
Section 8.2 NOTICES. Notice hereunder shall be effective upon receipt
and shall be given by personal service or by certified or registered mail,
return receipt requested, to:
The Issuer - County of Carroll, Kentucky
County Courthouse
Carrollton, Kentucky 41008
Attn: County Judge/Executive
The Company - Kentucky Ladder Company
93 Werner Road
Greenville, Pennsylvania 16125
Attn: Eric J. Werner, Esquire
Corporate Counsel
-23-
<PAGE> 27
The Trustee and - Dai-Ichi Kangyo Trust Company
Tender Agent of New York
One World Trade Center
Suite 5031
New York, New York 10048
Attn: Corporate Trust Department
The Bank - The Dai-Ichi Kangyo Bank, Limited,
New York Branch
One World Trade Center
Suite 4911
New York, New York 10048
Attn: Loan Administration Dept.
Section 8.3 SEVERABILITY. If any provision hereof is found by a court of
competent jurisdiction to be prohibited or unenforceable, it shall be
ineffective only to the extent of such prohibition or unenforceability, and such
prohibition or unenforceability shall not invalidate the balance of such
provision to the extent it is not prohibited or unenforceable, nor invalidate
the other provisions hereof, all of which shall be liberally construed in favor
of the Issuer or the Trustee in order to effect the provisions of this Lease.
Section 8.4 APPLICABLE LAW. This Lease shall be deemed to be a contract
made in the State and governed by the laws of the State.
Section 8.5 ASSIGNMENT; Successors and Assigns. The Company shall not
assign this Lease or any interest of the Company herein, either in whole or in
part, without the prior written consent of the Trustee, which consent shall be
given if the following conditions are fulfilled: (i) the assignee assumes in
writing all of the obligations of the Company hereunder; (ii) neither the
validity nor the enforceability of this Agreement shall be adversely affected by
such assignment; (iii) the Project shall continue in the opinion of nationally
recognized bond counsel to be a "project" as such term is defined in the Act
after such assignment; (iv) such assignment shall not, in the opinion of
nationally recognized bond counsel, have an adverse effect on the exclusion from
gross income of interest on the Bonds for federal income tax purposes; and (v)
if a Letter of Credit is held by the Tender Agent, the consent of the Bank. For
purposes of this Section, no assignment shall be deemed to have occurred by
reason of a change in the composition of the ownership of the Company. Subject
to the foregoing, this Lease shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns, and
the terms "Issuer" and "Company" shall, where the context requires, include the
respective successors and assigns of such persons. No assignment pursuant to
this Section shall release
-24-
<PAGE> 28
the Company from its obligations under this Lease unless consented to by the
Bank or, if there is no Letter of Credit securing the Bonds, the assignee has a
net worth equal to or greater than that of the Company.
Section 8.6 ENFORCEMENT OF CERTAIN PROVISIONS BY THE BANK. The Bank is
hereby explicitly recognized as a third party beneficiary of this Lease.
Section 8.7 AMENDMENTS. This Lease may not be amended except by an
instrument in writing signed by the parties and, if such amendment occurs after
the issuance of any of the Bonds, consented to by the Trustee.
Section 8.8 TERM OF AGREEMENT. This Lease and the respective obligations
of the parties hereto shall be in full force and effect from the date hereof
until (i) the principal or redemption price of, premium, if any, on and all
interest on the Bonds shall have been paid, or provision for such payment shall
have been made pursuant to the terms of the Indenture, (ii) the Indenture shall
have been released pursuant to Section 17.01 thereof, (iii) the Company shall
have satisfied all its obligations under the Reimbursement Agreement, and (iv)
the Company and the Issuer shall have satisfied their respective obligations
under Section 4.7.
Section 8.9 NO WARRANTY BY ISSUER OF CONDITION, SUITABILITY OR ZONING OF
PROJECT. The Issuer makes no warranty, either express or implied, as to the
condition of the Project Facilities or any part thereof or that they will be
suitable for the Company's purposes or needs. The Company acknowledges and
agrees that the Issuer is not a dealer in property of such kind, and that the
Issuer has not made, and does not hereby make, any representation or warranty or
covenant with respect to the merchantability, fitness for a particular purpose,
condition or suitability of the Project Facilities in any respect or in
connection with or for the purposes and uses of the Company or its tenants. The
Issuer makes no representations as to the zoning of the Premises.
Section 8.10 COMPANY'S FEDERAL INCOME TAXATION. Consistent with the
terms and conditions of this Agreement, the Issuer agrees that the Company shall
be deemed tine owner of the Project Facilities for federal income tax purposes
and further agrees to cooperate fully with the Company in obtaining favorable
federal income tax treatment of this lease and the Project Facilities subject
hereto. For such purposes, the parties acknowledge their intent to create a
valid lease herein, with legal title to the Project Facilities held by Issuer in
order to comply with the provisions of the Act prior to the eventual transfer of
such title to Company in the manner provided herein.
-25-
<PAGE> 29
Section 8.11 AMOUNTS REMAINING IN BOND FUND OR CONSTRUCTION FUND. It is
agreed by the parties that any amounts remaining in the Bond Fund or
Construction Fund, after payment in full of the Bonds (or provision for payment
thereof having been made in accordance with the provisions of the Indenture)
arid of the fees, charges and expenses of the Trustee and the Issuer in
accordance with the Indenture, shall upon release of the Indenture pursuant to
Section 17.01 thereof, be paid by the Trustee to the Bank to the extent of any
unreimbursed drawing under the Letter of Credit, or any other obligations owing
by the Company to the Bank under the Reimbursement Agreement. Any remaining
moneys shall belong to and be paid to the Company by the Trustee as overpayment
of the Rental.
Section 8.12 SURVIVAL OF COVENANTS, CONDITIONS AND REPRESENTATIONS. All
covenants, conditions and representations of the Company contained herein which,
by nature, impliedly or expressly involve performance in any particular manner
after the delivery of the Issuer's deed or which cannot be ascertained to have
been performed until after the said delivery, shall survive said delivery.
Section 8.13 RECEIPT OF INDENTURE. Tine Company hereby acknowledges that
it has received an executed copy of the Indenture and is familiar with its
provisions, and agrees that it will take all such actions as are required or
contemplated of it under the Indenture to preserve and protect tine rights of
the Trustee and of the Bondholders thereunder and that it will not take any
action which would cause a default thereunder. Any redemption of Bonds prior to
maturity shall be effected as provided in the Indenture.
Section 8.14 HEADINGS. The captions or headings in this Lease are for
convenience of reference only and shall not control or affect the meaning or
construction of any provision hereof.
-26-
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Lease to be executed and delivered as of the date first written
above.
COUNTY OF CARROLL, KENTUCKY
[SEAL]
Attest /s/ By /s/ Harold "Shorty" Tomlinson
--------------------------------- --------------------------------
Clerk County Judge/Executive
KENTUCKY LADDER COMPANY
Attest /s/ Eric J. Werner By /s/
---------------------------------- ---------------------------------
Secretary President
-27-
<PAGE> 31
COUNTY OF CARROLL )
) : SS.
COMMONWEALTH OF KENTUCKY )
The foregoing instrument was acknowledged before me this, the ____ day
of _______________, 1990 by __________________ as ________________ of COUNTY OF
CARROLL, KENTUCKY, on behalf of the Company.
My conimission expires: 12/1/93
/s/ James Carlton Monk
---------------------------------------------
Notary public
[NOTARIAL SEAL]
COMMONWEALTH OF KENTUCKY )
-------- ) : SS.
COUNTY OF CARROLL )
-------
The foregoing instrument was acknowledged before me this, the 14TH day
of September, 1990 by Howard L. Salot as President of KENTUCKY LADDER COMPANY,
on behalf of the Company.
My conimission expires: June 26, 1992
----------------
/s/ Diane Gordon
---------------------------------------------
Notary public
[NOTARIAL SEAL]
This instrument prepared by:
/s/ Charles R. Brodbeck
Charles R. Brodbeck
COHEN & GRIGSBY, A Professional
Corporation
2900 CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222
-28-
<PAGE> 32
EXHIBIT A
Real Estate Description
-----------------------
See attached.
<PAGE> 33
DEED DESCRIPTION
PROPERTY TO BE CONVEYED TRACT A
BY:
CARROLL COUNTY INDUSTRIAL DEVELOPMENT FOUNDATION, INC.
TO:
BEING PART OF ORIGINAL TRACT OF CCIDF AS RECORDED IN DEED BOOK 65, PAGE
563 AND LYING ON THE WEST SIDE OF ACCESS ROAD FOR CCIDF PARK AND BEING 1020 FEET
SOUTHEAST OF INTERSECTION OF AIRPORT ROAD AND BEING MORE PARTICULARLY DESCRIBED
AS FOLLOWS:
BEGINNING IN THE WEST RIGHT OF WAY OF CCIDF PARK ROAD AN IRON PIN FOUND
AND FRONTING WOODMASTERS FOUNDATION; THENCE WITH SOUTH RIGHT OF WAY OF SAID ROAD
AND ALONG PROPERTY LINE OF WOODMASTERS FOUNDATION S 55-00'-04"E, 400.06 FEET TO
AN IRON PIN FOUND AND PROPERTY LINE OF CCIDF CORNER; THENCE WITH CCIDF AND
LEAVING WOODMASTERS FOUNDATION AND ALONG SOUTH RIGHT OF WAY OF CCIDF PARK ROAD S
55-00'-04"E, 282.10 FEET TO AN IRON PIN SET AND REAL BEGINNING OF PROPERTY TO BE
CONVEYED BEING TRACT A; THENCE LEAVING CCIDF NEW DIVISION LINE AND ALONG SOUTH
50 FOOT RIGHT OF WAY OF CCIDF PARK ROAD AND iS FOOT EASEMENT ON THE SOUTH SIDE
OF THIS DESCRIBED LINE S 50-00'-04"E, 1009.69 FEET TO AN IRON PIN SET IN
PROPERTY LINE OF OAK'S; THENCE LEAVING ACCESS ROAD CCIDF PARK ROAD AND ALONG
OAK'S LINE S 34-35'-15"W, 506.31 FEET TO A STONE AND CORNER OF TRACT NO. 5 AND 4
OF EARL FLOYD FROM GENERAL MOTORS AND NOW KNOWN AS TRACT B ON PLAT; THENCE WITH
TRACT B N 55-10'-07"W, 1013.33 FEET TO AN IRON PIN AND CORNER POST AND PROPERTY
LINE OF CCIDF; THENCE LEAVING FLOYD AND ALONG NEW DIVISION LINE OF CCIDF AND
CENTER OF 30 FOOT UTILITY EASEMENT 15 FEET LEFT AND RIGHT OF THIS DESCRIBED LINE
N 34-59'-56"E, 509.26 FEET TO AN IRON PIN AND BEGINNING CONTAINING 11.791 ACRES
AND BEING SUBJECT TO LEGAL RIGHT OF WAYS AND LEGAL EASEMENTS ON RECORD AND/OR IN
EXISTENCE.
<PAGE> 34
DEED DESCRIPTION
PROPERTY TO BE CONVEYED
BY:
EARL FLOYD TRACT B
TO:
BEING TRACT NO. 5 OF GENERAL MOTORS TO EARL FLOYD AND LYING ON THE
NORTHWEST PORTION OF TOTAL 107 ACRE TRACT OF EARL FLOYD FROM GENERAL MOTORS AND
BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING IN SOUTH RIGHT OF WAY OF ACCESS ROAD TO CCIDF PARK AN IRON PIN
SET AND PROPERTY LINE OF TRACT A; THENCE LEAVING SOUTH RIGHT OF WAY AND ALONG
DIVISION LINE OF CCIDF AND TRACT A AND ALONG 30 FOOT UTILITY EASEMENT 15 FEET
LEFT AND RIGHT OF DESCRIBED LINE S 34-59'-56"W, 509.26 FEET TO A CORNER POST AND
IRON PIN AND REAL BEGINNING OF TRACT B; THENCE WITH PROPERTY LINE OF CCIDF AND
30 FOOT UTILITY EASEMENT BEING 15 FEET LEFT AND RIGHT OF DESCRIBED LINE S
48-23'-04"W, 480.38 FEET TO A CORNER POST AND PROPERTY LINE OF PHELPS DODGE
ALUMINUM PRODUCTS CO. AND END OF 30 FOOT UTILITY EASEMENT AND BEGINNING OF 20
FOOT EASEMENT LYING TOTAL EAST OF THIS LINE BEING LEFT OF DESCRIBED LINE; THENCE
WITH PDAPC PROPERTY LINE AND 20 FOOT EASEMENT S 15-27'-31"E, 1446.56 FEET TO AN
IRON PIN AND CORNER OF TRACT 2 AND TRACT 3 OF EARL FLOYD; THENCE LEAVING PDAPC
AND CORNER OF TRACT 2 AND 20 FOOT EASEMENT AND ALONG PROPERTY LINE OF TRACT 3 N
47-59'-33"E, 672.01 FEET TO AN IRON PIN FOUND AND CORNER OF TRACT 4 OF EARL
FLOYD; THENCE LEAVING TRACT 3 AND ALONG TRACT NO. 4 N 48-10'-21"E, 755.52 FEET
TO AN IRON PIN SET AND PROPERTY LINE OF OAK'S; THENCE LEAVING TRACT NO. 4 AND
ALONG OAK'S LINE N 54-51'-13"W, 314.27 FEET TO A STONE AND CORNER OF TRACT A;
THENCE LEAVING OAK'S AND ALONG TRACT A N 55-10'-07"W, 1013.33 FEET TO AN IRON
PIN AND CORNER POST AND BEGINNING CONTAINING 28.341 ACRES AND SUBJECT TO LEGAL
RIGHT OF WAYS AND LEGAL EASEMENTS ON RECORD AND/OR IN EXISTENCE.
<PAGE> 35
EXHIBIT B
Description of Project Facilities
---------------------------------
The Project Facilities to be financed with the proceeds of the Bonds
consist of the acquisition of land and construction and equipping of a
manufacturing facility thereon to be used in the manufacture, processing and
assembly of climbing ladder products and related products, together with
storage, warehousing and distribution facilities with respect thereto.
The following is an itemization of the estimated Project Facilities
Costs:
SOURCES AND USES OF FUNDS
-------------------------
SOURCES OF FUNDS
----------------
Principal Amount of Bonds $5,000,000
Company Equity Contribution $ 100,000
----------
TOTAL SOURCES OF FUNDS $5,100,000
USES OF FUNDS
-------------
Land $ 307,500
Building $3,707,500
Equipment $ 785,000
Landscaping, title fees,
architects, engineers,
financing costs $ 300,000
----------
TOTAL USES OF FUNDS $5,100,000
==========
<PAGE> 1
Exhibit 10.9
COMMERCIAL
LEASE AGREEMENT
SSMRT BENSENVILLE INDUSTRIAL PARK (3),INC.
------------------------------------------
Landlord
AND
OLYMPUS PROPERTIES, INC. AN ILLINOIS CORPORATION
------------------------------------------------
Tenant
<PAGE> 2
STANDARD INDUSTRIAL LEASE AGREEMENT 608 Supreme Drive
COMMERCIAL 93 Bensenville, Illinois
NET ESCROW BIP #6
TRAMMELL CROW COMPANY Drafted August 29, 1994
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between, SSMRT Bensenville
Industrial Park (3), Inc.
or its assigns, hereinafter referred to as "Landlord", and Olympus Properties,
Inc.
hereinafter referred to as "Tenant";
WITNESSETH:
1. PREMISES AND TERM, In consideration of the mutual obligations of
Landlord and Tenant set forth herein, Landlord leases to Tenant, and Tenant
hereby takes from Landlord the Premises situated within the County of DuPage,
State of Illinois, more particularly described on EXHIBIT "A", commonly known as
608 Supreme Drive and outlined in red attached hereto and incorporated herein by
reference, (the "Premises"), to have and to hold, subject to the terms,
covenants and conditions in this Lease. The term of this Lease shall commence on
the commencement date hereinafter set forth and shall end on the last day of the
month that is twenty-four (24) months after the commencement date.
A. EXISTING BUILDING. If no improvements are to be constructed to the
Premises, the commencement date shall be October 15, 1994, Tenant acknowledges
that (i) it has inspected and accepts the Premises, (ii) the buildings and
improvements comprising the same are suitable for the purpose for which the
Premises are leased, (iii) the Premises are in good and satisfactory condition,
and (iv) no representations as to the repair of the Premises, nor promises to
alter, remodel or improve the Premises have been made by Landlord (unless
otherwise expressly set forth in this Lease). If this lease is executed before
the Premises become vacant or otherwise available and ready for occupancy, or if
any present Tenant or occupant of the Premises holds over, and Landlord cannot,
using good faith efforts, acquire possession of the Premises prior to the date
above recited as the commencement date of this lease, Landlord shall not be
deemed to be in default hereunder nor in any way liable to Tenant because of
such failure, and Tenant agrees to accept possession of the Premises at such
time as Landlord is able to tender the same, which date shall thenceforth be
deemed to be the "commencement date"; and the term of this lease automatically
shall be extended so as to include the full number of months hereinbefore
provided for, except that if the commencement date is other than the first day
of a calendar month such term also shall be extended for the remainder of the
calendar month in which possession is tendered. Landlord hereby waives payment
of rent covering any period prior to such tendering of possession. After the
commencement date, Tenant shall, upon demand, execute and deliver to Landlord a
letter of acceptance of delivery of the Premises.
Notwithstanding anything contained in Paragraph 1.A, Landlord will
diligently pursue the substantial completion of the following improvements to
the Premises on behalf of Tenant prior to October 15, 1994:
*Enlarge three (3) overhead dock doors to a 9' wide x 10' high.
*Clean carpet in the office and clean washroom area.
*Deliver heating, ventilation, and air conditioning, and all
mechanicals in good working condition.
*Power scrub warehouse floor.
*Provide two (2) 24' wide x 24' high sized openings in the existing
demising wall that separates the warehouses.
B. [BUILDING TO BE CONSTRUCTED OR SHELL SPACE. If the Premises or part
thereof are to be constructed, the commencement date shall be deemed to be the
date upon which the Premises and other improvements to be erected in accordance
with the plans and specifications described on Exhibit "B" attached hereto and
incorporated herein by reference (the "Plans") have been substantially
completed.] As used herein, the term "substantially completed" shall mean, the
date on which the City of Bensenville issues a temporary or permanent
certificate of occupancy for the premises, [that in the opinion of the
architect or space planner that prepared the Plans, such improvements have been
completed in accordance with the Plans] and the Premises are in good and
satisfactory condition, subject only to completion of minor punch list items. As
soon as such improvements have been substantially completed, Landlord shall
notify Tenant in writing that the commencement date has occurred. Within ten
(10) days thereafter, Tenant shall submit to Landlord in writing a punch list of
items needing completion or correction. Landlord shall use its best efforts to
complete such items within thirty (30) days after the receipt of such notice. In
the event Tenant, its employees agents or contractors cause construction of such
improvements to be delayed, the commencement date shall be deemed to be the date
that, in the opinion of the architect or space planner that prepared the Plans,
substantial completion would have occurred if such delays had not taken place.
2. BASE RENT, SECURITY DEPOSIT AND ESCROW PAYMENTS.
A. Tenant agrees to pay to Landlord rent for the Premises, in advance,
without demand, deduction or set off, at the rate of Twenty Five Thousand
Seventy-Nine and 00/100 Dollars ($25,079) per month during the term hereof. One
such monthly installment, plus the other monthly charges set forth in Paragraph
2C below shall be due and payable on the date hereof and a like monthly
installment shall be due and payable on or before the first day of each calendar
month succeeding the commencement date, except that all payments due hereunder
for any fractional calendar month shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the date
hereof the sum of Thirty Two Thousand Seven Hundred Fifty-Nine and 00/100
Dollars ($ 32,579.00) which shall be held by Landlord, without obligation for
interest, as security for the performance of Tenant's obligations under this
lease, it being expressly understood and agreed that this deposit is not an
advance rental deposit or a measure of Landlord's damages in case of Tenant's
default. Upon each occurrence of an event of default, Landlord may use all or
pant of the deposit to pay past due rent or other payments due Landlord under
this Lease, and the cost of any other damage, injury, expense or liability
caused by such event of default without prejudice to any other remedy provided
herein or provided by law. On demand, Tenant shall pay Landlord the amount that
will restore the security deposit to its original amount. The security deposit
shall be deemed the property of Landlord, but any remaining balance of such
deposit shall be returned by Landlord to Tenant when Tenant's obligations under
this Lease have been fulfilled.
Landlord
Tenant
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C. Tenant agrees to pay its proportionate share (as defined in
Paragraph 22K below) of (i) Taxes (hereinafter defined) payable by Landlord
pursuant to paragraph 3A below, (ii) the cost of utilities payable pursuant to
paragraph 8 below, (iii) the cost of administering and maintaining any insurance
pursuant to paragraph 9 below and (iv) the cost of any common area charges
payable by Tenant in accordance with paragraph 4C. below. During each month of
the term of this Lease, on the same day that rent is due hereunder, Tenant shall
escrow with Landlord an amount equal to 1/2 of the estimated annual cost of its
proportionate share of such items. Tenant authorizes Landlord to use the funds
deposited with Landlord under this Paragraph 2C to pay such costs. The initial
monthly escrow payments are based upon the estimated amounts for the year in
question, and shall be increased or decreased annually to reflect the projected
actual cost of all such items. If the Tenant's total escrow payments are less
than Tenant's actual proportionate share of all such items, Tenant shall pay the
difference to Landlord within ten (10) days after demand. If the total escrow
payments of Tenant are more than Tenant's actual proportionate share of all such
items, Landlord shall retain such excess and credit it against Tenant's next
annual escrow payments. The amount of the monthly rental and the initial monthly
escrow payments are as follows:
<TABLE>
<CAPTION>
<S> <C>
(1) Base Rent as set forth in Paragraph 2A ........... $ 25,079.00
(2) Tax Escrow Payment ............................... $ 5,956.00
(3) Insurance Escrow Payment ......................... $ 392.00
(4) Utility Charge ................................... $ 0
(5) Common Area Charge ............................... $ 1,332.00
(6) Other ............................................ $
Monthly Payment Total .............................. $ 32,759.00
</TABLE>
[D. In the event that the Consumer Price Index for the Base Year (the term "Base
Year" herein means the calendar year of the commencement date of the term of
this lease) shall be less than the Consumer Price Index for any Comparison Year
(the term "Comparison Year" means each calendar year after the Base Year through
and including the year in which the term of this lease expires), Tenant shall
pay Landlord upon demand, as additional rent for each such Comparison Year, the
annual base rent multiplied by the percentage of increase by which the Consumer
Price Index in such Comparison Year exceeds the Consumer Price Index in the Base
Year. For the purposes of this Lease, the term "Consumer Price Index" means the
Consumer Price Index -- United States All Items for All Urban Consumers for the
SMSA in which the Premises are located published by the Bureau of Labor
Statistics of the Department of Labor (Base Year - 1982 - 1984). The Consumer
Price Index for the Base Year or any Comparison Year shall be determined by
averaging the monthly indices for that year.]
3. TAXES.
A. Landlord agrees to pay all taxes, assessments and governmental
charges of any kind and nature (collectively referred to herein as "Taxes") that
accrue against the Premises, and/or the land and/or improvements of which the
Premises are a part. If at any time during the term of this Lease, there shall
be levied, assessed or imposed on Landlord a capital levy or other tax directly
on the rents received therefrom and/or a franchise tax assessment, levy or
charge measured by or based, in whole or in part, upon such rents from the
Premises and/or the land and improvements of which the Premises are a part, then
all such taxes, assessments, levies or charges, or the part, thereof so measured
or based, shall be deemed to be included within the term "Taxes" for the
purposes hereof. The Landlord shall have the right to employ a tax consulting
firm to attempt to assure a fair tax burden on the building and grounds within
the applicable taxing jurisdiction. Tenant agrees to pay its proportionate share
of the cost of such consultant.
B. Tenant shall be liable for all taxes levied or assessed against any
personal property or fixtures placed in the Premises. If any such taxes are
levied or assessed against Landlord or Landlord's property and (i) Landlord pays
the same or (ii) the assessed value of Landlord's property is increased by
inclusion of such personal property and fixtures and Landlord pays the increased
taxes, then, upon demand Tenant shall pay to Landlord such taxes.
4. LANDLORD'S REPAIRS.
A. Landlord, at its own cost and expense, shall maintain the roof,
foundation and the structural soundness of the exterior walls of the building of
which the Premises are a part in good repair, reasonable wear and tear excluded.
The term "walls" as used herein shall not include windows, glass or plate glass,
doors, special store fronts or office entries. Tenant shall immediately give
Landlord written notice of defect or need for repairs, after which Landlord
shall have reasonable opportunity to repair same or cure such defects.
B. Landlord [reserves the right to] to shall perform the paving, [floor
slab], common area, and landscape replacement and maintenance, exterior
painting, common sewage line plumbing and any other items that are otherwise
Tenant's obligations under Paragraph 5A, in which event, Tenant shall be liable
for its proportionate share of the cost and expense of such repair, replacement,
maintenance and other such items (which cost shall include any administration
and supervision fees incurred by Landlord in connection therewith equal to
fifteen percent (15%) of the cost thereof unless a repair is necessitated by
damage caused by the act or neglect of Tenant, its agents, employees, invitees,
licensees or contractors, in which event Tenant shall bear one hundred percent
(100%) of such cost which cost shall include an administration and supervision
fee of fifteen percent 15%) of the cost thereof). The cost that the Tenant may
be charged is the cost of performing such service for this building on a stand
alone basis.
C. Tenant agrees to pay its proportionate share of the cost (i)
maintenance and/or landscaping of any property that is a part of the building
and/or project of which the Premises are a part, (ii) maintenance and/or
landscaping of any property that is maintained or landscaped by any property
owner or community owner association that is named in the restrictive covenants
or deed restrictions to which the Premises are subject, and (iii) operating and
maintaining any property, facilities or services provided for the common use of
Tenant and other lessees of any project or building of which the Premises are a
part.
D. Landlord, at Tenant's cost and expense, shall enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
for servicing all hot water, heating and air conditioning systems and equipment
within the Premises. The service contract will include all services suggested by
the equipment manufacturer in its operations/maintenance manual and an executed
copy of such contract will be provided to Tenant.
Landlord
Tenant
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5. TENANT'S REPAIRS.
A. Tenant, at its own cost and expense, shall (i) maintain all parts
and floor slab of the Premises, [landscape, and grounds surrounding the
Premises] (except those for which Landlord is expressly responsible hereunder)
in good condition, (ii) promptly make all necessary repairs and replacements,
(except those for which Landlord is expressly responsible hereunder) and (iii)
keep the parking areas sidewalks, driveways and alleys surrounding the Premises
in a clean and sanitary condition and shall remove all rubbish, [snow and ice]
from same. [and (iv) maintain any spur track servicing the Premises. Tenant
agrees to sign a joint maintenance agreement with the railroad company
servicing the Premises if requested by the railroad company. Landlord shall
have the right to coordinate all repairs and maintenance of any rail tracks
serving or intended to serve the premises and, if Tenant uses such rail tracks
Tenant shall reimburse Landlord from time to time, upon demand, for its
proportionate share of the costs of such repairs and maintenance and any other
sums specified in any agreement respecting such tracks to which Landlord is a
party.]
B. Tenant, at its own cost and expense, shall properly maintain the
surface of the floor slab, and shall use equipment and fixtures which avoid
damage to the floor slab. In addition, Tenant agrees not to overload the floor
slabs in any way so as to cause damage to the slab or the foundation.
6. ALTERATIONS. Tenant shall not make any alterations, additions or improvements
to the Premises without the prior written consent of Landlord. Tenant, at its
own cost and expense, may erect such shelves, bins machinery and trade fixtures
as it desires provided that (a) such items do not alter the basic character of
the Premises or the building and/or improvements of which the Premises are a
part, (b) such items do not overload or damage the same, (c) such items may be
removed without injury to the Premises; and (d) the construction, erection or
installation thereof complies with all applicable governmental laws, ordinances,
regulations and with Landlord's specifications and requirements. All
alterations, additions, improvements and partitions erected by Tenant shall be
and remain the property of Tenant during the term of this Lease. All shelves,
bins, machinery and trade fixtures installed by Tenant shall be removed on or
before the earlier to occur of the date of termination of this Lease or vacating
the Premises, at which time Tenant shall restore the Premises to their original
condition. All alterations, installations, removals and restoration shall be
performed in a good and workmanlike manner so as not to damage or alter the
primary structure or structural qualities of the buildings and other
improvements situated on the Premises or of which the Premises are a part.
7. SIGNS. Tenant shall not install any signs upon the Premises without
the prior written consent of Landlord. Any signs shall be removed at Tenant's
cost upon termination or expiration of this Lease. Tenant shall repair, paint,
and/or replace the building facia surface to which its signs are attached upon
vacation of the Premises, or the removal or alteration of its signage. Tenant
shall not, (i) make any changes to the exterior of the Premises, (ii) install
any exterior lights, decorations, balloons, flags, pennants, banners or
painting, or (iii) erect or install any signs, windows or door lettering,
placards, decorations or advertising media of any type which can be viewed from
the exterior of the Premises, without Landlord's prior written consent. All
signs, decorations, advertising media, blinds, draperies and other window
treatment or bars or other security installations visible from outside the
Premises shall conform in all respects to the criteria established by Landlord.
8. UTILITIES. Landlord agrees to provide normal water service to the
Premises. Tenant shall pay for all water, gas, heat, light, power, telephone,
sewer, sprinkler charges and other utilities and services used on or at the
Premises, together with any taxes, penalties, surcharges or the like pertaining
to the Tenant's use of the Premises, and any maintenance charges for utilities.
Landlord shall have the right to cause any of said services to be separately
metered to Tenant, at Tenant's expense. Tenant shall pay its pro rata share, as
reasonably determined by Landlord, of all charges for jointly metered utilities.
Landlord shall not be liable for any interruption or failure of utility service
on the Premises.
9. INSURANCE.
A. Landlord shall maintain insurance covering the buildings situated on
the Premises or of which the Premises are a part in an amount not less than
eighty percent (80%) of the "replacement cost" thereof insuring against the
perils of Fire, Lightning, Extended Coverage Vandalism and Malicious Mischief
Liability and Rental Interruption and such other insurance as Landlord shall
deem necessary.
B. Tenant, at its own expense, shall maintain during the term of this
Lease a policy or policies of worker's compensation and comprehensive general
liability insurance, including personal injury and property damage, with
contractual liability endorsement, in the amount of Five Hundred Thousand
Dollars ($500,000.00) for property damage and Two Million Dollars ($2,000,000)
per occurrence for personal injuries or deaths of persons occurring in or about
the Premises. Tenant, at its own expense, also shall maintain during the term of
this Lease, fire and extended coverage insurance covering the replacement cost
of (i) all alterations, additions, partitions and improvements installed or
placed on the Premises by Tenant or by Landlord on behalf of Tenant and (ii) all
of Tenant's personal property contained within the Premises, and business
interruption insurance insuring loss of profits in the event of an insured peril
damaging the Premises. Said policies shall (i) name Landlord as an additional
insured (except for the worker's compensation policy, which instead shall
include waiver of subrogation endorsement in favor of Landlord), (ii) be issued
by an insurance company which is acceptable to Landlord, and (iii) provide that
said insurance shall not be canceled unless thirty (30) days prior written
notice shall have been given to Landlord. Said policies shall provide primary
coverage to Landlord or name Landlord as additional insured; when any policy
issued to Landlord is similar or duplicate in coverage, Landlord's policy shall
be excess over Tenant's policies. Said policy or policies, or certificates
thereof shall be delivered to Landlord by Tenant upon commencement of the term
of the Lease and upon each renewal of said insurance.
C. Tenant will not permit the Premises to be used for any purpose or in
any manner that would (i) void the insurance thereon (ii) increase the insurance
risk, or (iii) cause the disallowance of any sprinkler credits, including
without limitation, use of the Premises for the receipt, storage or handling of
any product, material or merchandise that is explosive or highly inflammable. If
any increase in the cost of any insurance on the Premises or the building of
which the Promises are a part is caused by Tenant's use of the Premises, or
because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord.
10. FIRE AND CASUALTY DAMAGE.
A. If the Premises or the building of which the Premises are a part
should be damaged or destroyed by fire or other peril, Tenant immediately shall
give written notice to Landlord. If the buildings situated upon the Premises or
of which the Premises are a part should be totally destroyed by any peril
covered by the insurance to be provided by Landlord under Paragraph 9A above, or
if they should be so damaged thereby that, in Landlord's estimation, rebuilding
or repairs cannot be completed within one hundred eighty (180) days after the
date of such damage, this Lease shall terminate and the rent shall be abated
during the unexpired portion of this Lease effective upon the date of the
occurrence of such damage.
B. If the buildings situated upon the Premises or of which the Premises
are a part, should be damaged by any peril covered by the insurance to be
provided by Landlord under Paragraph 9A above, and in Landlord's estimation,
rebuilding or repairs can be substantially completed within one hundred eighty
(180) days after the date of such damage, this Lease shall not terminate, and
Landlord shall restore the Premises to
Landlord
Tenant
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substantially its previous condition, except that Landlord shall not be required
to rebuild, repair or replace any part of the partitions, fixtures, additions
and other improvements that may have been constructed, erected or installed in,
or about the Premises or for the benefit of; or by or for Tenant. If such
repairs and rebuilding have not been substantially completed within one hundred
eighty (180) days after the date of such damage (subject to delays outside of
Landlord's control), Tenant, as Tenant's exclusive remedy, may terminate this
Lease by delivering written notice of termination to Landlord in which event the
rights and obligations hereunder shall cease and terminate. In the event of any
insurance claim, Tenant shall be liable for payment of any deductible under any
of Landlord's insurance policies with respect to the premises.
C. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made known by any such holder, whereupon all rights and obligations hereunder
shall cease and terminate.
D. Anything in this Lease to the contrary notwithstanding, Landlord and
Tenant hereby waive and release each other of and from any and all rights of
recovery, claim, action or cause of action, against each other, their agents,
officers and employees, for any loss or damage that may occur to the Premises,
improvements to the building of which the Premises are a part, or personal
property (building contents) within the building and/or Premises, for any reason
regardless of cause or origin. Each party to this Lease agrees immediately after
execution of this Lease to give each insurance company, which has issued to it
policies of fire and extended coverage insurance, written notice of the terms of
the mutual waivers contained in this subparagraph, and if necessary, to have the
insurance policies properly endorsed.
E. If the Premises are damaged by any peril not covered by the
insurance to be provided by Landlord under paragraph 9A above and the cost to
repair such damage exceeds any amount Tenant may elect to contribute, Landlord
may elect either to commence to repair and restore the Premises, in which event
this Lease shall remain in full force and effect, or not to repair and restore
the Premises, in which event this Lease shall terminate.
11. LIABILITY AND INDEMNIFICATION. Tenant shall hold Landlord harmless
from and defend Landlord against any and all claims or liability for any injury
or damage (i) to any person or property whatsoever occurring in, on or about the
Premises or any part thereof and/or of the building of which the Premises are a
part, including without limitation elevators, stairways, passageways or
hallways, the use of which Tenant may have in accordance with this Lease, when
such injury or damage shall be caused by the act neglect, fault of, or omission
of any duty with respect to the same by Tenant, its agents, servants, employees,
or invitees (ii) arising from the conduct of management of any work done by the
Tenant in or about the Premises, (iii) arising from transactions of the Tenant,
and (iv) all costs, counsel fees, expenses and liabilities incurred in
connection with any such claim or action or proceeding brought thereon. The
provisions of this Paragraph 11 shall survive the expiration or termination of
this Lease with respect to any claims or liability occurring prior to such
expiration or termination.
12. USE. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (other than retail) products, materials and
merchandise made and/or distributed by Tenant and for such other lawful purposes
as may be incidental thereto. Outside storage, including without limitation,
storage of trucks and other vehicles, is prohibited without Landlord's prior
written consent except that overnight parking of trucks and other vehicles shall
be permitted so long as it complies with all applicable laws, ordinances and
restrictions. Tenant shall have the non-exclusive right to use, in common with
other Tenants of the building of which the Premises are a part, the parking
provided and designated as such by Landlord. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to the use of the
Premises, and promptly shall comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in or upon, or
connected with, the Premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action that would
constitute a nuisance or would disturb, unreasonably interfere with, or endanger
Landlord or any other lessees of the building in which the Premises are a part.
Tenant shall pay the cost of any modifications to the Premises, the building in
which the Premises are located and the common areas required as a result of
Tenant's particular use of the Premises.
13. INSPECTION. Landlord and Landlord's agents and representatives
shall have the right to enter the Premises at any reasonable time during
business hours, to inspect the Premises and to make such repairs as may be
required or permitted pursuant to this Lease. During the period that is six (6)
months prior to the end of the Lease term, upon telephonic notice to Tenant,
Landlord and Landlord's representatives may enter the Premises during business
hours for the purpose of showing the Premises. In addition, Landlord shall have
the right to erect a suitable sign on the Premises stating the Premises are
available. Tenant shall notify Landlord in writing at least thirty (30) days
prior to vacating the Premises and shall arrange to meet with Landlord for
a joint inspection of the Premises prior to vacating. If Tenant fails to give
such notice or to arrange for such inspection, then Landlord's inspection of the
Premises shall be deemed correct for the purpose of determining Tenant's
responsibility for repairs and restoration of the Premises.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not have the right to assign, sublet, transfer or
encumber this Lease, or any interest therein without the prior written consent
of Landlord. Any attempted assignment, subletting, transfer or encumbrance by
Tenant in violation of the terms and covenants of this Paragraph shall be void.
In the event Tenant desires to sublet the Premises, or any portion thereof, or
assign this Lease, Tenant shall give written notice thereof to Landlord within a
reasonable time prior to the proposed commencement date of such subletting or
assignment which notice shall set forth the name of the proposed sublessee or
assignee, the relevant terms of any sublease and copies of financial reports and
other relevant financial information of the proposed sublessee or assignee.
B. In addition to, but not in limitation of, Landlord's right to
approve of any sublessee or assignee, Landlord shall have the option, in its
sole discretion, in the event of any proposed subletting or assignment, to
terminate this Lease, or in case of a proposed subletting of less than the
entire Premises, to recapture the portion of the Premises to be sublet, as of
the date the subletting or assignment is to be effective. The option shall be
exercised if at all, by Landlord giving Tenant written notice thereof within
sixty (60) days following Landlord's receipt of Tenant's written notice as
required above. If this lease shall be terminated with respect to the entire
demised Premises, pursuant to this Paragraph, the term of this lease shall end
on the date stated in Tenant's notice as the effective date of the sublease or
assignment as if that date had been originally fixed in this lease for the
expiration of the term hereof, provided, however, that effective on such date
Tenant shall pay Landlord all amounts, as estimated by Landlord, payable by
Tenant to such date with respect to taxes, insurance, repairs, maintenance,
restoration and other obligations, costs or charges which are the responsibility
of Tenant hereunder. Further, upon any such cancellation Landlord and Tenant
shall have no further obligations or liabilities to each other under this lease,
except with respect to obligations or liabilities which accrued hereunder as of
such cancellation date (in the same manner as if such cancellation date were the
date originally fixed in this lease of the expiration of the term hereof). If
Landlord recaptures under this Paragraph only a portion of the Premises, the
rent during the unexpired term hereof shall abate proportionately based on the
rent per square foot contained in this lease as of the date immediately prior to
such recapture. Tenant shall, at Tenant's own cost and expense, discharge in
full any outstanding commission obligation on the part of Landlord with respect
to this lease, and any commissions which may be due and owing as a result of any
proposed assignment or subletting, whether or not the Premises are recaptured
pursuant thereto and rented by Landlord to the proposed Tenant or any other
tenant.
Landlord
Tenant
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C. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et. seq., (the
"Bankruptcy Code"), any and all monies or other consideration payable or
otherwise to be delivered in connection with such assignment shall be paid or
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any and all monies or other considerations
constituting Landlord's property under the preceding sentence not paid or
delivered to Landlord shall be held in trust for the benefit of Landlord and be
promptly paid or delivered to Landlord. Any person or entity to which this Lease
is assigned pursuant to the provisions of the Bankruptcy Code, shall be deemed,
without further act or deed, to have assumed all of the obligations arising
under this Lease on and after the date of such assignment. Any such assignee
shall upon demand execute and deliver to Landlord an instrument confirming such
assumption.
D. Notwithstanding the foregoing, Tenant shall have the right to assign
this Lease to any affiliate (as such term is defined in the Securities Act of
1933) provided that such assignment is in form satisfactory to Landlord. Any
assignee, sublessee or transferee of Tenant's interest in this Lease (all such
assignees, sublessees and transferees being hereinafter referred to as
"Transferees"), by assuming Tenant's obligations hereunder, shall assume
liability to Landlord for all amounts paid to persons other than Landlord by
such Transferees in contravention of this Paragraph. No assignment, subletting
or other transfer, whether consented to by Landlord or not or permitted
hereunder shall relieve Tenant of its liability hereunder. If an event of
default occurs while the Premises or any part thereof are assigned or sublet,
then Landlord, in addition to any other remedies herein provided, or provided by
law, may collect directly from such Transferee all rents payable to the Tenant
and apply such rent against any sums due Landlord hereunder. No such collection
shall be construed to constitute a novation or a release of Tenant from the
further performance of Tenant's obligations hereunder. Notwithstanding the
foregoing, Landlord hereby approves the assignment of this Lease by Tenant to
its affiliate, Werner Co., provided that Werner Co. expressly agrees to assume
all of the obligations of Tenant under this Lease and the terms and provisions
of this Lease shall otherwise remain in full force and effect and applicable to
Tenant and its assignee.
15. CONDEMNATION. If more than eighty percent (80%) of the Premises are
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking prevents or materially interferes with the use of the
Premises for the purpose for which they were leased to Tenant, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease, effective on the date of such taking. If less than eighty percent (80%)
of the Premises are taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof, this Lease shall not terminate, but the rent
payable hereunder during the unexpired portion of this Lease shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. All
compensation awarded in connection with or as a result of any of the foregoing
proceedings shall be the property of Landlord and Tenant hereby assigns any
interest in any such award to Landlord; provided, however, Landlord shall have
no interest in any award made to Tenant for the taking of Tenant's fixtures and
improvements, if a separate award for such items is made to Tenant.
16. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Tenant immediately shall deliver possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed. If,
for any reason, Tenant retains possession of the Premises or any part thereof
after such termination, then Landlord may, at its option, serve written notice
upon Tenant that such holding over constitutes either (i) renewal of this lease
for one year, and from year to year thereafter, (ii) creation of a month to
month tenancy, upon the terms and conditions set forth in this lease, or (iii)
creation of a tenancy at sufferance, in any case upon the terms and conditions
set forth in this lease; provided, however, that the monthly rental or daily
rental under (iii) shall, in addition to all other sums which are to be paid by
Tenant hereunder whether or not as additional rent, be equal to [double] 150% of
the rental being paid monthly to Landlord under this lease immediately prior to
such termination (prorated in the case of (iii) on the basis of a 365 day year
for each day Tenant remains in possession). If no such notice is served then a
tenancy at sufferance shall be deemed to be created at the rent in the preceding
sentence. Tenant shall also pay to Landlord all damages sustained by Landlord
resulting from retention of possession by Tenant, including the loss of any
proposed subsequent tenant for any portion of the Premises. The provisions of
this Paragraph shall not constitute a waiver by Landlord of any right of
re-entry as herein set forth; nor shall receipt of any rent or any other act in
apparent affirmance of the tenancy operate as a waiver of the right to terminate
this Lease for a breach of any of the terms, covenants, or obligations herein on
Tenant's part to be performed. No holding over by Tenant, whether with or
without consent of Landlord shall operate to extend this Lease except as
otherwise expressly provided. The preceding provisions of this Paragraph 16
shall not be construed as consent for Tenant to retain possession of the
Premises in the absence of written consent thereto by Landlord.
17. QUIET ENJOYMENT. Landlord covenants that on or before the
commencement date it will have good title to the Premises, free and clear of all
liens and encumbrances, excepting only the lien for current taxes not yet due,
such mortgage or mortgages as are permitted by the terms of this Lease, zoning
ordinances and other building and fire ordinances and governmental regulations
relating to the use of such property, and easements restrictions and other
conditions of record. If this Lease is a sublease then Tenant agrees to take the
Premises subject to the provisions of the prior Leases. Landlord represents that
it has the authority to enter into this Lease and that so long as Tenant pays
all amounts due hereunder and performs all other covenants and agreements herein
set forth, Tenant shall peaceably and quietly have, hold and enjoy the Premises
for the term hereof without hindrance or molestation from Landlord, subject to
the terms and provisions of this Lease.
18. EVENTS OF DEFAULT. The following events (herein individually
referred to as "event of default") each shall be deemed to be events of
nonperformance by Tenant under this Lease:
A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due, and such failure shall continue for a period of five (5) days from the date
such payment was due.
B. The Tenant or any guarantor of the Tenant's obligations hereunder
shall (i) become insolvent, (ii) admit in writing its inability to pay its
debts; (iii) make a general assignment for the benefit of creditors, (iv)
commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as a debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property, or (v) take any action to
authorize or in contemplation of any of the actions set forth above in this
Paragraph.
C. Any case, proceeding or other action against the Tenant or any
guarantor of the Tenant's obligations hereunder shall be commenced seeking (i)
to have an order for relief entered against it as debtor or to adjudicate it a
bankrupt or insolvent; (ii) reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors; (iii)
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (a) results in the entry of an order for relief against it which it
is not fully stayed within thirty (30) business days after the entry thereof or
(b) shall remain undismissed for a period of [forty-five] sixty (60) days.
D. Tenant shall (i) vacate all or a substantial portion of the Premises
or (ii) fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Tenant is in default of the
rental payments due under this Lease.
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E. Tenant shall fail to discharge or bond over any lien placed upon the
Premises in violation of Paragraph 21 hereof within twenty (20) days after any
such lien or encumbrance is filed against the Premises.
F. Tenant shall fail to comply with any term, provision or covenant of this
Lease (other than those listed in this Paragraph 18), and shall not cure such
failure within twenty (20) days after written notice thereof to Tenant. Tenant
shall not be in default, however, if the failure is not capable of cure within
such twenty (20) day period, but Tenant is diligently and in good faith
prosecuting such cure. Tenant shall not be in default hereunder so long as such
failure is cured within thirty (30) additional days.
G. Tenant shall fail to comply with the terms and provisions of Paragraph 24
hereunder.
H. Tenant shall fail to deliver the estoppel certificate within the time
provided in Paragraph 22D.
19. REMEDIES.
A. Upon each occurrence of an event of default, Landlord shall have the
option to pursue any one or more of the following remedies without any notice or
demand:
(1) Terminate this Lease; and/or
(2) Enter upon and take possession of the Premises without terminating
this Lease; and/or
(3) Alter all locks and other security devices at the Premises with or
without terminating this Lease, and pursue, at Landlord's option, one or more
remedies pursuant to this Lease, Tenant hereby specifically waiving any state or
federal law to the contrary; and in any such event Tenant immediately shall
surrender the Premises to Landlord, and if Tenant fails so to do Landlord,
without waiving any other remedy it may have, may enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may be
occupying such Premises or any part thereof, without being liable for
prosecution or any claim of damages therefor and/or
(4) Maintain Tenant's right to possession in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover rent as it
becomes due.
B. If Landlord terminates this Lease, at Landlord's option, Tenant
shall be liable for and shall pay to Landlord, the sum of all rental and other
payments owed to Landlord hereunder accrued to the date of such termination,
plus, as liquidated damages, an amount equal to (1) the present value of the
total rental and other payments owed hereunder for the remaining portion of the
Lease term, calculated as if such term expired on the date set forth in
Paragraph 1, less (2) all amounts received by landlord through reletting the
Premises during such remaining term (but only to the extent of the rent herein
reserved). An action to collect amounts due by Tenant to Landlord under this
Subparagraph may be brought following termination of the Lease without the
necessity of Landlord's waiting until the expiration of the Lease Term.
C. If Landlord repossesses the Premises without terminating the Lease,
Tenant, at Landlord's option, shall be liable for and shall pay Landlord on
demand all rental and other payments owed to Landlord hereunder, accrued to the
date of such repossession, plus all amounts required to be paid by Tenant to
Landlord until the date of expiration of the term as stated in Paragraph 1,
diminished by all amounts received by Landlord through reletting the Premises
during such remaining term (but only to the extent of the rent herein reserved).
Actions to collect amounts due by Tenant to Landlord under this Subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the Lease term.
D. Upon an event of default, in addition to any sum provided to be paid
herein, Tenant also shall be liable for and shall pay to Landlord (i) brokers'
fees incurred by Landlord in connection with reletting the whole or any part of
the Premises; (ii) the costs of removing and storing Tenant's or other
occupant's property; (iii) the costs of repairing, altering, remodeling or
otherwise putting the Premises into condition acceptable to a new tenant or
tenants and (iv) all reasonable expenses incurred in marketing the Premises and
(v) all reasonable expenses incurred by Landlord in enforcing or defending
Landlord's rights and/or remedies. If either party hereto institute any action
or proceeding to enforce any provision hereof by reason of any alleged breach of
any provision of this Lease, the prevailing party shall be entitled to receive
from the losing party all reasonable attorneys' fees and all court costs in
connection with such proceeding.
E. In the event Tenant fails to make any payment due hereunder when
payment is due, to help defray the additional cost to Landlord for processing
such late payments, Tenant shall pay to Landlord on demand a late charge in an
amount equal to five percent (5%) of such installment; and the failure to pay
such amount within ten (10) days after demand therefor shall be an additional
event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
F. Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises by Landlord, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. Tenant and Landlord further agree that forbearance by
Landlord to enforce its rights pursuant to the Lease at law or in equity, shall
not be a waiver of Landlord's right to enforce one or more of its rights in
connection with any subsequent default.
G. In the event of termination and/or repossession of the Premises for
an event of default, Landlord shall use reasonable efforts to relet the Premises
and to collect rental after reletting, provided, that, Tenant shall not be
entitled to credit or reimbursement of any proceeds in excess of the rental owed
hereunder. Landlord may relet the whole or any portion of the Premises for any
period, to any Tenant and for any use and purpose.
H. If Landlord fails to perform any of its obligations hereunder within
thirty (30) days after written notice from Tenant specifying such failure,
Tenant's exclusive remedy shall be an action for damages. Notwithstanding the
foregoing, if the nature of Landlord's obligation is such that more than thirty
(30) days is reasonably required to cure such failure, then Landlord shall have
such time as is reasonably required provided Landlord commences such performance
within thirty (30) days after written notice from Tenant and thereafter
diligently prosecutes the same to completion. Unless and until Landlord fails to
so cure any default after such notice, Tenant shall not have any remedy or cause
of action by reason thereof. All obligations of Landlord hereunder will be
construed as covenants, not conditions; and all such obligations will be binding
upon Landlord only during the period of its possession of the Premises and not
thereafter. The term "Landlord" shall mean only the owner, for the time being of
the Premises, and in the event of the transfer by such owner of its interest in
the Premises, such owner shall thereupon be released and discharged from all
covenants and obligations of the Landlord thereafter accruing, but such
covenants and obligations shall be binding during: the Lease term upon each new
owner for the duration of such owner's ownership. Notwithstanding any other
provision hereof, Landlord shall not have any personal liability hereunder. In
the event of any breach or default by Landlord in any term or provision of this
Lease, Tenant agrees to look solely to the equity or interest then owned by
Landlord in the Premises or of the
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building of which the Premises are a part; however, in no event, shall any
deficiency judgment or any money judgment of any kind be sought or obtained
against any Landlord.
I. If Landlord repossesses the Premises pursuant to the authority
herein granted, then Landlord shall have the right to (i) keep in place and use
or (ii) remove and store all of the furniture, fixtures and equipment at the
Premises including that which is owned by or leased to Tenant at all times prior
to any foreclosure thereon by Landlord or repossession thereof by any Landlord
thereof or third party having a lien thereon. Landlord also shall have the right
to relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") who presents to Landlord
a copy of any instrument represented by Claimant to have been executed by Tenant
(or any predecessor of Tenant) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Landlord to inquire into the
authenticity or legality of said instrument. The rights of Landlord herein
stated shall be in addition to any and all other rights that Landlord has or may
hereafter have at law or in equity; and Tenant stipulates and agrees that the
rights herein granted Landlord are commercially reasonable.
J. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this Lease, whether or not
expressly denominated as rent, shall constitute rent.
K. This is a contract under which applicable law excuses Landlord from
accepting performance from (or rendering performance to) any person or entity
other than Tenant.
20. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises or the improvements situated thereon or the building
of which the Premises are a part, provided, however, that if the mortgagee,
trustee, or holder of any such mortgage or deed of trust elects to have Tenant's
interest in this Lease superior to any such instrument, then by notice to Tenant
from such mortgagee, trustee or holder, this Lease shall be deemed superior to
such lien, whether this Lease was executed before or after said mortgage or deed
of trust. Tenant, at any time hereafter on demand, shall execute any
instruments, releases or other documents that may be required by any mortgagee
for the purpose of subjecting and subordinating this Lease to the lien of any
such mortgage.
21. MECHANIC'S LIENS. Tenant has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interest of Landlord or Tenant in the Premises or
to charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant, including those who may furnish materials or perform labor
for any construction or repairs. Tenant covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from any and all loss,
cost or expense based on or arising out of asserted claims or liens against the
leasehold estate or against the right, title and interest of the Landlord in the
Premises or under the terms of this Lease. Tenant agrees to give Landlord
immediate written notice of the placing of any lien or encumbrance against the
Premises.
22. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
B. The terms, provisions and covenants and conditions contained in this
Lease shall run with the land and shall apply to, inure to the benefit of, and
be binding upon, the parties hereto and upon their respective heirs, executors,
personal representatives, legal representatives, successors and assigns, except
as otherwise herein expressly provided. Landlord shall have the right to
transfer and assign, in whole or in part, its rights and obligations in the
building and property that are the subject of this Lease. Each party agrees to
furnish to the other, promptly upon demand, a corporate resolution, proof of due
authorization by partners, or other appropriate documentation evidencing the due
authorization of such party to enter into this Lease.
C. Landlord shall not be held responsible for delays in the performance
of its obligations hereunder when caused by material shortages, weather, acts of
God or labor disputes.
D. Tenant agrees, from time to time, within ten (10) days after request
by Landlord, to deliver to Landlord or Landlord's designee, [a certificate of
occupancy], a credit references and credit information acceptable to Landlord,
[current financial statements prepared in accordance with GAAP], and an estoppel
certificate stating that this Lease is in full force and effect, the date to
which rent is paid and such other factual matters pertaining to this lease as
may be requested by Landlord. Tenant hereby irrevocably appoints Landlord as
attorney-in-fact for the Tenant with full power and authority to execute and
deliver in the name of Tenant such estoppel certificate if Tenant fails to
deliver the same within such ten (10) day period and such certificate as signed
by Landlord or Landlord's beneficiary, as the case may be, shall be fully
binding on Tenant, if Tenant fails to deliver a contrary certificate within five
(5) days after receipt by Tenant of a copy of the certificate executed by
Landlord or Landlord's beneficiary, as the case may be, on behalf of Tenant.
E. This Lease constitutes the entire understanding and agreement of the
Landlord and Tenant with respect to the subject matter of this Lease, and
contains all of the covenants and agreements of Landlord and Tenant with respect
thereto. Landlord and Tenant each acknowledge that no representations,
inducements, promises or agreements oral or written, have been made by Landlord
or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not
contained herein, and any prior agreements, promises, negotiations, or
representations not expressly set forth in this Lease are of no force or effect.
This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition and repair of the Premises. Upon the
expiration or earlier termination of the term hereof, and prior to Tenant
vacating the Premises, Tenant shall pay to Landlord any amount reasonably
estimated by Landlord as necessary to put the Premises, including without
limitation, all heating and air conditioning systems and equipment therein, in
good condition and repair, reasonable wear and tear excluded. Tenant shall also,
prior to vacating the Premises, pay to Landlord the amount, as estimated by
Landlord, of Tenant's obligation hereunder for real estate taxes and insurance
premiums for the year in which the Lease expires or terminates. All such amounts
shall be used and held by Landlord for payment of such obligations of Tenant
hereunder, with Tenant being liable for any additional costs therefor upon
demand by Landlord, or with any excess to be returned to Tenant after all such
obligations have been determined and satisfied as the case may be. Any security
deposit held by Landlord shall be credited against the amount due from Tenant
under this Paragraph 22F.
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G. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added, as a
part of this Lease, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.
H. All references in this Lease to "the date hereof or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
I. Tenant represents and warrants that it has dealt with no broker,
except for Mr. Matt Smetana, Real Estate Consultants, Inc., agent or other
person in connection with this transaction or that no broker, except for Mr.
Matt Smetana, Real Estate Consultants, Inc., agent or other person brought about
this transaction, other than as may be referenced in a separate written
agreement executed by Tenant, and delivered to Landlord, and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any other
broker, except for Mr. Matt Smetana, Real Estate Consultants, Inc., agent or
other person claiming a commission or other form of compensation by virtue of
having dealt with Tenant with regard to this leasing transaction.
J. If and when included within the term "Landlord", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address for the receipt of notices
and payments to Landlord. If and when included within the term "Tenant", as used
in this instrument, there is more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively shall be bound
by notices given in accordance with the provisions of Paragraph 25 hereof to the
same effect as if each had received such notice.
K. In the event the Premises constitute a portion of a multiple
occupancy building, Tenant's "proportionate share", as used in this Lease, shall
mean a fraction, the numerator of which is 94,048 and the denominator of which
is 202.759 equaling 46.4%.
L. Submission of this Lease shall not be deemed to be a reservation of
the Premises. Landlord shall not be bound hereby until its delivery to Tenant of
an executed copy hereof signed by Landlord, already having been signed by
Tenant, and until such delivery Landlord reserves the right to exhibit and lease
the Premises to other prospective tenants. Notwithstanding anything contained
herein to the contrary Landlord may withhold delivery of possession of the
Premises from Tenant until such time as Tenant has paid to Landlord the security
deposit required by subparagraph 2B hereof and one month's rent as set forth in
Subparagraph 2A hereof.
23. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivering of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address for Landlord set
forth below or at such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this Lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord. In addition to base rental due hereunder, all sums of
money and all payments due Landlord hereunder shall be deemed to be additional
rental owed to Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address set forth below, or at such other
address within the continental United States as Tenant may specify from time to
time by written notice delivered in accordance herewith.
(c) Any written notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually received or
not when deposited in the United States Mail, postage prepaid, Certified Mail,
addressed to the parties hereto at the respective addresses set out below, or at
such other address as they have theretofore specified by written notice
delivered in accordance herewith.
24. HAZARDOUS WASTE. The term "Hazardous Substances", as used in this
Lease shall mean pollutants, contaminants, toxic or hazardous materials or
wastes, petroleum products or any other substances, the removal of which is
required or the use of which is restricted prohibited or penalized by any
"Environmental Law", which terms shall mean any and all federal, state or local
laws including statutes, regulations, ordinances, codes, rules and other
governmental restrictions and requirements relating to the environment,
hazardous substances, or petroleum products including, but not limited to, the
Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Comprehensive Environmental Responsibility, Cleanup and Liability Act of
1980, regulations of the Environmental Protection Agency, regulations of the
nuclear Regulatory Agency, regulations or laws administered by OSHA and
regulations of any state department of natural resources or state environmental
protection agency now or at any time hereinafter in effect. Tenant hereby agrees
that (i) no activity will be conducted on the Premises that shall produce any
Hazardous Substance, except for such activities that are part of the ordinary
course of Tenant's business (the "Permitted Activities") provided said Permitted
Activities are conducted in accordance with all Environmental Laws, are fully
and completely disclosed to Landlord, and are expressly approved in advance in
writing by Landlord; (ii) the Premises shall not be used in any manner for the
storage of those Hazardous Substances, except for such storage that is in the
ordinary course of Tenant's business in amounts appropriate for such use (the
"Permitted Material") provided such Permitted Materials are properly stored in a
manner and location meeting all Environmental Laws, are fully and completely
disclosed to Landlord, and are expressly approved in advance in writing by
Landlord; (iii) no portion of the Premises shall be used as a landfill or a
dump; (iv) Tenant shall not install any underground tanks of any type; (v)
Tenant shall not allow any surface or subsurface conditions to exist or come
into existence that constitute, or with the passage of time may constitute, a
public or private nuisance; (vi) Tenant shall not permit any Hazardous
Substances to be brought onto the Premises, except for the Permitted Materials,
and if so brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required removal and cleanup procedures
shall be diligently undertaken pursuant to all Environmental Laws. Tenant shall
immediately give Landlord written notice as soon as Tenant becomes aware of any
suspected breach of this Paragraph, or any condition or circumstance which makes
the environmental warranties contained in this Lease incomplete, inaccurate or
misleading, upon learning of the presence or any release of any Hazardous
Substances, or upon receiving any correspondence, notice, pleading, citation,
indictment, complaint, order, decree, or other document from any source
asserting or alleging a circumstance or condition which requires or may require
a cleanup, removal, remedial action, or other response by, or on the part of the
Tenant under Environmental Laws, or which seeks criminal or punitive penalties
from Tenant for an alleged violation of Environmental Laws, or otherwise
pertaining to Hazardous Substances which may affect the Premises, together with
a copy thereof. In the event of any such circumstance, Tenant agrees, at its
expense and at the request of Landlord, to permit an environmental audit solely
for the benefit of the Landlord, to be conducted by the Landlord or an
independent agent selected by the Landlord and which may not be relied upon by
the Tenant for any purpose. This provision shall not relieve the Tenant from
conducting its own environmental
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Tenant
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<PAGE> 10
audits or taking any other steps necessary to comply with Environmental Laws.
Landlord, in the event it is named as a party, shall have the right, but not the
obligation, to join and participate in any legal proceedings or actions
initiated in connection with any matters related to Environmental Laws and to
have its attorneys' fees in connection therewith paid by Tenant. Tenant shall,
at Landlord's request, defend all suits, actions or proceedings commenced
against Landlord with counsel approved by Landlord, in Landlord's sole
discretion, and Tenant shall pay all costs and judgments associated therewith.
Tenant shall be solely responsible and shall indemnify, defend and hold
Landlord, and any property manager of the Premises, their directors, officers,
employees, agents, successors and assigns, harmless from and against all claims,
demands, actions, losses, liabilities, costs, expenses, damages and obligations
of any nature (including, without limitation, diminution in value of the
Premises; all consequential damages; the cost of any required or necessary
repair, cleanup or detoxification of the Premises; the preparation and
implementation of any closure, remedial or other required plans; damages for the
loss or restriction on use of rentable or usable space or of any amenity of the
Premises; damages arising from any adverse impact on marketing of space; damages
to adjacent property; costs of restoring the Premises, and sums paid in
settlement of claims, attorneys' fees, court costs, consultant fees, and expert
fees) incurred by or asserted against Landlord and directly or indirectly as a
result of, arising from, connected with, or attributable to Tenant's use of the
Premises, or the generation, storage, release, threatened release, discharge,
disposal, removal or presence of any Hazardous Substances, or relating to any
activity, act or omission involving Hazardous Substances or noncompliance with
any Environmental Law by Tenant. The foregoing indemnification shall survive the
termination or expiration of the Lease. Notwithstanding anything to the contrary
contained in this Lease, any default under the terms of this Paragraph shall be
a material default under this Lease enabling Landlord, at Landlord's option, to
immediately exercise any of the remedies set forth in this Lease, in addition to
any other remedies available to Landlord, without notice to Tenant and without
obligation to provide any grace or cure period to Tenant. Notwithstanding
anything to the contrary contained herein, Landlord's approval of any activity
or storage relating to any Hazardous Substance is not intended to, and shall
not, be deemed an undertaking by Landlord to determine whether or not such
activity or storage is in compliance with Environmental Laws and Landlord
assumes no responsibility with respect thereto.
25. ADDITIONAL PROVISIONS. See _________________________ attached hereto and
incorporated by reference herein.
26. [LANDLORD'S LIEN. in Addition to any statutory lien for rent in Landlord's
favor, Landlord shall have and Tenant hereby grants to Landlord a continuing
security interest for all rentals and other sums of money become due hereunder
from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory,
and other personal property of Tenant now or hereafter situated at the
Premises, and such property shall not be removed therefrom without the consent
of Landlord until all arrearages in rent as well as any and all other sums of
money then due to Landlord hereunder shall first have been paid and discharged.
In the event any of the foregoing described property is removed from the
Premises in violation of the covenant in the preceding sentence, the security
interest shall continue in such property and all proceeds and products,
reguardless of location. Upon a default hereunder by Tenant in addition to all
other rights and remedies, Landlord shall have all rights and remedies under
the Uniform Commercial Code including without limitation, the right to sell the
property described in this Paragraph at public or private sale upon five (5)
days notice by Landlord. Tenant hereby agrees to execute such other
instruments, necessary or desirable under applicable law to perfect the
security interest hereby created. Landloard and Tenant agree that this Lease
and security agreement serves as a financing statement and that a copy,
photographic or other reproduction of this portion of this Lease may be filed of
record by Landlord and have the same force and effect as the original. This
security agreement and financing statement also covers fixtures located at the
Premises subject to this Lease and legally described in Exhibit "A" attached
hereto and incorporated herein by reference and is to be filed for record in
the real estate records. the record owner of this property is ______________.]
27. Provided that this Lease is in full force and effect and the Tenant shall
not be in default hereunder at the time it exercises this option to extend or at
the time the extension term commences, Tenant may extend this Lease one time for
two (2) years from the expiration of the Initial term hereof by notice in
writing delivered to Landlord not less than) ninety (90) days prior to the
expiration date of the then current term of this Lease, as extended. All of the
covenants, conditions and provisions of this Lease shall thereupon be applicable
during said additional two (2) year term, except that the amount of rental to
be paid by the Tenant to Landlord shall be adjusted to reflect a 6% increase in
the base rent as referenced in Paragraph 2.A.
Landlord
Tenant
- --------------
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
Page 9
<PAGE> 11
28. Provided that this Lease is in full force and effect and the Tenant shall
not be in default hereunder at the time it exercises this option to transfer,
Tenant may transfer to another unit at least 30% larger than the current space
after the 12th month of the Lease, upon not less than ninety (90) days written
notice delivered to Landlord, provided that such a unit is available in
Landlord's current portfolio and such new term is at least 36 months in
additional length and such new Lease is at a market rental rate.
EXECUTED BY LANDLORD, this 22 day of September, 1994.
Attest /Witness
- --------------------------- SSMRT BENSENVILLE INDUSTRIAL PARK (3),
INC
By: /s/ ? ? ?
- --------------------------- ----------------------------------------
Title: Title: Special Assistant
--------------------- -------------------------------------
Corporate Secretary
ADDRESS:
505 Montgomery Street
-------------------------------------------
San Francisco, CA 94111
-------------------------------------------
-------------------------------------------
EXECUTED BY TENANT, this 14th day of September, 1994_.
Attest/Witness
/s/ Michael E. Werner
- --------------------------- OLYMPUS PROPERTIES, INC. AN ILLINOIS
CORPORATION
Michael E. Werner By: /s/ Donald M. Werner
- ---------------------------
Title: Assistant Secretary Title: President
---------------------
ADDRESS:
10900 W. Belmont Avenue
---------------------------------------------
Franklin Park, IL 60131-1588
---------------------------------------------
---------------------------------------------
---------------------------------------------
Landlord
Tenant
Page 10
<PAGE> 12
EXHIBIT "A"
Lot 5 (except the West 250.0 feet, as measured at right angles to the West line
thereof) in Thorndale Distribution Park in Bensenville, Unit No. 2, being a
subdivision of part of the South 1/2 of Section 2, Township 40 North, Range 11,
East of the Third Principal Meridian, according to the Plat thereof recorded
November 7, 1977 as Document No. R77-102030 and consent to contents and
recordation of Plat recorded January 31, 1978 as Document No. R78-08789, in
DuPage County, Illinois containing a 202,759 square foot building commonly
known as 600 Supreme Drive, Bensenville, Illinois 60106.
<PAGE> 13
[Map of Trammell Crow Company]
* 24' Clear Height
*200 Car Parking
*Fully Sprinklered
*32'x 40' Bays
NORTH SECTION (600 Supreme)
*129,423 Sq. Ft. Total Area
*17,170 Sq. Ft. Office
*12 Exterior Docks
*4 Interior Docks
South Section (608 Supreme)
*73,336 Sq. Ft. Total Area
*5,632 Sq. Ft. Office
*11 Exterior Docks
*1 Drive-in Door
Trammell Crow Company
Contact: Chuck Johanns
Chris Lydon
Michael Nelligan
<PAGE> 14
EXTENSION AGREEMENT to be attached to and form a part of lease (which together
with any amendments, modifications and extensions thereof is hereinafter called
the "Lease"), made of 22nd of September, 1994.
Between
Bensenville Associates, Ltd. later revised to
SSMRT Bensenville Industrial Park (3), Inc.
as Landlord
and
Olympus Properties, Inc.
as Tenant
covering the premises known as
608 Supreme Drive
Bensenville, IL
WITNESSETH that the Lease is hereby renewed and extended for a further term of
24 months to commence on November 1, 1996, and to end on October 31, 1998, on
the condition that Landlord and Tenant comply with all the provisions of the
covenants and agreements contained in the Lease, except that the monthly base
rent as described in Paragraph 2A of the Lease during said period shall be
$26,584.00.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this extension
agreement this 31st day of July, 1996
WITNESS: SSMRT Bensenville Industrial Park (3), Inc.
WITNESS:
Bensenville Associates, Ltd. later revised to
SSMRT Bensenville Industrial Park (3), Inc.
/s/ B. Talbot By: /s/ ? ? ?
- ---------------------------- ---------------------------------------------
WITNESS:
Olympus Properties, Inc
/s/ Marilyn Dambacher By: /s/ ? ? ?
- ---------------------------- ---------------------------------------------
<PAGE> 1
Exhibit 10.13
PENSION PLAN FOR
CERTAIN HOURLY BARGAINING UNIT EMPLOYEES OF
R. D. WERNER CO., INC.
(RESTATED EFFECTIVE OCTOBER 1, 1989)
<PAGE> 2
<TABLE>
<CAPTION>
CONTENTS
Page
PREAMBLE V
ARTICLE I DEFINITIONS
<S> <C> <C>
1.01 Accrued Benefit 1
1.02 Adjustment Factor 1
1.03 Annuity Starting Date 1
1.04 Beneficiary 1
1.05 Board 2
1.06 Code 2
1.07 Date of Employment or Reemployment 2
1.08 Disability Retirement Age 3
1.09 Disability Retirement Date 3
1.10 Early Retirement Age 3
1.11 Early Retirement Date 3
1.12 Employee 3
1.13 Employer 3
1.14 ERISA 3
1.15 Hour of Service 3
1.16 Joint and Survivor Annuity 4
1.17 Limitation Year 5
1.18 Normal Pension 5
1.19 Normal Retirement Benefit 5
1.20 Normal Retirement Age 5
1.21 Normal Retirement Date 5
1.22 Participant 5
1.23 Pension Board 5
1.24 Plan 6
1.25 Plan Administrator 6
1.26 Plan Year 6
1.27 Prior Plan 6
1.28 Related Employer 6
1.29 Restatement Date 6
1.30 Service 7
1.31 Severance From Service 8
1.32 Total and Permanent Disability 9
1.33 Trust Agreement and Trust 10
1.34 Trust Fund 10
1.35 Trustee 10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
CONTENTS
(continued)
Page
<S> <C> <C>
1.36 Union 10
1.37 Vested Interest 10
1.38 Vesting Service 11
ARTICLE II ELIGIBILITY AND PARTICIPATION
2.01 Participation 13
2.02 Reemployment of a Participant 13
ARTICLE III CONTRIBUTIONS
3.01 Trustee and Trust Agreement 14
3.02 Employer Contributions 14
3.03 Forfeitures 14
3.04 Reversion of Employer Contributions 14
ARTICLE IV BENEFITS
4.01 Normal Retirement Benefit 16
4.02 Postponed Retirement Benefit 17
4.03 Early Retirement Benefit 17
4.04 Termination of Vested Participant 18
4.05 Disability Retirement Benefit 19
4.06 Minimum Benefits 21
4.07 Maximum Benefits 21
4.08 Combined Maximum Limitations 25
4.09 Definition of Compensation for Purposes of 27
Sections 4.07 and 4.08
4.10 Reemployment After Receipt of Benefits 29
ARTICLE V FORM AND PAYMENT OF BENEFITS
5.01 Normal Pension 31
5.02 Joint and Survivor Annuity 31
5.03 Election Not to Receive Normal Pension 31
5.04 Election Not to Receive Joint and Survivor 32
Annuity
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
CONTENTS
(continued)
Page
<S> <C> <C>
5.05 Payment in Optional Form on Retirement 33
5.06 Pre-retirement Survivor Annuity 35
5.07 Administrative Powers Relating to Payments 37
5.08 No Guaranty of Benefits 38
5.09 Time of Payment 38
5.10 Death Distribution Requirements 39
5.11 Direct Rollovers 39a
ARTICLE VI FIDUCIARY RESPONSIBILITY
6.01 Fiduciary Responsibility Provisions 40
ARTICLE VII PENSION BOARD
7.01 Appointment and Acceptance 42
7.02 Duties and Authority 42
7.03 Decisions of the Pension Board 45
7.04 Differences as to Disability 46
7.05 Pension Board Procedures 46
7.06 Expenses and Assistance 47
7.07 Participants and Other Payees - Data 47
7.08 Resignation and Removal of Member of 47
Pension Board
7.09 Appointment of Successor 48
7.10 Plan Administration - Miscellaneous 48
ARTICLE VIII TEMPORARY RESTRICTIONS ON BENEFITS IN
CASE OF EARLY TERMINATION
8.01 Restrictions on Plan Termination 51
8.02 Restriction on Distributions 51
ARTICLE IX AMENDMENT AND TERMINATION
9.01 Right to Amend or Terminate 56
9.02 Termination 57
9.03 Partial Termination 58
9.04 Method of Payment 59
9.05 Notice of Amendment, Termination, or 59
Partial Termination
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
CONTENTS
(continued)
Page
ARTICLE X MISCELLANEOUS
<S> <C> <C>
10.01 No Contract of Employment 60
10.02 Merger or Consolidation of Plan, Transfer 60
of Assets
10.03 Data 60
10.04 Restrictions Upon Assignments and 61
Creditors' Claims
10.05 Restriction of Claims Against Trust Fund 61
10.06 Benefits Payable by Trust Fund 62
10.07 Successor to Employer 62
10.08 Applicable Law 62
10.09 Internal Revenue Service Approval 62
</TABLE>
- iv -
<PAGE> 6
PENSION PLAN FOR
CERTAIN HOURLY BARGAINING UNIT EMPLOYEES OF
R. D. WERNER CO., INC.
PREAMBLE
R. D. Werner Co., Inc. has amended and restated, effective October 1, 1989,
the pension plan for its eligible Employees known as the Pension Plan for
Certain Hourly Bargaining Unit Employees of R. D. Werner Co., Inc. (the
"Plan"). The Plan constitutes a continuation and restatement of the
Pension Plan for Certain Hourly Bargaining Unit Employees of R. D. Werner
Co., Inc. (the "Prior Plan"), effective as of October 1, 1958, and as
amended from time to time.
The Plan has been restated in order to comply with changes promulgated under the
Tax Reform Act of 1986 and subsequent legislation.
The restatement of the Prior Plan shall not in any way affect the rights of
Employees who participated in the Prior Plan in accordance with its provisions.
All matters relating to the benefits, if any, payable to such Employees (or
their Beneficiaries) based upon events occurring prior to October 1, 1989 shall,
except as otherwise expressly provided herein, be determined in accordance with
the applicable provisions of the Prior Plan.
-v-
<PAGE> 7
ARTICLE I
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and phrases
shall have the meanings stated below unless a different meaning is plainly
required by the context. All masculine terms shall include the feminine and all
singular terms shall include the plural, unless the context clearly indicates
the gender or the number.
1.01 ACCRUED BENEFIT means the amount computed under the formula set forth in
Section 4.01 of the Plan payable at Normal Retirement Date.
1.02 ADJUSTMENT FACTOR means the appropriate adjustment factor(s) that may be
applicable to a Participant's retirement income in accordance with the
terms of the Plan as shown on the tables attached hereto and made a part
hereof.
1.03 ANNUITY STARTING DATE means the first day of the first period for which
an amount is payable as an annuity or in any other form.
1.04 BENEFICIARY means the person or persons designated by a Participant to
receive any benefits under the Plan which may be due upon the
Participant's death. Notwithstanding anything to the contrary, if a
Participant is married on the date of his death, the Beneficiary of such
Participant shall be his spouse unless:
(a) The Participant's spouse consents in writing not to be said
Beneficiary, such written consent is witnessed by either a
representative of the Plan or a notary public and such consent
acknowledges the effect of the Participant's selection of a
Beneficiary other than his spouse;
-1-
<PAGE> 8
(b) The foregoing consent may not be obtained because such spouse
cannot be located; or
(c) Such other circumstances exist as the Pension Board may,
in accordance with applicable regulations, deem appropriate to
waive the foregoing spousal consent requirement.
The spouse's consent will apply with respect to a specific alternate Beneficiary
only, and change of Beneficiary will require a new spousal consent. If no person
or entity has been designated by the Participant as Beneficiary, or if no named
original or successive Beneficiary survives the Participant, any payments owed
to a Beneficiary shall be made:
(a) To the Participant's surviving spouse;
(b) After the death of the surviving spouse, to the Participant's
surviving children, in equal shares; or
(c) If none of the foregoing survives to the end of such period, to
the personal representative of his estate.
1.05 BOARD means the Board of Directors of R. D. Werner Co., Inc.
Section 1.05 is amended by the addition of the following sentence at the end
thereof, to read as follows (First Amendment to Plan):
Effective March 1, 1994, "Board" means the Board of Directors of Werner
Co.
Balance of page retyped only for easy reading with addition of above amendment.
1.06 CODE means the Internal Revenue Code of 1986, as amended from time to
time.
1.07 DATE OF EMPLOYMENT OR REEMPLOYMENT means the first day an Employee
performs an Hour of Service.
-2-
<PAGE> 9
1.08 DISABILITY RETIREMENT AGE means the age at which a Participant
terminates his employment by reason of a Total and Permanent Disability,
provided he was actively employed and accruing service and had completed
at least fifteen (15) years of Vesting Service on the date he became
Totally and Permanently Disabled.
1.09 DISABILITY RETIREMENT DATE means the first day of the seventh month
following the date a Participant attains his Disability Retirement Age.
1.10 EARLY RETIREMENT AGE means the age at which a Participant completes at
least fifteen (15) years of Vesting Service and has attained the age
which is five (5) years prior to his Normal Retirement Age.
1.11 EARLY RETIREMENT DATE means the first day of any month coincident with
or immediately following the date a Participant terminates employment
other than for death, after attaining his Early Retirement Age, but
prior to his Normal Retirement Date.
1.12 EMPLOYEE means any person employed by the Employer. Employee shall also
include any leased employee deemed to be an Employee of the Employer as
provided in Section 414(n) of the Code.
1.13 EMPLOYER means R. D. Werner Co., Inc.
Section 1.13 is amended by the addition of the following sentence at the end
thereof to read as follows (First Amendment to Plan):
Effective March 1, 1994, "Employer" means Werner Co.
Balance of page retyped only for easy reading with addition of above amendment.
1.14 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.15 HOUR OF SERVICE means:
(a) Each hour for which an employee is paid or entitled to payment
for the performance of duties for the Employer
<PAGE> 10
or for a Related Employer. These hours shall be credited to the
Employee for the computation period or periods in which the
duties are performed; and
(b) Each hour for which an Employee is paid or entitled to payment
by the Employer or a Related Employer on account of a period of
time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or other approved leave of
absence. No more than five hundred one (501) Hours of Service
shall be credited under this paragraph for any single continuous
period (whether or not such period occurs in a single
computation period). Hours under this paragraph shall be
calculated and credited pursuant to Section 2530.200b-2 of the
Department of Labor regulations, which are incorporated herein
by reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer or a
Related Employer. The same Hours of Service shall not be
credited under both paragraph (a) or paragraph (b), as the case
may be, and under this paragraph (c). These hours shall be
credited to the Employee for the computation period or periods
to which the award or agreement pertains rather than the
computation period in which the award, judgment or payment is
made.
1.16 JOINT AND SURVIVOR ANNUITY means an annuity which is payable monthly to
the Participant for his life with a survivor annuity payable to his
spouse for the life of such spouse in an amount equal to one-half (i) of
the monthly amount payable during the
-4-
<PAGE> 11
life of the Participant. The Participant's monthly income under
the Joint and Survivor Annuity shall be an amount equal to the
amount payable under the Normal Pension, multiplied by the
applicable Adjustment Factor, and based upon the age of the
Participant and that of his spouse as of the date benefits
commence under the Joint and Survivor Annuity.
1.17 LIMITATION YEAR means the Plan Year.
1.18 NORMAL PENSION means a retirement benefit payable monthly to the
Participant for his lifetime only.
1.19 NORMAL RETIREMENT BENEFIT means the amount of retirement income computed
under Section 4.01 of the Plan that would be payable in the normal form
under the conditions described in Section 5.01 of the Plan, commencing
upon the Participant's Normal Retirement Date, if he is then entitled to
receive a retirement income under the terms of the Plan.
1.20 NORMAL RETIREMENT AGE means the later of the Participant's sixty-fifth
birthday or the fifth anniversary of the date he commenced participation
in the Plan.
1.21 NORMAL RETIREMENT DATE means the first day of the month coincident with
or immediately following the date a Participant attains his Normal
Retirement Age.
1.22 PARTICIPANT means an Employee who meets the requirements of
participation in the Plan as provided in Article II.
1.23 PENSION BOARD means the pension plan board appointed by the Board to
administer the Plan.
-5-
<PAGE> 12
Section 1.24 is amended by the addition of the following sentence at the end
thereof, to read as follows (First Amendment to Plan):
Effective March 1, 1994, "Plan" means the Pension Plan for Certain
Hourly Bargaining Unit Employees of Werner Co.
1.25 PLAN ADMINISTRATOR means the Pension Board.
1.26 PLAN YEAR means the calendar year for all years after December 31, 1989.
Prior to January 1, 1990, Plan Year means the twelve (12) month period
beginning on October 1 and ending on September 30 of the following
calendar year; provided that the Plan Year that began October 1, 1989
shall end on December 31, 1989.
1.27 PRIOR PLAN means the Plan as it existed on September 30, 1989 prior to
the amendment and restatement.
1.28 RELATED EMPLOYER means any corporation or other business entity which is
included in a controlled group of corporations within which the Employer
is also included, as provided in Section 414(b) of the Code (as
modified, for purposes of Sections 4.07 and 4.08 of the Plan, by Section
415(h) of the Code), or which is a trade or business under common
control with the Employer, as provided in Section 414(c) of the Code (as
modified, for purposes of Sections 4.07 and 4.08 of the Plan, by Section
415(h) of the Code), or which constitutes a member of an affiliated
service group within which the Employer is also included, as provided in
Section 414(m) of the Code, or which is required to be aggregated with
the Employer pursuant to regulations issued under Section 414(o) of the
Code.
1.29 RESTATEMENT DATE means October 1, 1989, the effective date of the
amendment and restatement of the Plan.
-6-
<PAGE> 13
1.30 SERVICE means the period commencing on the Employee's Date of Employment
or Reemployment, whichever is applicable, and ending on his Severance
From Service date, as determined in accordance with the following rules:
(a) An Employee's total period of Service shall be equal to his
total number of whole years of Service, whether or not all
periods of Service were completed consecutively. For purposes of
this aggregation, thirty (30) days shall equal one (1) month and
twelve (12) months shall equal one (1) year with fractional
months rounded to the next highest month.
(b) An Employee who transfers from an ineligible to an eligible
class of Employees shall be credited with all of his Service
with the Employer, both before and after such transfer. Such
Service shall be counted for both vesting and benefit accrual
purposes.
(c) An Employee who has been retired for permanent incapacity and
who, upon recovery from such incapacity and discontinuance of
his pension, is reemployed shall be credited with his Service as
of the date of his prior retirement for the purpose of
calculating any subsequent pension benefit to which he may
become entitled.
(d) Anything herein to the contrary notwithstanding, if an Employee
is absent on account of military duty, then such absence shall
be counted as Service while the Employee's reemployment rights
are protected by law, provided the Employee returns to work
within ninety (90) days after he is eligible for release from
active duty.
-7-
<PAGE> 14
1.31 SEVERANCE FROM SERVICE means the earliest of the following
dates:
(a) The date on which an Employee terminates employment, is
discharged, retires, or dies;
(b) The date which is three (3) years after the first day on
which the Employee is absent because of disability;
provided, however, that an Employee who is injured while
on duty shall accumulate credit for Service until at
least the end of the period for which statutory
compensation is payable to him;
(c) The first anniversary of the date when the Employee is
first absent from Service because of leave of absence
authorized by the Employer, provided the Employee fails
to return to work by the second anniversary of such
date;
(d) The second anniversary of the date the Employee is
absent because of maternity or paternity reasons;
(e) The date on which his period of absence due to layoff
equals his prior period of Service, but such date shall
not be less than two (2) years nor more than five (5)
years from the date the layoff began; however, no
continuous period of layoff that exceeds two (2) years
shall be included as Service; or
(f) The first anniversary of the date the Employee is absent
for any other reason (e.g., sickness, vacation).
-8-
<PAGE> 15
For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence:
(a) By reason of the pregnancy of the individual;
(b) By reason of a birth of a child of the individual;
(c) By reason of the placement of a child with the individual in
connection with the adoption of such child by such individual;
or
(d) For purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Employer's leave policy shall be applied in a uniform and
non-discriminatory manner to all Employees under similar circumstances.
1.32 TOTAL AND PERMANENT DISABILITY means total and permanent disability by
bodily injury or disease from some unavoidable cause so as to be
prevented from engaging in any occupation or employment for remuneration
or profit, which, in the opinion of a qualified physician, will be
permanent and continuous during the remainder of the Employee's life.
Disability shall be deemed to have resulted from an unavoidable cause
unless it:
(a) Was contracted, suffered, or incurred while the Employee was
engaged in, or resulted from his having been engaged in, a
criminal enterprise;
(b) Resulted from an intentionally self-inflicted injury; or
-9-
<PAGE> 16
(c) Resulted from habitual drunkenness or addiction to narcotics.
Total and permanent disability resulting from any of such enumerated
causes, or from future service in the armed forces and which prevents an
Employee from returning to employment with the Employer and for which he
receives a military pension, shall not entitle an Employee to benefits
because of a Total and Permanent Disability.
A Participant will not cease to be deemed disabled solely because he
engages in gainful employment for purposes of rehabilitation as approved
by the Employer.
1.33 TRUST AGREEMENT and TRUST mean the agreement between the Trustee and the
Employer governing the administration of the Trust Fund, as it may be
amended from time to time, and the Trust established thereunder.
1.34 TRUST FUND means all money, securities, and other property held by the
Trustee for the purposes of the Plan, together with the income
therefrom.
1.35 TRUSTEE means the person, persons, entity, or entities appointed by the
Board to act as trustee of the Trust.
1.36 UNION means the United Steelworkers of America.
1.37 VESTED INTEREST means that portion of a Participant's Accrued Benefit
which is nonforfeitable and vested, based upon the number of years of
Vesting Service credited to the Participant.
- 10 -
<PAGE> 17
1.38 VESTING SERVICE means a Participant's credit for purposes of determining
his right to a nonforfeitable benefit under the Plan. Such Vesting
Service shall mean the Employee's Service determined in accordance with
the following rules:
(a) If an Employee is reemployed by the Employer within the twelve
(12) consecutive month period beginning on the date that the
Employee quit, was discharged, retired, or began a leave of
absence per Contract, then the period of time during which he
was not employed shall count as Service.
(b) If an Employee returns to work within twenty-four (24) months
after a leave of absence authorized by the Employer commenced,
the period of time during which he was not at work shall count
as Service.
(c) If an Employee returns to work within twelve (12) months after
his sickness, vacation, disability or layoff commenced, then the
period of time during which he was not at work shall count as
Service.
(d) If an Employee does not complete an Hour of Service during the
twelve (12) consecutive month period beginning on his Severance
From Service date, then such date shall be considered his
"break-in-service" date and, unless the former Employee is
subsequently reemployed by the Employer, he shall not be
credited with any additional Service.
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<PAGE> 18
(e) If an individual described in subparagraph (d) above is later
reemployed by the Employer, the special rules described below
shall apply:
Service prior to his most recent Severance From Service date
shall be counted along with Service earned after the Employee's
Date of Reemployment if:
(1) The Employee had any Vested Interest in his Accrued
Benefit prior to his most recent Severance From Service
date; or
(2) The Employee did not have any Vested Interest in his
Accrued Benefit, but the Employee's period of Service
prior to his most recent Severance From Service date
exceeds the greater of five (5) years or the latest
period of severance during which the Employee was not
employed by the Employer.
If a reemployed Employee does not meet either test in (1) or (2)
above, then any Service earned prior to the Severance From
Service date shall be disregarded.
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<PAGE> 19
ARTICLE 11
ELIGIBILITY AND PARTICIPATION
2.01 PARTICIPATION
Every Employee who was a Participant in the Prior Plan on the day prior
to the Restatement Date shall continue to participate in the Plan on the
Restatement Date if he is both:
(a) In an hourly job classification of the Employer; and
(b) A member of a collective bargaining unit represented by Local
3713 of the United Steelworkers of America.
No other Employees shall be eligible for participation in the Plan.
2.02 REEMPLOYMENT OF A PARTICIPANT
A Participant who incurs a Severance From Service shall be a Participant
immediately upon his Date of Reemployment.
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<PAGE> 20
ARTICLE III
CONTRIBUTIONS
3.01 TRUSTEE AND TRUST AGREEMENT
The Plan shall be funded through the Trust Fund. The Trustee shall have
the rights, powers, and duties set forth in the Trust Agreement, under
which agreement the Trustee shall receive contributions from the
Employer to the Trust Fund.
3.02 EMPLOYER CONTRIBUTIONS
Except as otherwise provided by mutual agreement between the Employer
and the Union, during the continuance of the Plan, the Employer will pay
to the Trustee) to be held or applied under the Trust Agreement, such
amounts as shall comply with the funding requirements of the Code.
3.03 FORFEITURES
Any forfeiture under the Plan shall be applied to reduce Employer
contributions and not to increase the benefits any Participant would
otherwise receive under the Plan.
3.04 REVERSION OF EMPLOYER CONTRIBUTIONS
At no time shall any part of the corpus or income of the Trust Fund be
used for or diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries and to pay the reasonable expenses
of administration of the Plan and Trust, to the extent that such
expenses are not paid by the Employer, and
- 14 -
<PAGE> 21
no part of the Trust Fund shall revert or be repaid to the Employer,
either directly or indirectly, except for such part of the Trust Fund,
if any, which remains under the Trust after the satisfaction of all
liabilities to persons entitled to benefits under the Plan.
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<PAGE> 22
ARTICLE IV
BENEFITS
4.01 NORMAL RETIREMENT BENEFIT
An Employee who is an active Participant on or after June 1, 1987 and
who retires at his Normal Retirement Age shall be entitled to a monthly
retirement income payable as provided in Article V of the Plan,
commencing upon his Normal Retirement Date, in an amount equal to
one-twelfth (1/12) of: One hundred eighty-six dollars ($186) multiplied
by the number of the Participant's years of Service, not to exceed forty
(40).
If any Participant is or shall become, or upon application would become,
entitled to any other retirement income or payment in the nature of a
pension (other than primary old age insurance benefits or disability
insurance benefits provided under the Social Security Act) from any
source or fund, to which source or fund the Employer shall have directly
or indirectly contributed, then the amount of the retirement income
payable to such Participant for any period shall be reduced by the
amount of any such other retirement income paid or payable to him or
that would upon application become payable to him during the time any
retirement income is payable under this Plan; provided, however) if such
Participant shall have contributed to the source or fund out of which
such other retirement income shall be paid or become payable or would
become payable upon application, the amount by which the retirement
income payable under this Plan shall be reduced for any period shall be
decreased by the amount attributable to the contributions that such
Participant shall have made to such source or fund.
- 16 -
<PAGE> 23
Notwithstanding anything to the contrary in the preceding paragraphs of
this section, if a Participant is entitled to a benefit from the
Employer's individual account retirement plan, then the retirement
income payable to the Participant under this Plan shall not be reduced
by the benefit from the individual account retirement plan.
In no event will the total yearly amount of retirement income to be
provided for a reemployed Participant on account of all periods of
employment be greater than the yearly amount of retirement income that
would have been provided for him if his prior Severance From Service had
not occurred.
4.02 POSTPONED RETIREMENT BENEFIT
The following language shall be added at the end of Section 4.02, to
read as follows (First Amendment to Plan):
A Participant who remains in the employ of the Employer after his Normal
Retirement Date shall be notified by the Plan Administrator, in writing
by personal delivery or first-class mail, during the calendar month
during which his Normal Retirement Date occurs, that he will not be
entitled to receive any benefit for any calendar month of employment
during which he is scheduled to work forty (40) or more Hours of Service
or receives from the Employer or Related Employer payment for any Hours
of Service performed on each of eight (8) or more days in such month (or
separate work shifts), provided that the Plan has not determined or used
the actual number of Hours of Service. The benefit of such Participant
shall be actuarially increased to reflect the benefit payable to such
Participant for any calendar month during which he does not complete
forty (40) Hours of Service or receive from the Employer or Related
Employer payment for any Years of Service performed on each of eight
(8) or more days in such month (or separate work shifts), provided the
Plan has not determined or used the actual number of Hours of Service.
If such Participant dies before the commencement of his benefit as so
increased, a single sum equal to the aggregate benefit payable to the
Participant for each month after his Normal Retirement date during which
he did not complete at least forty (40) Hours of Service shall be paid
to his surviving spouse, and if none, to his estate.
4.03 EARLY RETIREMENT BENEFIT
A Participant who has reached his Early Retirement Age may retire at any
time prior to his Normal Retirement Age. A Participant who retires on or
after his Early Retirement Age, but prior to his Normal Retirement Age,
shall be entitled to a retirement income for life, commencing upon his
Normal Retirement Date, in an amount
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<PAGE> 24
equal to his Accrued Benefit. However, the Participant may elect to have
his retirement income begin on the first day of any month on or after
his Early Retirement Date, in which event he shall be entitled to
receive a retirement income for life in an amount equal to his Accrued
Benefit, but multiplied by the applicable Adjustment Factor shown on the
attached table.
4.04 TERMINATION OF VESTED PARTICIPANT
A Participant who has completed at least five (5) years of Vesting
Service and who incurs a Severance From Service before he becomes
eligible to retire at his Normal Retirement Age, his Disability
Retirement Age, or his Early Retirement Age shall be entitled to receive
a retirement income for life commencing upon his Normal Retirement Date
in an amount equal to his Accrued Benefit. However, the Participant, if
he has completed at least fifteen (15) years of Vesting Service, may
elect to have his retirement income begin on the first day of any month
within the five (5) year period immediately preceding his Normal
Retirement Date, in which event he shall be entitled to receive a
retirement income for life in an amount equal to his Accrued Benefit,
but multiplied by the applicable Adjustment Factor shown on the attached
table. A Participant who incurs a Severance From Service before he
completes five (5) years of Vesting Service or before his Normal
Retirement Age shall not be entitled to any benefits under the Plan,
except as provided in Article IX, and his Accrued Benefit shall be
forfeited as of the last day of the Plan Year in which his employment
terminated.
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<PAGE> 25
4.05 DISABILITY RETIREMENT BENEFIT
(a) A Participant who incurs a Severance From Service on or after
his Disability Retirement Age shall be entitled to a disability
retirement pension, which shall commence on his Disability
Retirement Date. The monthly amount of such Participant's
disability retirement pension is the monthly retirement income
computed in accordance with Section 4.01 (based on the
Participant's Service and the benefit multiple in effect on his
date of Total and Permanent Disability). If the Participant's
disability retirement pension is to commence after a period of
time when he receives statutory compensation, his disability
retirement pension shall be based on his Service when his
disability retirement pension is to begin.
The monthly amount of disability retirement pension will,
however, be reduced by the monthly value of any periodic payment
provided for the Participant under any workers' compensation law
or similar law that becomes payable while he is receiving
disability benefits under the Plan.
(b) A Participant applying for or receiving a disability retirement
pension may be required to submit to an examination by a
competent physician acceptable to the Employer and may be
required to submit to such reexaminations at reasonable
intervals as shall be determined by the Pension Board to make a
determination concerning his physical condition. If a
Participant refuses to submit to periodic medical examinations,
his benefits
- 19 -
<PAGE> 26
shall be discontinued until he completes the examination. If, on
the basis of such an examination, it is found that the
Participant is no longer Totally and Permanently Disabled,
payment of his disability retirement pension shall be
terminated. Payment of the disability retirement pension will be
made until the earliest of the following dates:
(1) The date the Participant ceases to be disabled;
(2) The Participant's Normal Retirement Date; or
(3) The date of the Participant's death.
(c) In the case of a Participant who is unmarried at the time his
disability retirement pension commences, the benefit shall be in
the form of a pension payable during his lifetime only, but
ceasing with the cessation of Total and Permanent Disability,
prior to Normal Retirement Date.
In the case of a Participant who is married and has not attained
Normal Retirement Age at the time his disability retirement
pension commences, the benefit shall be in the form of a pension
payable during his lifetime only, and ceasing with the cessation
of Total and Permanent Disability.
A Participant who is receiving a disability retirement pension
as of his Normal Retirement Date shall be eligible to receive
retirement income in accordance with Article V (based on the
Participant's Service and the
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<PAGE> 27
Plan as in effect as of the Participant's date of Total and
Permanent Disability). If a Participant ceases to be disabled
before his Normal Retirement Date and if he promptly returns to
the employment of the Employer, he will not be considered to
have interrupted his employment but he will not have accrued
Service during the period of his Disability. If a Participant
ceases to be disabled before his Normal Retirement Date and does
not promptly return to the employment of his Employer, he will
be considered to have terminated his employment on the date he
became disabled and his Vested Interest will be determined in
accordance with the terms of the Plan on the date he became
disabled.
4.06 MINIMUM BENEFITS
In no event shall any Participant who was participating in the Prior
Plan prior to October 1, 1989 receive a benefit less than the benefit he
would have been entitled to receive under the Prior Plan as constituted
on September 30, 1989.
4.07 MAXIMUM BENEFITS
Effective October 1, 1987, for purposes of compliance with Section 415
of the Code (or any successor to said Section), the following
limitations on Plan benefits are hereby imposed:
(a) The retirement benefits payable to a Participant in any
Limitation Year shall not exceed an annual sum equal to the
least of:
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<PAGE> 28
(1) Ninety thousand dollars ($90,000) (or such other amount
as may be determined by Treasury regulations issued
pursuant to Section 415 of the Code).
(2) The Participant's average annual compensation (as
defined in Section 4.09) over the three (3) consecutive
calendar years during which his compensation (as defined
in Section 4.09) from the Employer or a Related Employer
was the highest.
(3) If the Participant has less than ten (10) years of
participation in the Plan, the amount determined under
Section 4.07(a)(I) multiplied by a fraction, the
numerator of which is the number (not less than one (1))
of years (or parts thereof) of participation in the Plan
and the denominator of which is ten (30).
(4) If the Participant has less than ten (10) years of
Vesting Service, the amount determined under Section
4.07(a)(2) multiplied by a fraction, the numerator of
which is the Participant's number (not less than one
(1)) of years of Vesting Service and the denominator of
which is ten (10).
Notwithstanding the foregoing, in the event that a Participant
has never participated in any defined contribution plan
maintained by the Employer or a Related Employer, the annual
pension payable to such Participant shall not be deemed to
exceed the limitations of this
- 22 -
<PAGE> 29
section if it does not exceed ten thousand dollars ($10,000)
multiplied by a fraction, the numerator of which is the number
(not less than one (1)) of the Participant's years of Vesting
Service and the denominator of which is ten (10).
Subparagraphs 4.07(a)(3) and (4) shall be applied separately
with respect to each change in the benefit structure of the
Plan.
Pensions payable in a form other than a straight life annuity
shall be adjusted to an actuarially equivalent straight life
annuity before applying the limitations of this Section 4.07.
The interest rate assumption used to determine actuarial
equivalence for this purpose shall be the greater of the
interest rate currently used by the Plan for the purpose of
determining actuarial equivalence or five percent (5%). No
actuarial adjustment to the benefit is required for the value of
a Joint and Survivor Annuity form.
(b) If payments begin prior to a Participant's Social Security
Retirement Age, the limitation in subparagraph (a)(1) shall be
adjusted to the actuarial equivalent of such limitation as
follows. For benefit payments commencing on or after age
sixty-two (62), this adjustment will be made in such manner as
the Secretary of the Treasury may prescribe which is consistent
with the reduction for old age insurance benefits commencing
before the Social Security Retirement Age under the Social
Security Act. For benefit payments commencing prior to age
sixty-two (62), such limitation shall be adjusted so that it is
the actuarial equivalent of the
- 23 -
<PAGE> 30
limitation for benefits commencing at age sixty-two (62). The
interest rate assumption used to determine actuarial equivalence
for this purpose shall be the greater of the interest rate
currently used by the Plan for the purpose of determining
actuarial equivalence or five percent (5%). If benefit payments
begin after a Participant's Social Security Retirement Age, the
limitation in subparagraph (a)(1) shall be equal to the
actuarial equivalent of an annual benefit of ninety thousand
dollars ($90,000) commencing at the Social Security Retirement
Age multiplied by the Adjustment Factor. To determine actuarial
equivalence for purposes of the preceding sentence, the interest
rate assumption shall be the lesser of the interest rate
currently used by the Plan for the purpose of determining
actuarial equivalence or five percent (5%).
(c)(1) For purposes of Section 4.07(b) of this Plan,
"Adjustment Factor" shall mean the cost-of-living
adjustment factor prescribed by the Secretary of the
Treasury under Section 415(d) of the Code for years
beginning on or after January 1, 1987 applied to such
items and in such manner as the Secretary shall
prescribe.
(2) For purposes of Section 4.07(b) of this Plan, "Social
Security Retirement Age" shall mean the age used as the
retirement age for the Participant under Section 216(1)
of the Social Security Act, except that such section
shall be applied without regard to the age increase
factor and as if the early retirement age under Section
216(l)(2) of such Act were sixty-two (62).
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<PAGE> 31
(d) If the Current Accrued Benefit of an individual who was
a Participant in the Prior Plan as of September 30, 1987
exceeds the benefit limitations under Section 415(b) of
the Code, as modified by the foregoing provisions of
this Section 4.07, then, for purposes of Sections 415(b)
and (e) of the Code, the limitation set forth in Section
415(b)(1) of the Code with respect to such individual
shall be equal to such Current Accrued Benefit.
(e) For purposes of Section 4.07(d), "Current Accrued
Benefit" shall mean a Participant's Accrued Benefit
under the Prior Plan, determined as if the Participant
had separated from service as of September 30, 1987,
when expressed as an annual benefit within the meaning
of Section 415(b)(2) of the Code. In determining the
amount of a Participant's Current Accrued Benefit, the
following shall be disregarded:
(1) Any change in the terms and conditions of the
Prior Plan after May 5, 1986; and
(2) Any cost-of-living adjustment occurring after
May 5, 1986.
4.08 COMBINED MAXIMUM LIMITATIONS
In the event any Participant is also participating in any other
qualified defined contribution plan (within the meaning of Section 401
of the Internal Revenue Code) maintained by the Employer or a Related
Employer, then for any Limitation Year the sum of the "Defined Benefit
Plan Fraction" and the "Defined Contribution Plan Fraction" for such
Limitation Year shall not exceed 1.0. For purposes of this Section 4.08,
such sum shall be determined in accordance with the following:
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<PAGE> 32
(a) The "Defined Benefit Plan Fraction" for any year is a fraction:
(1) The numerator of which is a projected annual benefit of
the Participant under each defined benefit plan
(determined as of the close of the year); and
(2) The denominator of which is the lesser of the maximum
dollar limitation in effect under Section 415(b)(])(A)
of the Code for such Limitation Year times 1.25, or the
amount which may be taken into account under Section
4]5(b)(])(B) of the Code for such Limitation Year times
1.4.
(b) The "Defined Contribution Plan Fraction" for any year is a
fraction:
(1) The numerator of which is the sum of the annual
additions to the Participant's account under each
defined contribution plan as of the close of the year;
and
(2) The denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year
and each prior year of service with the Employer or a
Related Employer:
(A) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(c)(1)(A)
of the Code for such Limitation Year; or
- 26 -
<PAGE> 33
(B) The product of 1.4 multiplied by the amount
which may be taken into account under Section
415(c)(1)(B) of the Code for such Limitation
Year.
The annual additions for any Limitation Year beginning before October 1,
1987 shall not be recomputed to treat all employee contributions as
annual additions.
For purposes of this Section 4.08, all defined benefit or defined
contribution plans shall be treated as one (1) plan by class. In the
event the above limitation would otherwise be exceeded in any Limitation
Year, the Participant's benefits under this Plan are to be limited.
If the Plan satisfied the applicable requirements of Section 415 of the
Code as in effect for all Limitation Years beginning before October 1,
1987, an amount shall be subtracted from the numerator of the Defined
Contribution Plan Fraction (not exceeding such numerator), as prescribed
by the Secretary of the Treasury, so that the sum of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction computed under
Section 415(e)(1) of the Code does not exceed one (1).
Section 4.09 is amended to read as follows (First Amendment to Plan):
4.09 DEFINITION OF COMPENSATION FOR PURPOSES OF SECTIONS 4.07 AND 4.08
Solely for the purpose of applying the limitations of Sections 4.07 and
4.08, the compensation of a Participant includes:
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<PAGE> 34
(Continued from page 27) (First Amendment to Plan):
(a) A Participant's wages, salaries, fees for professional services,
and other amounts received (without regard to whether or not an
amount is paid in cash) for personal services actually rendered
in the course of employment with the Employer to the extent that
the amounts are includable in gross income (including but not
limited to, commissions paid salesmen, compensation for services
on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits,
reimbursements; and expense allowances);
(b) In the case of a Participant who is an employee within the
meaning of Section 401(c)(1) of the Code and the regulations
thereunder, the Participant's earned income (as described in
Section 401(c)(2) of the Code and the regulations thereunder);
(c) Amounts described in Sections 104(a)(3), 105(a), and 105(h) of
the Code, but only to the extent these amounts are includable in
the gross income of the Employee;
(d) Amounts paid or reimbursed by the Employer for moving expenses
incurred by an Employee, but only to the extent that these
amounts are not deductible by the Employee under Section 217 of
the Code;
(e) The value of a nonqualified stock option granted to an Employee
by the Employer, but only to the extent that the value of the
option is includable in the gross income for the Employee for
the taxable year in which granted; and
(f) The amount includable in the gross income of an Employee upon
making the election described in Section 83(b) of the Code.
Solely for the purpose of applying the limitations of Sections 4.07 and
4.08, the compensation of a Participant excludes:
(a) Employer contributions to a Plan of deferred compensation which
are not included in the Participant's gross income for the
taxable year in which contributed, Employer contributions under
a simplified employee pension plan to the extent such
contributions are excluded from the Participant's gross income,
or any distributions from a plan of deferred compensation;
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<PAGE> 35
(Continued from page 28) (First Amendment to Plan)
(b) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
Participant either becomes freely transferrable or is no longer
subject to substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange, or other disposition
of stock acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) toward the purchase of an annuity
described in Code Section 403(b) (whether or not the amounts are
actually excludable from the gross income of the Employee).
- 28a -
<PAGE> 36
4.10 REEMPLOYMENT AFTER RECEIPT OF BENEFITS
Section 4.10 is amended to read as follows (First Amendment to the Plan):
(a) A Participant who terminates employment and is rehired without
having received retirement benefits and who once again becomes a
Participant in the Plan may later retire and receive benefits
based upon his entire period of Credited Service both before and
after such termination and reemployment, to the extent not
disregarded under Section 1.39.
(b) A Participant who retires and is rehired prior to his Normal
Retirement Date after receiving retirement benefits shall have
such payments suspended.
In the event that a reemployed, retired Participant accrues further
periods of Credited Service, he may later retire again to receive
benefits based upon his total period of Credited Service both before and
after such termination and reemployment. However, the subsequent
retirement benefits shall be reduced by the Actuarial Equivalent of the
benefits he previously received prior to his reemployment.
(c) A Participant who retires and is rehired after his Normal
Retirement Date and after receiving retirement benefits shall
have such payments suspended. No payment shall be suspended
unless the Plan Administrator gives written notice to the
Employee by personal delivery or first-class mail, during the
month in which his reemployment occurs, that he will not receive
any benefit for any calendar month of employment during which he
works forty (40) or more Hours of Service for the Employer or a
Related Employer or receives from the Employer or a Related
Employer payment for any Hours of Service performed on each of
eight (8) or more days in such month (or separate work shifts),
provided that the Plan has not determined or used the actual
number of Hours of Service. The benefit of such Participant
shall be actuarially increased to reflect the benefit payable to
such Participant for any calendar month during which he does not
complete forty (40) Hours of Service for the Employer or a
Related Employer or receive from the Employer or Related
Employer payment for any Hours of Service performed on each of
eight (8) or more days in such month (or separate work shifts),
provided that the Plan has not determined or used the actual
number of Hours of Service. If such Participant dies before the
commencement of this benefit, as so increased, a single sum
equal to the aggregate benefit payable to the Participant for
each month after his Normal Retirement Date during which
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<PAGE> 37
(Continued from Page 29. First Amendment to Plan)
he did not complete at least forty (40) Hours of Service for the
Employer or Related Employer or receive from the Employer or
Related Employer payment for any Hours of Service performed on
each of eight (8) or more days in such month (or separate work
shifts), provided that the Plan has not determined or used the
actual number of Hours of Service shall be paid to the surviving
spouse, and if none, to his estate. Hours of Service in this
subsection are hours as defined under Department of Labor
Regulation Section 2530.200b-2(a).
In the event that a reemployed, retire Participant accrues
further periods of Credited Service, he may later retire again,
to receive benefits based upon his total period of Credited
Service both before and after such termination and reemployment.
However, the subsequent retirement benefits shall be reduced by
the Actuarial Equivalent of the benefits he previously received
prior to his Normal Retirement Date.
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<PAGE> 38
ARTICLE V
FORM AND PAYMENT OF BENEFITS
5.01 NORMAL PENSION
If a Participant is unmarried as of his Annuity Starting Date, the
benefit payments determined under Article IV shall be in the form of a
Normal Pension, unless the Participant elects the optional form of
payment provided in the Plan in accordance with the procedures of
Section 5.03. The benefit formula in Section 4.01 yields payments in the
form of a Normal Pension.
5.02 JOINT AND SURVIVOR ANNUITY
If a Participant is married on his Annuity Starting Date, benefit
payments determined under Article IV shall be in the form of a Joint and
Survivor Annuity, unless the Participant, with the consent of the
Participant's spouse, elects either the Normal Pension or the optional
form of payment provided in the Plan in accordance with the procedures
of Section 5.04.
5.03 ELECTION NOT TO RECEIVE NORMAL PENSION
An unmarried Participant may elect in writing, during the ninety (90)
day period ending on his Annuity Starting Date, to waive the automatic
Normal Pension form of benefit described in Section 5.01 and to make a
qualified election of the optional form of payment permitted under the
Plan. No less than thirty (30) days and no more than ninety (90) days
prior to the Participant's Annuity Starting Date and consistent with
such regulations as the Secretary of the Treasury may prescribe, the
Retirement Plan Board shall provide the Participant with a written
explanation of:
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<PAGE> 39
(a) The terms and conditions of the Normal Pension;
(b) The Participant's right to make and the effect of an election to
waive the Normal Pension;
(c) The right of the Participant to revoke such election and the
effect of such revocation; and
(d) The relative values of the various optional forms of benefit
available under the Plan.
5.04 ELECTION NOT TO RECEIVE JOINT AND SURVIVOR ANNUITY
(a) A Participant may, with his spouse's written consent, elect in
writing, during the ninety (90) day period ending on his Annuity
Starting Date, to waive the automatic Joint and Survivor Annuity
form of payment described in Section 5.02 and to make a
qualified election of either the Normal Pension or the optional
form of payment permitted under the Plan. The spouse's consent
must acknowledge the effect of such election and be witnessed by
a Plan representative or notary public. The spouse must also
consent both to the specific optional form of benefit chosen and
to the specific Beneficiary designated, if applicable.
Notwithstanding the foregoing, this paragraph (a) shall not
apply if it is established to the Retirement Plan Board's
satisfaction that the spouse cannot be located or that other
circumstances set forth in regulations promulgated under Section
417 of the Code which preclude the necessity of the spouse's
consent are present with respect to the Participant.
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<PAGE> 40
(b) No less than thirty (30) days and no more than ninety (90) days
prior to the Participant's Annuity Starting Date and consistent
with such regulations as the Secretary of the Treasury may
prescribe, the Retirement Plan Board shall provide the
Participant with a written explanation of:
(1) The terms and conditions of the Joint and Survivor
Annuity;
(2) The Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity;
(3) The right of the Participant's spouse to consent to
any election to waive the Joint and Survivor Annuity;
(4) The right of the Participant to revoke such election and
the effect of such revocation; and
(5) The relative values of the various optional forms of
benefit available under the Plan.
5.05 PAYMENT IN OPTIONAL FORM ON RETIREMENT
(a) As an optional form of payment, a Participant may elect to have
his retirement income payable in the form of a contingent
annuitant option. A contingent annuitant option shall be a
monthly income payable for the lifetime of the Participant and
continuing thereafter in an amount fifty percent (50%) as great
to a Beneficiary
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<PAGE> 41
designated in writing by the Participant for such Beneficiary's
life. The Participant's monthly income under the contingent
annuitant option shall be an amount equal to the amount payable
under the Normal Pension) multiplied by the applicable
Adjustment Factor as shown on the table attached hereto.
Distribution may be made over only one (1) of the following
periods (or a combination thereof):
(1) The life of the Participant;
(2) The life of the Participant and a designated
Beneficiary;
(3) A period certain not extending beyond the life
expectancy of the Participant; or
(4) A period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
A Participant's life expectancy may be recalculated no more
frequently than annually; however, the life expectancy of a
nonspouse Beneficiary may not be recalculated. If a
Participant's spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least fifty
percent (50%) of the present value of the amount available for
distribution is paid within the life expectancy of the
Participant.
The following sentence shall be added at the end of Section 5.05(a) to read
as follows (First Amendment to the Plan):
All distributions shall be made in accordance with Section 401(a)(9) of
the Code and regulations thereunder.
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<PAGE> 42
(b) If a Participant's Annuity Starting Date precedes his Normal
Retirement Date, then such Participant must consent in writing
to the early commencement of benefits. his spouse must also
consent in writing to the early commencement of benefits unless
payment is made in the form of a Joint and Survivor Annuity.
(c) If a Participant who has elected an Optional form of benefit
dies prior to his Annuity Starting Date, retirement income
payments shall be made in accordance with the provisions of the
Plan as if no Optional form of retirement income had been
elected. If a Participant who has elected an optional form of
benefit dies either on or after his Annuity Starting Date,
retirement income payments shall be made in accordance with the
optional form elected.
5.06 PRE-RETIREMENT SURVIVOR ANNUITY
If a Participant or former Participant dies after having earned a
nonforfeitable right to his Accrued Benefit, but prior to his Annuity
Starting Date, and if he is survived by a spouse to whom he has been
married throughout the twelve (12) month period preceding his death,
such spouse shall be eligible to receive a Preretirement Survivor
Annuity under this Section 5.06, payable as set forth in subsection (a)
or (b) below, whichever is applicable:
(a) If a Participant dies during employment on or after the
attainment of the earlier of his Early Retirement Age or Normal
Retirement Age, the Pre-retirement Survivor Annuity shall be a
monthly income payable for the life of the spouse, commencing on
the first day of the month coinciding with or next following the
Participant's date
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<PAGE> 43
of death, equal to the benefit that would have been payable to
the spouse had the deceased Participant retired on the day
before death and elected immediate commencement of benefits in
the form of a Joint and Survivor Annuity under Section 5.02. The
last monthly payment shall be made for the month in which death
of such spouse occurs. The spouse may elect to defer
commencement of benefits, but not beyond the date the
Participant would have attained age seventy and one-half
(70 1/2).
(b) If a Participant dies during employment but prior to the
attainment of his Early Retirement Age or Normal Retirement Age,
in the case of the death of a former Participant, the following
rules shall apply:
(1) If a Participant or former Participant was eligible to
immediately commence receipt of his retirement income as
of the date of his death, the Pre-retirement Survivor
Annuity shall be a monthly income payable for the life
of the spouse, commencing on the first day of the month
coinciding with or next following the Participant's date
of death equal to the benefit that would have been
payable to the spouse had such Participant retired on
the day before death and elected immediate commencement
of benefits in the Joint and Survivor Annuity form. The
last monthly payment shall be made for the month in
which death of such spouse occurs. The spouse may elect
to defer commencement of benefits, but not beyond the
date the Participant would have attained age seventy and
one-half (70 1/2).
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(2) If a Participant or former Participant was not eligible to
immediately commence receipt of benefits hereunder as of the
date of his death, the Pre-retirement Survivor Annuity shall be
a monthly income payable for the life of the spouse, beginning
with the first day of the month in which such Participant could
have elected immediate benefits had he survived, equal to the
benefit that would have been payable to such spouse had the
Participant terminated employment on his date of death (except,
where termination of employment occurred prior to his death, the
Participant's date of termination of employment shall be used)
and then survived and retired on the first date upon which he
could have elected immediate benefits and elected immediate
commencement of benefits in the Joint and Survivor Annuity form.
The last monthly payment shall be made for the month in which
death of such spouse occurs. The spouse may elect to defer
commencement of benefits, but not beyond the date the
Participant would have attained age seventy and one-half
(70 1/2).
The following subparagraph (c) shall be added at the end of Section 5.06 to read
as follows (First Amendment to the Plan):
(c) If a Participant dies prior to his Annuity Starting Date and the
single sum Actuarial Equivalent of the Pre-Retirement Survivor
Annuity exceeds, or at the time of any prior distribution
exceeded, three thousand five hundred ($3,500), the spouse must
consent in writing in order for payment to be made prior to the
date the Participant would have attained his Normal Retirement
Age.
Balance of page is being retyped only for easy reading with the addition of the
above amendment.
5.07 ADMINISTRATIVE POWERS RELATING TO PAYMENTS
If a Participant or Beneficiary is under a legal disability or, by
reason of illness or mental or physical disability, is unable, in the
opinion of the Retirement Plan Board, to attend properly to his personal
financial matters, the Trustee may make such payments in such of the
following ways as the Retirement Plan Board shall direct:
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(a) Directly to such Participant or Beneficiary;
(b) To the legal representative of such Participant or
Beneficiary; or
(c) To some relative by blood or marriage, or friend, for the
benefit of such Participant or Beneficiary.
Any payment made pursuant to this Section 5.07 shall be in complete
discharge of the obligation for such payment under the Plan.
5.08 NO GUARANTY OF BENEFITS
The benefits provided under the Plan shall be paid solely from the
assets of the Trust Fund. Nothing contained in the Plan or the Trust
Agreement shall constitute a guaranty by the Employer or the Trustee
that the assets of the Trust Fund will be sufficient to pay any benefit
to any person.
5.09 TIME OF PAYMENT
Unless the Participant elects otherwise, payment shall be made or shall
commence not later than the sixtieth day after the latest of the close
of the Plan Year in which:
(a) The Participant attains age sixty-five (65);
(b) The tenth anniversary of the year in which the Participant
commenced participation in the Plan occurs; or
(c) The Participant terminates his employment with the Employer.
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<PAGE> 46
Payment of retirement income to any Participant shall commence no later
than the April 1 of the calendar year following the calendar year in
which the Participant attains age seventy and one-half (70 1/2), whether
or not such Participant has retired. The preceding sentence shall not
apply to a Participant who:
(a) Has made a written election to receive his benefits under the
Plan at a later date in accordance with Section 242(b) of the
Tax Equity and Fiscal Responsibility Act of 1982; or
(b) Has attained age seventy and one-half (70 1/2) before January 1,
1988 and was not a five percent (5%) owner of the Employer or a
Related Employer at any time during the Plan Year ending with or
within the calendar year in which such individual attained age
sixty-six and one-half (66 1/2) or any subsequent Plan Year.
5.10 DEATH DISTRIBUTION REQUIREMENTS
In addition to any other requirements specified in the Plan, if the
Participant dies after his Annuity Starting Date, the remaining portion
of his retirement income will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
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<PAGE> 47
A new Section 5. 11 shall be added as follows (First Amendment to the Plan)
5.11 DIRECT ROLLOVERS
Effective January 1, 1993, a Distributee may elect, at the time and in
the manner prescribed by the Plan Administrator, to have any portion of
an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan in the form of a Direct Rollover. Notwithstanding the
above, an Eligible Rollover Distribution of less than two hundred ($200)
is not eligible for a Direct Rollover. Further, A Distributee may elect
to have an Eligible Rollover Distribution paid to only one Eligible
Retirement Plan in a Direct Rollover.
For purposes of this Section 5.11, the following definitions apply:
(a) "Distributee" means a Participant or former Participant, his
surviving spouse, his spouse, or his former spouse who is the
Alternate Payee under a Qualified Domestic Relations Order.
(b) "Eligible Rollover Distribution" means any distribution of all
or portion of the Participant's vested Accrued Benefit, except
that an an Eligible Rollover Distribution does not include any
distribution that is one (I) of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Participant, or the joint
lives (or joint life expectancies) of the Participant and his
designated Beneficiary, or for a specified period often (10)
years or more; any distribution to the extent such distribution
is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net
realized appreciation with respect to employer securities).
(c) "Eligible Retirement Plan" means an individual retirement
account described in Section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is limited to an
individual retirement account or individual retirement annuity.
(d) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
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<PAGE> 48
ARTICLE VI
FIDUCIARY RESPONSIBILITY
6.01 FIDUCIARY RESPONSIBILITY PROVISIONS
As required by ERISA, the Employer has appointed certain named
fiduciaries of this Plan and, until otherwise changed by action of the
Board, such named fiduciary is the Pension Board.
The named fiduciary or fiduciaries, as the case may be, shall have the
authority to control and manage the operation of this Plan, and shall be
responsible for establishing and carrying out a funding policy and
method consistent with the objectives of this Plan and the requirements
of ERISA. If more than one fiduciary has been named, this authority and
responsibility shall be jointly and severally shared.
Any person or group of persons may serve in more than one (3) fiduciary
capacity with respect to this Plan. A named fiduciary (or a fiduciary
designated by a named fiduciary) may employ one (1) or more persons to
render advice with regard to any responsibilities such fiduciary has
under the Plan. A person who is a named fiduciary with respect to
control and management of the assets of the Plan may appoint an
investment manager or managers to manage any assets of the Plan. The
insurance carrier's liability as a fiduciary is limited to that arising
from its management of any assets of the Plan held by the insurance
carrier in one (1) or more of its separate accounts.
The Employer may allocate fiduciary responsibilities (other than trustee
responsibilities) among named fiduciaries if there is more than one (3).
Provision may be made for named fiduciaries to
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<PAGE> 49
designate persons other than named fiduciaries to carry out fiduciary
responsibilities under the Plan. If any fiduciary responsibility of a
named fiduciary is allocated to any person or a person is designated to
carry out such responsibility, then such named fiduciary shall not be
liable for any act or omission of such person in carrying out such
responsibility except as provided by ERISA.
No fiduciary guarantees the Fund in any manner against investment loss
or depreciation of asset value.
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<PAGE> 50
ARTICLE VII
PENSION BOARD
7.01 APPOINTMENT AND ACCEPTANCE
As required by ERISA, the Employer has appointed an administrative
Pension Board of this Plan by designating individuals to act in this
capacity and/or offices or positions whose occupants will act in this
capacity.
Each member of the Pension Board shall be deemed to be a fiduciary
within the meaning of ERISA, and each shall signify his acceptance of
his function by filing written notice with the Employer. No member of
the Pension Board who is an Employee shall receive compensation with
respect to his services on the Pension Board.
7.02 DUTIES AND AUTHORITY
The Pension Board shall administer the Plan on behalf of the Employer in
a nondiscriminatory manner for the exclusive benefit of Participants and
their Beneficiaries and with the care, skill prudence and diligence
under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and with like aims.
The Pension Board shall perform all such duties as are necessary to
operate, administer, and manage the Plan in accordance with the terms
thereof, including but not limited to the following:
(a) To determine all questions relating to a Participant's coverage
under the Plan;
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<PAGE> 51
(b) To maintain all necessary records for the administration of the
Plan;
(c) To compute and authorize the payment of retirement income and
other benefit payments to eligible Participants and
Beneficiaries; subject, however; to the provisions of Section
7.03;
(d) To interpret and construe the provisions of the Plan and to make
regulations that are not inconsistent with the terms thereof;
subject, however, to the provisions of Section 7.03; and
(e) To advise or assist Participants regarding any rights, benefits,
or elections available under the Plan.
A new subparagraph (f) shall be added to section 7.02 to read as follows (First
Amendment to the Plan)
(f) Subject to Section 7.03, the Pension Board shall have full and
complete discretionary authority to determine eligibility for
benefits, to construe the terms of the Plan, and to decide any
matter presented through the claims review procedure. Any final
determination by the Pension Board shall be binding on all
parties. If challenged in court, such determination shall not be
subject to de novo review and shall not be overturned unless
proven to be arbitrary and capricious based upon the evidence
considered by the Pension Board at the time of such
determination.
The balance of page retyped only for easy reading with the addition of above
amendment.
The Pension Board annually shall prepare a report, which shall be
submitted to the Board, showing in reasonable summary the assets and
liabilities of the Plan and giving a brief account of the operation of
the Plan for the past year.
In addition the Pension Board shall also furnish annually to the Joint
Committee, to be established under Section 7.10(g), a report regarding
the operation of the Plan and such additional information as may be
reasonably required.
The Pension Board, either as a board or as individuals, shall not be
liable for any loss or depreciation of the Trust Fund or for any
insufficiency therein. All payments of pensions as provided in this Plan
shall be made solely out of the Trust Fund and the Pension Board shall
not be in any manner liable therefor.
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<PAGE> 52
The members of the Pension Board and the Employer and its officers and
directors shall be entitled to rely upon all tables, valuations,
certificates, and reports furnished by any actuary, upon all
certificates and reports made by any accountant, and upon all opinions
given by any legal counsel, selected or approved by the Pension Board or
the Employer, and the members of the Pension Board and the Employer and
its officers and directors shall be fully protected in respect of any
action taken or suffered by them in good faith in reliance on any such
tables, valuations, certificates, reports, opinions, or any other advice
of such actuary, accountant, or counsel, and all action so taken or
suffered shall be conclusive upon all Employees and pensioners.
The Employer shall select a qualified actuary to make periodic actuarial
valuations of the Plan for the purpose of determining whether the
"monthly pension unit" can be maintained by the assets of the Trust Fund
and by the level of future contributions. A copy of the report of the
actuary shall be furnished to the Employer and the Joint Committee.
Following the submission of the actuary's report and its review by the
Employer and Joint Committee, the parties shall meet to consider any
changes which might have been indicated as necessary or desirable by the
actuary's report. No changes in the "monthly pension unit" or other
provisions of the Plan shall be made except with the agreement of both
parties; provided, however, that pensions once granted shall not be
reduced, except as provided in this Plan.
The Pension Board shall take such actions as are necessary to establish
and maintain the Plan as a retirement program that is at all times in
full and timely compliance with any law or regulation having pertinence
to this Plan.
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<PAGE> 53
The Pension Board shall be granted by the Employer all reasonable powers
necessary or appropriate to accomplish its duties as an administrative
Pension Board.
7.03 DECISIONS OF THE PENSION BOARD
Decisions of the Pension Board shall be final and binding on all
Employees, except as provided in this Section 7.03. If any difference
shall arise between the Employer or the Board and any Employee who shall
be an applicant for retirement income as to:
(a) The number of years of Service of such applicant in the employ
of the Employer;
(b) The age of such applicant;
(c) The propriety of or correctness of calculations of any
deductions from retirement income under the provisions of this
Plan;
(d) Whether an applicant, who shall have been determined to be
permanently incapacitated and who shall have at least fifteen
(15) years of such Service but shall not have attained his
Normal Retirement Date, shall have become so permanently
incapacitated through some unavoidable cause; or
(e) Calculations of retirement income under this Plan,
and agreement cannot be reached between the Pension Board and a
representative of the Union, such question shall be referred to an
impartial umpire to be selected by the Pension Board and the Union. The
impartial umpire shall have authority only to decide
- 45 -
<PAGE> 54
the question pursuant to the provisions of this Plan applicable to the
question, but he shall not have authority in any way to alter, add to,
or subtract from any of such provisions. The decision of the impartial
umpire on any such question shall be binding on the Employer, the
Pension Board, the Union and the Employee. The fees and expenses of the
impartial umpire shall be shared equally by the Employer and the Union.
7.04 DIFFERENCES AS TO DISABILITY
If any difference shall arise between the Employer and any Employee as
to whether such Employee is or continues permanently incapacitated
within the meaning of Section 1.32, such difference shall be resolved as
follows:
The Employee shall be examined by a physician appointed for the purpose
by the Employer and by a physician appointed for the purpose by a duly
authorized representative of the Union. If they shall disagree
concerning whether the Employee is permanently incapacitated, that
question shall be submitted to a third physician selected by such two
(2) physicians. The medical opinion of the third physician, after
examination of the Employee and consultation with the other two (2)
physicians, shall decide such question. The fees and expenses of the
third physician shall be shared equally by the Employer and the Union.
7.05 PENSION BOARD PROCEDURES
The Pension Board shall act by a majority of its members in office at
any time and may adopt such bylaws and regulations as it deems desirable
for the conduct of its affairs.
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<PAGE> 55
7.06 EXPENSES AND ASSISTANCE
All reasonable expenses necessary to operate and administer the Plan
shall be borne by the Employer. The Employer shall furnish the Pension
Board with such clerical and other assistance as is required in the
performance of its duties.
7.07 PARTICIPANTS AND OTHER PAYEES - DATA
Participants and other persons affected by the Plan shall furnish the
Pension Board upon request such documents, evidence, or information
which the Pension Board considers necessary or desirable for the purpose
of administering the Plan. The Pension Board may cause to be withheld
any benefit payments, otherwise due the Participant or other person,
until the required document, evidence, or other information is so
furnished.
7.08 RESIGNATION AND REMOVAL OF MEMBER OF PENSION BOARD
A member of the Pension Board may resign at any time by delivering to
the Employer a written notice or resignation, to take effect at a date
specified therein. Such date should not be less than thirty (30) days
after the delivery of the resignation, unless waived by the Employer.
A member of the Pension Board may be removed with or without cause by
the Employer through delivery to him of written notice of removal, to
take effect at a date specified therein.
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<PAGE> 56
7.09 APPOINTMENT OF SUCCESSOR
In the event any position on the Pension Board is vacant, the Employer
shall promptly designate a successor member of the Pension Board who
must signify acceptance of this position in writing.
7.10 PLAN ADMINISTRATION - MISCELLANEOUS
(a) Filing a Claim for Benefits. A Participant or Beneficiary shall
notify the Pension Board of a claim for benefits under the Plan.
Such request may be in any form adequate to give reasonable
notice to the Pension Board and shall set forth the basis of
such claim and shall authorize the Pension Board to conduct such
examinations as may be necessary to determine the validity of
the claim and to take such steps as may be necessary to
facilitate the payment of any benefits to which the Participant
or Beneficiary may be entitled under the Plan.
(b) Denial of Claim. Whenever a claim for benefits by any
Participant or Beneficiary has been denied, written notice
prepared in a manner calculated to be understood by the
Participant or Beneficiary will be provided, setting forth the
specific reasons for the denial and explaining the procedure for
an appeal and review of the decision by the Pension Board.
(c) Masculine and Feminine, Singular and Plural. In construing the
text of this Plan, the masculine shall include the feminine and
the singular shall include the plural, and the plural the
singular wherever the context shall plainly so require.
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<PAGE> 57
(d) Reference to Laws. Any reference herein to any section of the
Code, ERISA, or any other statute or law shall be deemed to
include any successor statute or law of similar import.
(e) Limitation. Participation in the Plan shall not grant any
Participant the right to be retained in the service of the
Employer or any other rights other than those to which he is
entitled under relevant law or regulations.
(f) Divestment of Benefits for Cause Precluded. In no event may a
Participant be divested for cause of retirement income or other
benefits which he is eligible to receive.
(g) Joint Committee. The Joint Committee under this Plan shall
consist of six (6) members, three (3) of whom shall be
designated by the Employer and three (3) of whom shall be
designated by the Union. The several members of the Joint
Committee shall serve until their respective successors have
been selected in like manner. The Joint Committee shall be
entitled to receive from the Pension Board an annual report
regarding the operation of the Plan and the benefits thereunder
insofar as they affect the Employees of the Employer and such
additional information as shall be reasonably required for the
purpose of enabling the Committee to be properly informed. The
Joint Committee may make such recommendations as in its
discretion it deems advisable to the Pension Board and the
Union.
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<PAGE> 58
(h) Clerical Error. If any fact pertaining to eligibility for or
amounts of benefits payable under the Plan to a Participant or
other payee has been misstated, or in the event of clerical
error, the benefits will be adjusted on the basis of the correct
facts in a manner precluding individual selection.
- 50 -
<PAGE> 59
Article VIII is amended to read as follows (First Amendment to the Plan)
ARTICLE VIII
RESTRICTIONS ON BENEFITS
8.01 RESTRICTIONS ON PLAN TERMINATION
In the event of Plan termination, the benefit of any Participant or
former Participant who is a highly compensated employee shall be limited
to a benefit that is nondiscriminatory under Section 401(a)(4) of the
Code.
For purposes of this Article VIII, "highly compensated employee" shall
mean highly compensated employee as defined under Section 414(q) of the
Code.
8.02 RESTRICTION ON DISTRIBUTIONS
(a) The annual payments to a restricted Participant shall be limited
to an amount equal to the payments that would be made on behalf
of such restricted Participant under a single life annuity that
is the Actuarial Equivalent of the sum of the restricted
Participant's Accrued Benefit and other benefits under the Plan.
Notwithstanding the foregoing, the restriction set forth in this
Section 8.02 shall not apply in the event that either of the
following requirements is met:
(1) The value of Plan assets equals or exceeds one hundred
ten percent (110%) the value of the Plan's current
liabilities, as defined under Section 412(l)(7) of the
Code, after payment to a restricted Participant of his
"Benefits" as described in paragraph (b) below; or
(2) The value of "Benefits", as described in paragraph (b)
below, of a restricted Participant is less than one
percent (1%) of the value of the Plan's current
liabilities, as defined in Section 412(l)(7) of the
Code.
For purposes of this Section 8.02, "restricted Participant"
means a Participant who is among the twenty-five (25) highest
paid highly compensated employees.
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<PAGE> 60
(Continued from page 51) (First Amendment to the Plan)
(b) "Benefits", for purposes of this Section 8.02, include
loans in excess of the amounts set forth in section
72(p)(2)(A) of the Code, any periodic income, the value
of any withdrawals made by the Participant, in the event
the Participant is still living, and any death benefits
not provided for by insurance on the Participant's life.
Pages 53, 54 & 55 are now blank pages as the result of this Amendment.
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<PAGE> 61
This page is Blank.
- 53 -
<PAGE> 62
This page is Blank.
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<PAGE> 63
ARTICLE IX
AMENDMENT AND TERMINATION
9.01 RIGHT TO AMEND OR TERMINATE
This Plan may be amended or modified in whole or in part from time to
time upon agreement between the Employer and the Union; provided,
however, that no amendment:
(a) Shall have the effect of vesting in the Employer or any Related
Employer any interest in or control of any funds, securities or
other property subject to the terms of the Trust;
(b) Shall authorize or permit at any time any part of the corpus or
income of the Trust Fund to be used for or diverted to purposes
other than for the exclusive benefit of Participants and their
Beneficiaries, except as provided in Section 3.04;
(c) Shall have any retroactive effect as to deprive any Participant,
former Participant or Beneficiary of any benefit already
accrued, save only that no amendment made in conformance with
the provisions of the Code or any other statute relating to
employees' trusts, or of any official regulation or rulings
issued pursuant thereto, shall be considered prejudicial to the
rights of any Participant or Beneficiary; and
(d) Shall eliminate an optional form of benefit or decrease an
Accrued Benefit.
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<PAGE> 64
9.02 TERMINATION
(a) It is the expectation of the Employer that it will continue this
Plan and the payment of contributions hereunder indefinitely,
but the continuation of the Plan is not assumed as a contractual
obligation of the Employer, and the right is reserved by the
Employer at any time to discontinue permanently its
contributions hereunder. In the event that the Plan is
terminated in whole or in part or if contributions by the
Employer are discontinued completely, the benefits then accrued
for all affected Participants shall be fully vested and
nonforfeitable. Notwithstanding the previous sentence, a person
shall have recourse in seeking satisfaction of his benefits
against only the Trust Fund and the PBGC. No Participant or
Beneficiary shall have a claim against the Employer, the Trust
or any Plan fiduciary for any benefit in excess of the amount
funded on the date of the Plan termination.
(b) This Plan may be terminated by the Board at any time, but the
Employer must notify the PBGC of its intention to terminate the
Plan. Such termination shall become effective as set forth in
ERISA.
(c) The funds are to be allocated in such manner as:
(1) To continue benefits which began to be paid three (3)
years before the termination date under the provisions
of the Plan in effect during the five (5) years prior to
termination which would provide the smallest benefit.
Benefits which would be in this category if
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<PAGE> 65
the Participant eligible for benefits had elected to
begin receipt of such benefit payments at least three
(3) years prior to the termination shall also be
provided;
(2) Then to provide all other insured benefits guaranteed by
the PBGC, including benefits for a substantial owner who
owns directly or indirectly more than ten percent (10%)
of the Employer's voting stock;
(3) Then to provide all other nonforfeitable benefits;
(4) Then to provide all other benefits under the Plan; and
(5) Then to provide a return to the Employer of any balance
due to actuarial error if any assets remain after all
liabilities with respect to Participants, former
Participants and Beneficiaries have been satisfied.
This allocation is intended to fulfill the requirements of
ERISA, and assets shall be allocated on the basis of ERISA
should the above provisions and ERISA differ.
9.03 PARTIAL TERMINATION
In the event the Plan is partially terminated, the Participants affected
shall have a nonforfeitable right to the benefits accrued to the date of
the partial termination.
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<PAGE> 66
9.04 METHOD OF PAYMENT
Amounts allocated to affected individuals upon termination or partial
termination of the Plan shall be paid through the purchase of annuity
contracts; provided, however, that if the single sum value of an
individual's benefit is three thousand five hundred dollars ($3,500) or
less, payment shall be made in a single sum in cash.
9.05 NOTICE OF AMENDMENT, TERMINATION, OR PARTIAL TERMINATION
Affected Participants shall be notified of an amendment, termination or
partial termination of the Plan as required by the applicable provisions
of ERISA. In the event that any amendment to the Plan would change the
provisions of Section 4.04 with respect to eligibility for a
nonforfeitable benefit, each Participant who has completed at least
three (3) years of Vesting Service shall be entitled to elect, in
accordance with ERISA, to have his right to a nonforfeitable benefit
computed under the Plan without regard to such amendment.
- 59 -
<PAGE> 67
ARTICLE X
MISCELLANEOUS
10.01 NO CONTRACT OF EMPLOYMENT
Nothing herein contained shall be construed to constitute a contract of
employment between the Employer and any Employee. The employment
records of the Employer and the Trustee's records shall be final and
binding upon all Employees as to liability and participation.
10.02 MERGER OR CONSOLIDATION OF PLAN, TRANSFER OF ASSETS
Any merger or consolidation of the Plan with another plan or transfer
of Plan assets or liabilities to any other plan shall be effected, in
accordance with such regulations, if any, as may be issued pursuant to
Section 208 of ERISA, in such a manner that each Participant in the
Plan would receive, if the merged, consolidated or transferred plan
were terminated immediately following such event, a benefit which is
equal to or greater than the benefit he would have been entitled to
receive if the Plan had terminated immediately before such event.
10.03 DATA
It shall be a condition precedent to the payment of all benefits under
the Plan that each Participant, former Participant and Beneficiary must
furnish to the Employer such documents, evidence or information as the
Employer considers necessary or desirable for the purpose of
administering the Plan, or to protect the Employer or the Trustee.
- 60 -
<PAGE> 68
10.04 RESTRICTIONS UPON ASSIGNMENTS AND CREDITORS' CLAIMS
Except as otherwise provided in the Plan, no Participant, former
Participant or any Beneficiary, or the estate of any such person, shall
have the power to assign, pledge, encumber or transfer any interest in
the Trust Fund while the same shall be in possession of the Trustee.
Any such attempt at alienation shall be void. No such interest shall be
subject to attachment, garnishment, execution, levy or any other legal
or equitable proceeding or process, and any attempt to do so shall be
void. The preceding shall apply also to the creation, assignment or
recognition of any right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order
is determined to be a qualified domestic relations order, as defined in
Section 414(p) of the Code. A domestic relations order entered before
January 1, 1985 will be treated as a qualified domestic relations order
if payment of benefits pursuant to the order has commenced as of such
date and may be treated as a qualified domestic relations order if
payment of benefits has not commenced as of such date, even though the
order does not satisfy the requirements of Section 414(p) of the Code.
10.05 RESTRICTION OF CLAIMS AGAINST TRUST FUND
The Trust Fund under this Plan and Trust Agreement from its inception
shall be a separate entity aside and apart from the Employer and its
assets. The Trust and the corpus and income thereof shall in no event
and in no manner whatsoever be subject to the rights or claims of any
creditor of the Employer. Neither the establishment of the Trust Fund,
the modification thereof, the creation of any fund or account nor the
payment of any benefits shall be construed as giving any Participant or
any other person whomsoever any legal or equitable rights against the
Employer or the Trustee unless the same shall be specifically provided
for in this Plan.
- 61 -
<PAGE> 69
10.06 BENEFITS PAYABLE BY TRUST FUND
All benefits payable under the Plan shall be paid or provided for
solely from the Trust Fund, and the Employer assumes no liability or
responsibility therefor.
10.07 SUCCESSoR TO EMPLOYER
In the event that any successor to the Employer, by merger,
consolidation, purchase or otherwise, shall elect to adopt the Plan,
such successor shall be substituted hereunder for the Employer upon
filing in writing with the Trustee its election to do so.
10.08 APPLICABLE LAW
The Plan shall be construed and administered in accordance with ERISA,
and any judicial review thereunder shall be governed by the "arbitrary
and capricious" standard, and with the laws of the state where the
Employer has its principal office, to the extent that such laws are not
preempted by ERISA.
10.09 INTERNAL REVENUE SERVICE APPROVAL
This amendment and restatement of the Plan shall be effective as of
October 1, 1989 provided that the Employer shall obtain a favorable
determination letter from the Internal Revenue Service that this Plan
and the related Trust Agreement qualify under Sections 401(a) and
501(a) of the Code, as amended. Any modification or amendment of this
Plan may be made retroactive as necessary or appropriate in order to
secure or maintain such qualification.
- 62 -
<PAGE> 70
Table 1
EARLY RETIREMENT ADJUSTMENT FACTORS
Number of Years and Months From Retirement Date
to Normal Retirement Date
<TABLE>
<CAPTION>
Months Years: 0 1 2 3 4 5
------ - - - - - -
<S> <C> <C> <C> <C> <C> <C>
0 92.8% 85.6% 78.4% 71.2% 64.0%
1 99.4% 92.2% 85.0% 77.8% 70.6% 63.7%
2 98.8% 91.6% 84.4% 77.2% 70.0% 63.4%
3 98.2% 91.0% 83.8% 76.6% 69.4% 63.1%
4 97.6% 90.4% 83.2% 76.0% 68.8% 62.8%
5 97.0% 89.8% 82.6% 75.4% 68.2% 62.5%
6 96.4% 89.2% 82.0% 74.8% 67.6% 62.2%
7 95.8% 88.6% 81.4% 74.2% 67.0% 61.9%
8 95.2% 88.0% 80.8% 73.6% 66.4% 61.6%
9 94.6% 87.4% 80.2% 73.0% 65.8% 61.3%
10 94.0% 86.8% 79.6% 72.4% 65.2%. 61.0%
11 93.4% 86.2% 79.0% 71.8% 64.6% 60.7%
</TABLE>
<TABLE>
<CAPTION>
Months Years: 6 7 8 9 10
------ - - - - --
<S> <C> <C> <C> <C> <C>
0 60.4% 56.8% 53.2% 49.6% 46.0%
1 60.1% 56.5% 52.9% 49.3%
2 59.8% 56.2% 52.6% 49.0%
3 59.5% 55.9% 52.3% 48.7%
4 59.2% 55.6% 52.0% 48.4%
5 58.9% 55.3% 51.7% 48.1%
6 58.6% 55.0% 51.4% 47.8%
7 58.3% 54.7% 51.1% 47.5%
8 58.0% 54.4% 50.8% 47.2%
9 57.7% 54.1% 50.5% 46.9%
10 57.4% 53.8% 50.2% 46.6%
11 57.1% 53.5% 49.9% 46.3%
</TABLE>
- 64 -
<PAGE> 71
Table II
JOINT AND SURVIVOR ADJUSTMENT FACTORS
50% CONTINUATION TO SPOUSE
<TABLE>
<CAPTION>
Spouse's Participant's Age
--------------------------------------------------------------------------------------------------------
Age 55 56 57 58 59 60 61 62 63 64 65 66
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 84.7 83.6 82.4 81.3 80.2 79.0 77.7 76.3 74.8 73.4 72.0 70.8
46 85.1 84.0 82.9 81.8 80.6 79.4 78.1 76.7 75.3 73.9 72.5 71.3
47 85.6 84.5 83.4 82.3 81.1 79.9 78.6 77.2 75.8 74.5 73.1 71.9
48 86.1 85.0 83.9 82.8 81.6 80.4 79.2 77.8 76.4 75.0 73.6 72.4
49 86.5 85.4 84.3 83.3 82.2 81.0 79.7 78.3 76.9 75.6 74.2 73.0
50 87.0 85.9 84.8 83.8 82.7 81.5 80.2 78.8 77.5 76.1 74.7 73.5
51 87.5 86.4 85.3 84.3 83.2 82.0 80.7 79.4 78.0 76.7 75.3 74.1
52 88.0 87.0 85.9 84.8 83.7 82.5 81.3 80.0 78.6 77.3 75.9 74.7
53 88.5 87.5 86.4 85.4 84.3 83.1 81.9 80.6 79.2 77.9 76.5 75.3
54 88.9 87.9 86.9 85.9 84.9 83.7 82.5 81.2 79.8 78.5 77.2 76.0
55 89.4 88.4 87.4 86.4 85.4 84.3 83.1 81.8 80.4 79.1 77.8 76.6
56 89.9 88.9 87.9 87.0 86.0 84.9 83.7 82.4 81.0 79.7 78.4 77.2
57 90.4 89.4 88.4 87.5 86.5 85.4 84.3 83.0 81.7 80.4 79.1 77.9
58 90.8 89.9 89.0 88.1 87.1 86.0 84.9 83.6 82.3 81.1 79.8 78.6
59 91.3 90.4 89.5 88.6 87.6 86.6 85.5 84.2 83.0 81.7 80.5 79.3
60 91.7 90.9 90.0 89.1 88.2 87.2 86.1 84.9 83.6 82.4 81.2 80.0
61 92.2 91.4 90.5 89.7 88.8 87.8 86.7 85.5 84.3 83.1 81.9 80.7
62 92.6 91.8 90.9 90.1 89.3 88.3 87.3 86.1 84.9 83.8 82.6 81.4
63 93.0 92.2 91.4 90.6 89.8 88.9 87.9 86.7 85.6 84.5 83.3 82.1
64 93.4 92.6 91.8 91.1 90.3 89.4 88.4 87.3 86.2 85.2 84.1 82.8
65 93.8 93.1 92.3 91.6 90.8 89.9 89.0 87.9 86.9 85.8 84.8 83.5
66 94.2 93.5 92.8 92.1 91.3 90.5 89.6 88.6 87.5 86.5 85.5 84.2
67 94.6 93.9 93.2 92.5 91.8 91.0 90.2 89.2 88.2 87.2 86.2 84.9
68 94.9 94.3 93.6 93.0 92.3 91.5 90.7 89.8 88.8 87.9 86.9 85.6
69 95.3 94.7 94.1 93.5 92.8 92.1 91.3 90.4 89.5 88.6 87.7 86.3
70 95.6 95.4 95.1 94.5 93.9 93.4 92.8 91.0 90.1 89.3 88.4 87.0
</TABLE>
*Age nearest birthday on Retirement Date.
Factors for other age combinations will be determined in a manner consistent
with the manner used in determining these factors.
These factors are for the Life-No Death Benefit Form.
- 65 -
<PAGE> 72
CONTINGENT PENSIONER ADJUSTMENT FACTORS
<TABLE>
<CAPTION>
Contingent Pensioner's Age Participant's Age
-------------------------- -----------------
55 60 65 70
-- -- -- --
With Full Continuation to Contingent
Pensioner.
<S> <C> <C> <C> <C>
45 77.8% 69.7% 60.4% 50.4%
50 81.7% 73.9% 64.5% 54.2%
55 85.5% 78.3% 69.3% 58.8%
60 89.0% 82.9% 74.7% 64.4%
65 92.3% 87.5% 80.4% 71.0%
70 94.8% 91.4% 86.0% 78.0%
With Two-Thirds Continuation to
Contingent Pensioner.
45 84.0% 77.5% 69.5% 60.4%
50 87.0% 80.9% 73.1% 64.0%
55 89.8% 84.4% 77.2% 68.1%
60 92.4% 87.9% 81.5% 73.1%
65 94.7% 91.3% 86.0% 78.6%
70 96.5% 94.1% 90.2% 84.2%
With One-Half Continuation to
Contingent Pensioner.
45 87.5% 82.1% 75.3% 67.0%
50 89.9% 85.0% 78.4% 70.3%
55 92.2% 87.9% 81.9% 74.1%
60 94.2% 90.6% 85.5% 78.4%
65 96.0% 93.3% 89.1% 83.0%
70 97.3% 95.5% 92.5% 87.6%
</TABLE>
*Age nearest birthday on Retirement Date, or on date contingent Pensioner option
becomes effective, if later.
Factors for other age combinations will be determined in a manner consistent
with the manner used in determining these factors.
- 66 -
<PAGE> 1
Exhibit 10.14
RETIREMENT PLAN FOR
SALARIED EMPLOYEES OF
WERNER HOLDING CO. (DE), INC.
(RESTATED EFFECTIVE SEPTEMBER 1, 1989)
<PAGE> 2
Effective March 1, 1994, any reference in the Plan to R.D. Werner Co., Inc.
shall be amended to be a reference to Werner Co. (First Amendment to the Plan).
<PAGE> 3
CONTENTS
Page
PREAMBLE
ARTICLE I DEFINITIONS
1.01 Accrued Benefit 1
1.02 Actuarial Equivalent 1
1.03 Annuity Starting Date 2
1.04 Beneficiary 2
1.05 Board 3
1.06 Code 3
1.07 Compensation 3
1.08 Covered Compensation 4
1.09 Credited Service 4
1.10 Date of Employment or Reemployment 5
1.11 Disability Retirement Age 5
1.12 Disability Retirement Date 5
1.13 Early Retirement Age 5
1.14 Early Retirement Date 5
1.15 Employee 6
1.16 Employer 6
1.17 ERISA 6
1.18 Final Average Earnings 6
1.19 Hour of Service 7
1.20 Joint and Survivor Annuity 8
1.21 Limitation Year 8
1.22 Normal Pension 9
1.23 Normal Retirement Benefit 9
1.24 Normal Retirement Age 9
1.25 Normal Retirement Date 9
1.26 Participant 9
1.27 Plan 9
1.28 Plan Administrator 9
1.29 Plan Year 10
1.30 Prior Plan 10
1.31 Related Employer 10
1.32 Restatement Date 10
1.33 Retirement Plan Board 10
1.34 Severance From Service 10
1.35 Total and Permanent Disability 12
1.36 Trust Agreement and Trust 12
-i-
<PAGE> 4
CONTENTS
(continued)
Page
1.37 Trust Fund 12
1.38 Trustee 12
1.39 Vested Interest 13
1.40 Vesting Service 13
ARTICLE II ELIGIBILITY AND PARTICIPATION
2.01 Participation 16
2.02 Reemployment of a Participant 17
ARTICLE III CONTRIBUTIONS
3.01 Trustee and Trust Agreement 18
3.02 Employer Contributions 18
3.03 Forfeitures 18
3.04 Reversion of Employer Contributions 18
ARTICLE IV BENEFITS
4.01 Normal Retirement Benefit 20
4.02 Postponed Retirement Benefit 21
4.03 Early Retirement Benefit 21
4.04 Termination of Vested Participant 22
4.05 Disability Retirement Benefit 23
4.06 Minimum Benefits 24
4.07 Maximum Benefits 24
4.08 Combined Maximum Limitations 28
4.09 Definition of Compensation for Purposes of 30
Sections 4.07 and 4.08
4.10 Reemployment After Receipt of Benefits 31
4.11 Transfers 33
ARTICLE V FORM AND PAYMENT OF BENEFITS
5.01 Normal Pension 35
5.02 Joint and Survivor Annuity 35
5.03 Election Not to Receive Normal Pension 35
5.04 Election Not to Receive Joint and Survivor 36
Annuity
- ii -
<PAGE> 5
CONTENTS
(continued)
Page
5.05 Payment in Optional Form on Retirement 37
5.06 Pre-retirement Survivor Annuity 41
5.07 Pre-retirement Death Benefit for Unmarried 43
Participants
5.08 Administrative Powers Relating to Payments 45
5.09 No Guaranty of Benefits 46
5.10 Time of Payment 46
5.11 Death Distribution Requirements 47
5.12 Direct Rollovers 47(a)
5.13 Additional Rules Relating to Payments 47(b)
ARTICLE VI PLAN ADMINISTRATION
6.01 Plan Administrator 48
6.02 Duties 48
6.03 Directions to Trustee 49
6.04 Nondiscrimination 49
6.05 Agents 49
6.06 Limitations 50
6.07 Unstated Rules and Procedures 50
6.08 Named Fiduciary 50
6.09 Exercise of the Plan Administrator's 50
Duties
6.10 Indemnification 51
ARTICLE VII CLAIMS PROCEDURES
7.01 Claims Review 52
7.02 Appeals Procedure 53
ARTICLE VIII TEMPORARY RESTRICTIONS ON BENEFITS IN
CASE OF EARLY TERMINATION
8.01 Restrictions on Benefits 54
8.02 Restrictions on Distribution 54
- iii -
<PAGE> 6
CONTENTS
(continued)
Page
ARTICLE IX AMENDMENT AND TERMINATION
9.01 Right to Amend or Terminate 59
9.02 Termination 60
9.03 Partial Termination 62
9.04 Method of Payment 62
9.05 Notice of Amendment, Termination, or 63
Partial Termination
ARTICLE X MISCELLANEOUS
10.01 No Contract of Employment 64
10.02 Merger or Consolidation of Plan, Transfer 64
of Assets
10.03 Data 64
10.04 Restrictions Upon Assignments and 65
Creditors' Claims
10.05 Restriction of Claims Against Trust Fund 65
10.06 Benefits Payable by Trust Fund 66
10.07 Successor to Employer 66
10.08 Applicable Law 66
10.09 Internal Revenue Service Approval 66
ARTICLE XI TOP-HEAVY PROVISIONS
11.01 General 67
11.02 Definitions 67
11.03 Minimum Accrued Benefit 72
11.04 Vesting Requirements 74
11.05 Special 415 Limitations 75
- iv -
<PAGE> 7
RETIREMENT PLAN FOR
SALARIED EMPLOYEES OF
WERNER HOLDING CO. (DE), INC.
PREAMBLE
Werner Holding Co. (DE), Inc. has amended and restated, effective
September 1, 1989, the pension plan for its eligible Employees known as the
Retirement Plan for Salaried Employees of Werner Holding Co. (DE), Inc.
(the "Plan"). The Plan constitutes a continuation and restatement of the
Retirement Plan for Salaried Employees of R. D. Werner Co., Inc. (the
"Prior Plan"), effective as of September 1, 1966, and as amended from time
to time.
The Plan has been restated in order to:
(a) Reflect changes in the Plan resulting from the September 30,
1988 reorganization of the original R. D. Werner Co., Inc.,
and the establishment of newly created subsidiaries
thereunder; and
(b) Comply with changes promulgated under the Tax Reform Act of
1986 and subsequent legislation.
The restatement of the Prior Plan shall not in any way affect the rights of
Employees who participated in the Prior Plan in accordance with its provisions.
All matters relating to the benefits, if any, payable to such Employees (or
their Beneficiaries) based upon events occurring prior to September 1, 1989
shall, except as otherwise expressly provided herein, be determined in
accordance with the applicable provisions of the Prior Plan.
-v-
<PAGE> 8
ARTICLE I
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and phrases
shall have the meanings stated below unless a different meaning is plainly
required by the context. All masculine terms shall include the feminine
and all singular terms shall include the plural, unless the context clearly
indicates the gender or the number.
1.01 ACCRUED BENEFIT means the amount computed under the formula set forth
in Section 4.01 of the Plan, considering the Participant's Final
Average Earnings and years of Credited Service at his termination of
employment.
1.02 ACTUARIAL EQUIVALENT means a benefit of equal value to another benefit
as determined by computations based upon the mortality table and
interest rate adopted by the Board.
(a) For purposes of this Plan, the mortality table means, for
Participants, the 1983 Group Annuity Mortality Table for
Males, with a two (2) year setback for the Participant and a
four (4) year setback for any spouse or Beneficiary (to be
used regardless of the sex of the Participant, spouse, or
Beneficiary).
(b) For purposes of this Plan, the interest rate shall be equal to
six percent (6%) per annum; provided, however, that the
interest rate or rates used for any Plan Year in conjunction
with the mortality table to determine the Actuarial Equivalent
of lump sum payments and benefits related to a qualified
domestic relations order, as defined in Section 414(p) of the
Code, shall be equal to
-1-
<PAGE> 9
1.03 ANNUITY STARTING DATE means the first day of the first period for which
an amount is payable as an annuity or in any other form.
Effective January 1, 1997, a new Section 1.04, the definition of "Beneficiary"
is amended to read as follows (Second Amendment to the Plan);
1.04 BENEFICIARY means the person designated by a Participant to receive any
benefits under the Plan which may be due upon the Participant's death.
A Participant may name a secondary Beneficiary for the purpose of
Section 5.01, 5.02 (Normal Pension only) and 5.07 but not for the
purpose of Section 5.05. A Participant may not name more than one
primary Beneficiary and one secondary Beneficiary. Notwithstanding
anything to the contrary, if a Participant is married on the date of
his death, the Beneficiary of such Participant shall be his spouse
unless:
(a) The Participant's spouse consents in writing not to be said
Beneficiary, such written consent is witnessed by either a
representative of the Plan or a notary public and such consent
acknowledges the effect of the Participant's selection of a
Beneficiary other than his spouse.
-2-
<PAGE> 10
the interest rate published by the Pension Benefit Guaranty
Corporation pursuant to Section 4062 of ERISA used in
calculating immediate or deferred annuities in effect on the
first day of the Plan Year in which the date of distribution
occurs.
Notwithstanding the foregoing, the Actuarial Equivalent of the Accrued
Benefit on or after September 1, 1985 shall be the greater of:
(a) The Actuarial Equivalent of the Accrued Benefit as of
September 1, 1985 computed on the basis of the Plan as in
effect on August 31, 1985; or
(b) The Actuarial Equivalent of the total Accrued Benefit as of
the computation date determined on the basis of the Plan as in
effect on such date.
Effective January 1, 1997, Section 1.02, the definition of "Actuarial
Equivalent" is amended by adding the following at the end thereof (Second
Amendment to the Plan):
Notwithstanding the foregoing, for purposes of determining the
Actuarial Equivalent lump sum value of distributions payable pursuant
to the terms of the Plan for Annuity Starting Dates occurring on or
after January 1, 1997, Actuarial Equivalent means a benefit based on
the 1983 Group Annuity Mortality Table, as set forth in Revenue Ruling
95-6, as it may be updated from time to time and the annual interest
rate on thirty-year (30) Treasury securities for the month that is two
(2) months prior to the first day of the Plan Year that includes the
Annuity Starting Date.
<PAGE> 11
(Continued from page 2), effective January 1, 1997, the definition of
"Beneficiary" is amended to read as follows (Second Amendment to the Plan):
(b) The foregoing consent may not be obtained because such spouse
cannot be located; or
(c) Such other circumstances exist as the Retirement Plan Board
may, in accordance with applicable regulations, deem
appropriate to waive the foregoing consent requirement.
The spouse's consent will apply with respect to a specific
alternate Beneficiary only, and any change of Beneficiary will
require a new spousal consent.
If no person or entity has been designated by the Participant as
Beneficiary, or if no named primary or successor Beneficiary survives
the Participant, any payments owed to a Beneficiary shall be made:
(a) to the Participant's surviving spouse; or
(b) if there is no surviving spouse, to the personal
representative of the Participant's estate.
1.05 BOARD means the Board of Directors of Werner Holding Co. (DE), Inc.
1.06 CODE means the Internal Revenue Code of 1986, as amended from time to
time.
1.07 COMPENSATION, for all purposes of the Plan and Trust except for
Sections 4.07 and 4.08, means the aggregate of all payments by the
Employer to a Participant in a Plan Year for services rendered,
excluding any amounts paid to him as bonus, overtime pay,
-3-
<PAGE> 12
Effective 1/1/94, the following adoption follows at the end of Section 1.07
(First Amendment to the Plan).
Notwithstanding anything herein to the contrary, for Plan Years beginning on or
after January I, 1994, the annual Compensation of each Participant taken into
account under the Plan shall not exceed the OBRA '93 annual compensation limit.
The OBRA '93 annual compensation limit is $150,000, adjusted by the Commissioner
for increase in the cost of living in accordance with Section 401(a)(17)(B) of
the Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the number of months
in the determination period, and the denominator of which is 12. For Plan Years
beginning on or after January 1, 1994, any reference in this Plan to the
limitation under section 401(a)(17) of the Code shall mean the OBRA '93 annual
compensation limit set forth in this provision. In determining the Compensation
of a Participant for purposes of this limitation, the rules of Section 414(q)(6)
of the Code relating to the treatment of certain family members shall apply,
except that, in applying such rules, the term "family" shall include only the
spouse of the Participant and any lineal descendants of the Participant who have
not attained age nineteen (19) before the close of the applicable Plan Year.
<PAGE> 13
commissions, cost-of-living allowance, contributions to this or any other
benefit plan made by the Employer, or any other additional, special, fringe,
or supplemental payments. Compensation in excess of two hundred thousand dollars
($200,000) (or such other amount as may be established by the Secretary of the
Treasury) in any year shall be disregarded for all purposes of the Plan.
1.08 COVERED COMPENSATION means the average of the FICA taxable wage bases
in effect under the Social Security Act for each year in the
thirty-five (35) year period ending with the earlier of the year the
Employee reaches the Social Security retirement age, as defined under
Section 415(b)(8) of the Code, or the year of termination or
retirement.
1.09 CREDITED SERVICE means the total number of years and months during
which a Participant is employed by an Employer. Credited Service shall
be equal to the sum of (a) and (b) below:
(a) If an Employee was employed by an Employer on August 31, 1976,
the years of credited service earned as of that date under the
Prior Plan as in effect on August 31, 1976; and
(b) An Employee's Vesting Service after August 31, 1976.
The foregoing notwithstanding, Credited Service shall not be granted
for employment by any Employee of Florida Ladder Company rendered to
Florida Ladder Company prior to January 1, 1989, the date Florida
Ladder Company became an Employer under the Plan; for employment by any
Employee of Gold Medal Ladder Company rendered to Gold Medal Ladder
Company prior to March 7, 1987, the date Gold
-4-
<PAGE> 14
Medal Ladder Company was acquired by the predecessor to the Employer;
for employment by any Employee of the Anniston Extrusion division of
R.D. Werner Co., Inc. rendered to the Anniston Extrusion division of
National Aluminum Corporation prior to November 30, 1989, the date the
Anniston Extrusion division becomes an Employer under the Plan; and for
employment by any Employee of Kentucky Ladder Company rendered to
Kentucky Ladder Company prior to March 14, 1989, the date Kentucky
Ladder Company became an Employer under the Plan.
1.10 DATE OF EMPLOYMENT or REEMPLOYMENT means the first day an Employee
performs an Hour of Service.
1.11 DISABILITY RETIREMENT AGE means the age at which a Participant
terminates his employment on or after attaining the age of forty (40),
after completing at least fifteen (15) years of Vesting Service, and by
reason of a Total and Permanent Disability.
1.12 DISABILITY RETIREMENT DATE means the first day of the seventh month
following the date a Participant attains his Disability Retirement Age.
1.13 EARLY RETIREMENT AGE means the age at which a Participant completes
at least fifteen (15) years of Vesting Service and has attained age
fifty-five (55).
1.14 EARLY RETIREMENT DATE means the first day of the month coincident with
or immediately following the date a Participant terminates employment
other than for death, after attaining his Early Retirement Age, but
prior to his Normal Retirement Date.
-5-
<PAGE> 15
1.15 EMPLOYEE means any person employed by an Employer, but excluding any
employee who is covered under a collective bargaining agreement with
an Employer, unless said agreement provides for his inclusion in this
Plan, and excluding all persons compensated on an hourly basis who are
employed by Gold Medal Ladder Company, the Anniston Extrusion division
of R. D. Werner Co., Inc., and Kentucky Ladder Company. Employee shall
also include any leased employee deemed to be an Employee of an
Employer as provided in Section 414(n) of the Code.
1.16 EMPLOYER means Werner Holding Co. (DE), Inc.; R. D. Werner Co., Inc.,
and, effective November 30, 1989, its Anniston Extrusion division; Gold
Medal Ladder Company; Manufacturers Indemnity and Insurance Company of
America; Werner Management, Inc.; Florida Ladder Company; Kentucky
Ladder Company, effective March 14, 1989; and any Related Employer
which, with the approval of the Board, shall adopt this Plan for the
benefit of its Employees, according to an appropriate written
resolution of the Board of Directors of such Related Employer. Where,
in the context of the Plan, Employer refers to a single entity, the
Employer shall mean Werner Holding, Co. (DE), Inc.
1.17 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.18 FINAL AVERAGE EARNINGS means the average Compensation of the
Participant from an Employer during the three (3) consecutive full
calendar years out of the last ten (10) full calendar years prior to
the Participant's date of termination of employment that provide the
highest average. If the Participant shall have completed less than
three (3) consecutive full years of employment, his average
Compensation during his period of continuous employment shall be used.
-6-
<PAGE> 16
1.19 HOUR OF SERVICE means:
(a) Each hour for which an Employee is paid or entitled to payment
for the performance of duties for an Employer or for a Related
Employer. These hours shall be credited to the Employee for
the computation period or periods in which the duties are
performed; and
(b) Each hour for which an Employee is paid or entitled to payment
by an Employer or a Related Employer on account of a period of
time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or other approved leave of
absence. No more than five hundred one (501) Hours of Service
shall be credited under this paragraph for any single
continuous period (whether or not such period occurs in a
single computation period). Hours under this paragraph shall
be calculated and credited pursuant to Section 2530.200b-2 of
the Department of Labor regulations, which are incorporated
herein by reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer or a
Related Employer. The same Hours of Service shall not be
credited under both paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (c). These hours shall
be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than
the computation period in which the award, judgment or payment
is made.
-7-
<PAGE> 17
1.20 JOINT AND SURVIVOR ANNUITY means an annuity which is payable
monthly to the Participant for his life with a survivor
annuity payable to his spouse for the life of such spouse in
an amount equal to one-half (1/2) of the monthly amount
payable during the life of the Participant. The Participant's
monthly income under the Joint and Survivor Annuity shall be
an amount equal to the amount payable under the Normal
Pension, multiplied by the applicable factor shown below,
and based upon the age of the Participant and that of his
spouse as of the date benefits commence under the Joint and
Survivor Annuity:
<TABLE>
<CAPTION>
Based on Age,
Spouse Is Factor
--------- ------
<S> <C> <C>
5 .925
4 .928
Years younger 3 .931
than Participant 2 .934
1 .937
0 .940
1 .943
Years older than 2 .946
Participant 3 .949
4 .952
5 .955
</TABLE>
For each additional year beyond five (5) that the spouse is younger
than the Participant, the factor shall be reduced by .003 for each such
year from the factor of .925, but shall not be less than a factor of
.502. For each additional year beyond five (5) that the spouse is older
than the Participant, the factor shall be increased by .003 for each
such year from the factor of .955, but shall not be greater than a
factor of .997.
1.21 LIMITATION YEAR means the Plan Year.
-8-
<PAGE> 18
1.22 NORMAL PENSION means a retirement benefit payable monthly to the
Participant for a period certain of sixty (60) months and during his
lifetime thereafter, with payments to continue to a Beneficiary
designated by the Participant for the balance of the sixty (60) month
period if he should die within such period.
1.23 NORMAL RETIREMENT BENEFIT means the amount of retirement income
computed under Section 4.01 of the Plan that would be payable in the
normal form under the conditions described in Section 5.01 of the Plan,
commencing upon the Participant's Normal Retirement Date, if he is then
entitled to receive a retirement income under the terms of the Plan.
1.24 NORMAL RETIREMENT AGE means a Participant's sixty-fifth birthday
(without regard to his years of Vesting Service at that time); provided
that, for an Employee who first performs an Hour of Service after
having attained age sixty (60), Normal Retirement Age means the fifth
anniversary of the date the Employee becomes a Participant or would
have become a Participant had the Employee not been excluded from
participation on account of first performing an Hour of Service after
having attained age sixty (60).
1.25 NORMAL RETIREMENT DATE means the first day of the month coincident with
or immediately following the date a Participant attains his Normal
Retirement Age.
1.26 PARTICIPANT means an Employee who meets the requirements of
participation in the Plan as provided in Article II.
1.27 PLAN means the Retirement Plan for Salaried Employees of Werner Holding
Co. (DE), Inc.
1.28 PLAN ADMINISTRATOR means the Retirement Plan Board.
-9-
<PAGE> 19
1.29 PLAN YEAR means the calendar year for all years after December 31,
1989. Prior to January 1, 1990, Plan Year means the twelve (12) month
period beginning on September 1 and ending on August 31 of the
following calendar year; provided that the Plan Year that began
September 1, 1989 shall end on December 31, 1989.
1.30 PRIOR PLAN means the Plan as it existed on August 31, 1989 prior to the
amendment and restatement.
1.31 RELATED EMPLOYER means any corporation or other business entity which
is included in a controlled group of corporations within which the
Employer is also included, as provided in Section 414(b) of the Code
(as modified, for purposes of Sections 4.07 and 4.08 of the Plan, by
Section 415(h) of the Code), or which is a trade or business under
common control with the Employer, as provided in Section 414(c) of the
Code (as modified, for purposes of Sections 4.07 and 4.08 of the Plan,
by Section 415(h) of the Code)) or which constitutes a member of an
affiliated service group within which the Employer is also included, as
provided in Section 414(m) of the Code, or which is required to be
aggregated with the Employer pursuant to regulations issued under
Section 414(o) of the Code.
1.32 RESTATEMENT DATE means September 1, 1989, the effective date of the
amendment and restatement of the Plan.
1.33 RETIREMENT PLAN BOARD means the retirement plan board appointed by the
Board to administer the Plan.
1.34 SEVERANCE FROM SERVICE means the earlier of the following dates:
(a) The date on which an Employee terminates employment, is
discharged, retires or dies; or
- 10 -
<PAGE> 20
(b) The first anniversary of the first day of a period in which an
Employee remains absent from service (with or without pay)
with an Employer or a Related Employer for any reason other
than one (1) listed in paragraph (a); provided, however, that
an Employee who fails to return to employment at the
expiration of a leave of absence approved by the Employer
shall be deemed to have incurred a Severance From Service on
the expiration of his leave and not upon the first anniversary
of the first day of his absence.
Notwithstanding anything herein to the contrary, an Employee shall not
incur a Severance From Service due to an absence for maternity or
paternity reasons until the second anniversary of the first date of
such absence. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence:
(a) By reason of the pregnancy of the individual;
(b) By reason of a birth of a child of the individual;
(c) By reason of the placement of a child with the individual in
connection with the adoption of such child by such individual;
or
(d) For purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Employee shall be required to furnish the Retirement Plan Board
with such timely information as the Retirement Plan Board may
reasonably require to establish both that the absence from work is for
maternity or paternity reasons and the number of days for which there
was such an absence.
- 11 -
<PAGE> 21
1.35 TOTAL AND PERMANENT DISABILITY means total and permanent
disability by bodily injury or disease from some unavoidable
cause 50 as to be prevented from engaging in any occupation or
employment for remuneration or profit) which, in the opinion
of a qualified physician, will be permanent and continuous
during the remainder of the Employee's life. Disability shall
be deemed to have resulted from an unavoidable cause unless
it:
(a) Was contracted, suffered, or incurred while the
Employee was engaged in, or resulted from his having
been engaged in, a criminal enterprise; or
(b) Resulted from an intentionally self-inflicted injury.
Total and permanent disability resulting from any of such
enumerated causes, or from future service in the armed forces
and which prevents an Employee from returning to employment
with the Employer and for which he receives a military
pension, shall not entitle an Employee to benefits because of
a Total and Permanent Disability.
1.36 TRUST AGREEMENT and TRUST mean the agreement between the Trustee and
the Employer governing the administration of the Trust Fund, as it may
be amended from time to time, and the Trust established thereunder.
1.37 TRUST FUND means all money, securities, and other property held by the
Trustee for the purposes of the Plan, together with the income
therefrom.
1.38 TRUSTEE means the person, persons, entity, or entities appointed by the
Board to act as trustee of the Trust.
- 12 -
<PAGE> 22
1.39 VESTED INTEREST means that portion of a Participant's Accrued Benefit
which is nonforfeitable and vested, based upon the number of years of
Vesting Service credited to the Participant.
1.40 VESTING SERVICE means a Participant's credit for purposes of de-
termining his right to a nonforfeitable benefit under the Plan. Such
Vesting Service shall mean service as an Employee with an Employer or
Related Employer, as follows:
(a) For periods of employment prior to September 1, 1976, Vesting
Service means the number of years of "Continuous" Service
earned under the Prior Plan prior to September 1, 1976 as such
term was defined under the Prior Plan as in effect prior to
September 1, 1976.
(b) For periods of employment after August 31, 1976, Vesting
Service means, as of any date, the number of years and
completed months of employment, equal to the aggregate of such
Employee's periods of employment with the Employer to the
extent provided in this Section 1.40.
(c) Subject to paragraph (d) below, each Employee shall be
credited with Vesting Service during any period of employment
with an Employer or Related Employer, beginning on his Date of
Employment or Reemployment, as applicable, and extending to
the date he incurs a Severance From Service or, if earlier,
the first anniversary of the first day of a period in which an
Employee remains absent from service (with or without pay)
with an Employer or Related Employer.
(d) Notwithstanding anything herein to the contrary, if a
Participant who does not have any nonforfeitable right
- 13 -
<PAGE> 23
to an Accrued Benefit shall have incurred a Severance From
Service, he shall be considered a new Employee for all
purposes of the Plan, and his prior Vesting Service and
Credited Service shall be disregarded, except:
(1) If he is reemployed before twelve (12) months have
elapsed after the date he is first absent from
service, the Credited Service and Vesting Service he
had at the date such absence commenced shall be
reinstated upon his reemployment, and he shall
receive credit for Credited Service and Vesting
Service for the period between the date his absence
commenced and his reemployment; or
(2) If the continuous period between his Severance From
Service and his reemployment does not equal or exceed
the greater of five (5) years (or one (1) year for a
Severance From Service prior to September 1, 1985) or
the years of Vesting Service he had at such Severance
From Service, the Credited Service and Vesting
Service he had at such Severance From Service shall
be reinstated on his Date of Reemployment.
(e) Vesting Service shall include the following absences from
employment:
(1) Military leave while the Employee's reemployment
rights are protected by law, provided he returns to
active employment within ninety (90) days after
release from active duty;
- 14 -
<PAGE> 24
(2) Any authorized leave of absence for any reason
approved by an Employer in accordance with rules of
uniform application applicable to all Employees; and
(3) Absence due to layoff or suspension, but not in
excess of two (2) years.
(f) Specifically, and notwithstanding any contrary provision,
Vesting Service shall not include service by an Employee of
Florida Ladder Company rendered to Florida Ladder Company
prior to January 1, 1987, the time Florida Ladder Company was
acquired by the predecessor to the Employer, and service by an
Employee of Gold Medal Ladder Company rendered to Gold Medal
Ladder Company prior to March 7, 1987, the date Gold Medal
Ladder Company was acquired by the predecessor to the
Employer.
(g) Specifically, and notwithstanding any contrary provision,
Vesting Service shall include service by an Employee of the
Anniston Extrusion division or Kentucky Ladder Company from
his Date of Employment or Reemployment, as applicable, and
extending to the date he incurs a Severance From Service or,
if earlier, the first anniversary of the first day of a
period in which an Employee remains absent from service (with
or without pay) with an Employer or Related Employer.
- 15 -
<PAGE> 25
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 PARTICIPATION
(a) Every Employee who was a Participant in the Prior Plan on the
day prior to the Restatement Date shall continue to
participate in the Plan on the Restatement Date if still
employed by an Employer.
(b) Every Employee whose Date of Employment was prior to the
Restatement Date but who had not become a Participant in the
Prior Plan prior to the Restatement Date shall become a
Participant in the Plan on the Restatement Date, provided he
is employed by an Employer on the Restatement Date. Each other
Employee shall become a Participant on the later of (i) the
January 1 which is coincident with or next follows his Date of
Employment, provided he is employed by an Employer on that
January 1, or (ii) the date the Employee's employer becomes an
Employer under the Plan.
(c) Notwithstanding the foregoing provisions of this Section 2.01,
any Employee hired prior to September 1, 1988 who was excluded
from participation in the Plan solely because he had attained
age sixty (60) on or prior to his Date of Employment shall
become a Participant in the Plan on September 1, 1988.
- 16 -
<PAGE> 26
2.02 REEMPLOYMENT OF A PARTICIPANT
A Participant who incurs a Severance From Service shall be a
Participant immediately upon his Date of Reemployment if his Date of
Reemployment occurs before twelve (12) months have elapsed after such
Severance From Service. A Participant who incurs a Severance From
Service and whose Date of Reemployment occurs after twelve (12) months
have elapsed from such Severance From Service shall become a
Participant as of his Date of Reemployment, provided that he had a
Vested Interest at his Severance From Service or his continuous period
between his Severance From Service and his Date of Reemployment does
not equal or exceed the greater of five (5) years (or one (1) year for
a Severance From Service prior to September 1, 1985) or the years of
Vesting Service he had at such Severance From Service. Any Employee or
any Participant who incurs a Severance From Service prior to obtaining
a Vested Interest, who again is employed by an Employer, and whose
continuous period between his Severance From Service and his Date of
Reemployment equals or exceeds the greater of five (5) years (or one
(1) year for a Severance From Service prior to September 1, 1985) or
the years of Vesting Service he had at such Severance From Service
shall commence participation after he satisfies the requirements set
forth in Section 2.01, based on his Date of Reemployment.
- 17 -
<PAGE> 27
ARTICLE III
CONTRIBUTIONS
3.01 TRUSTEE AND TRUST AGREEMENT
The Plan shall be funded through the Trust Fund. The Trustee shall have
the rights, powers, and duties set forth in the Trust Agreement, under
which agreement the Trustee shall receive contributions from the
Employer to the Trust Fund.
3.02 EMPLOYER CONTRIBUTIONS
During the continuance of the Plan, the Employer intends from time to
time to pay to the Trustee, to be held or applied under the Trust
Agreement, such amounts as shall comply with the funding requirements
of the Code. No contributions shall be made by Participants.
3.03 FORFEITURES
Any forfeiture under the Plan shall be applied to reduce Employer
contributions and not to increase the benefits any Participant would
otherwise receive under the Plan.
3.04 REVERSION OF EMPLOYER CONTRIBUTIONS
(a) At no time shall any part of the corpus or income of the Trust
Fund be used for or diverted to purposes other than for the
exclusive benefit of Participants and their Beneficiaries and to
pay the reasonable expenses of administration of the Plan and
Trust, to the extent that such expenses are not paid by the
Employers, and no part
-18-
<PAGE> 28
of the Trust Fund shall revert or be repaid to the Employer,
either directly or indirectly, except for such part of the Trust
Fund, if any, which remains under the Trust after the
satisfaction of all liabilities to persons entitled to
benefits under the Plan.
Effective 1/1/94, Section 3.04 (b) is amended to read as follows (First
Amendment to the Plan):
(b) Notwithstanding the above, if a contribution is made by an
Employer by a mistake in fact, such contribution shall be
returned to such Employer within one (1) year after the payment
of the contribution to the Trust Fund. Contributions are
conditioned upon their deductibility under Section 404(a) the
Code, and, to the extent the deduction is disallowed, such a
contribution shall be returned to the Employer within one (1)
year after the disallowance of the deduction is so requested by
the Employer.
-19-
<PAGE> 29
ARTICLE IV
BENEFITS
4.01 NORMAL RETIREMENT BENEFIT
A Participant who retires at his Normal Retirement Age shall be entitled
to a monthly retirement income payable as provided in Article V of the
Plan, commencing upon his Normal Retirement Date, in an amount equal to
one-twelfth (1/12) of the greater of (a) or (b) below:
(a) (1) One percent (1%) of Final Average Earnings not in excess of
Covered Compensation; plus
(2) One and five-tenths percent (1.5%) of Final Average
Earnings in excess of Covered Compensation; multi- plied
by
(3) Years of Credited Service (up to thirty-five (35)
years); plus
(4) One percent (1%) of Final Average Earnings multiplied by
Credited Service in excess of thirty-five (35) years.
(b) (1) Participant's Accrued Benefit as of August 31, 1989; plus
(2) Ninety-six dollars ($96.00) multiplied by Credited Service
earned after August 31, 1989.
-20-
<PAGE> 30
Effective 1/1/94, Section 4.01 is amended by the addition of the following
language at the end thereof as follows (First Amendment to the Plan):
Each Participant's Accrued Benefit under this Plan will the greater of
(c) or (d) below:
(c) The Participant's Accrued Benefit determined with respect to
the benefit formula applicable for the Plan Year beginning on or
after January 1, 1994, as applied to the Participant's total
years or Credited Service: or
(d) The sum of:
(1) The Participant's Accrued Benefit as of December 31,
1993, frozen in accordance with Section 1.401(a)(4)-13
of the regulations; and
(2) The Participant's Accrued Benefit determined under the
benefit formula applicable for the Plan Year beginning
on or after January 1, 1994, as applied to the
Participant's years of Credited Service earned on or
after January 1, 1994.
-20(a)-
<PAGE> 31
4.02 POSTPONED RETIREMENT BENEFIT
If a Participant remains in the employ of an Employer after his Normal
Retirement Age, his Postponed Retirement Date shall be the first day of
the month coincident with or next following the date on which he
actually retires from employment. A Participant who retires on a
Postponed Retirement Date shall be entitled to a retirement income
payable as provided in Article V of the Plan, commencing on his
Postponed Retirement Date, in the amount determined under the formula
set forth in Section 4.01 of the Plan, using his Final Average Earnings,
Covered Compensation, and years of Credited Service as of his Postponed
Retirement Date.
Effective 1/1/94, the following language shall be added at the end of
Section 4.02 to read as follows (First Amendment to the Plan):
A Participant who remains in the employ of the Employer after his Normal
Retirement shall be notified by the Plan Administrator, in writing by
personal delivery or first-class mail, during the calendar month during
which his Normal Retirement Date occurs, that he will not be entitled to
receive any benefit for any calendar month of employment during which he
is scheduled to work forty (40) or more Hours of Service or receives
from the Employer or a Related Employer payment for any Hours of Service
performed on each of eight (8) or more days in such month (or separate
work shifts), provided that the Plan has not determined or used the
actual number of Hours of Service. The benefit of such Participant shall
be actuarially increased to reflect the benefit payable to such
Participant for any calendar month during which he does not complete
forty (40) Hours of Service or receive from the Employer or Related
Employer payment for any Hours. of Service performed one each of eight
(8) or more days in such month (or separate work shifts), provided the
Plan has not determined or used the actual number of Hours of Service.
If such Participant dies before the commencement of his benefit, as so
increased, a single sum equal to the aggregate benefit payable to the
Participant for each month after his Normal Retirement Date during which
he did not complete at least forty (40) Hours of Service shall be paid
to his surviving spouse, and if none, to his estate.
-21-
<PAGE> 32
<TABLE>
<CAPTION>
Number of Years By Which
Date of Benefit Commencement
Precedes Normal Retirement Date Factor
- ------------------------------- ------
<S> <C>
1 .9200
2 .8400
3 .7600
4 .6800
5 .6000
6 .5600
7 .5200
8 .4800
9 .4400
10 .4000
</TABLE>
The above factors will be adjusted proportionately to allow for
fractional parts of a year.
4.04 TERMINATION OF VESTED PARTICIPANT
A Participant who has completed at least five (5) years of Vesting
Service and who incurs a Severance From Service before he becomes
eligible to retire at his Normal Retirement Age, his Disability
Retirement Age, or his Early Retirement Age shall be entitled to receive
a retirement income for life commencing upon his Normal Retirement Date
in an amount equal to his Accrued Benefit. However, the Participant,
if he has completed at least fifteen (15) years of Vesting Service, may
elect, by giving at least one hundred twenty (120) days' prior written
notice to the Retirement Plan Board, to have his retirement income begin
on the first day of any month on or after the date he attains age
fifty-five (55), in which event he shall be entitled to receive a
retirement income for life in an amount equal to his Accrued Benefit,
but reduced by the applicable factors set forth in Section 4.03. A
Participant who incurs a Severance From Service before he completes five
(5) years of Vesting Service or before his Normal Retirement Age shall
not be entitled to any benefits under the Plan, except as provided
-22-
<PAGE> 33
in Article IX, and his Accrued Benefit shall be forfeited as of the last
day of the Plan Year in which his employment terminated.
4.05 DISABILITY RETIREMENT BENEFIT
(a) A Participant who incurs a Severance From Service on or after
his Disability Retirement Age shall be entitled to a disability
retirement pension, which shall commence on his Disability
Retirement Date. A Participant's disability retirement pension
under this paragraph (a) shall be equal to his Accrued Benefit
determined under the formula set forth in Section 4.01 of the
Plan, using his Final Average Earnings, Covered Compensation,
and years of Credited Service as of his Disability Retirement
Date.
(b) A Participant applying for or receiving a disability retirement
pension may be required to submit to an examination by a
competent physician acceptable to the Employer and may be
required to submit to such reexaminations at reasonable
intervals as shall be determined by the Retirement Plan Board to
make a determination concerning his physical or mental
condition. If a Participant refuses to submit to periodic
medical examinations, his benefits shall be discontinued until
he completes the examination. If, on the basis of such an
examination, it is found that the Participant is no longer
Totally and Permanently Disabled, payment of his disability
retirement pension shall be terminated.
-23-
<PAGE> 34
4.06 MINIMUM BENEFITS
In no event shall any Participant who was participating in the Prior
Plan prior to September 1, 1989 receive a benefit less than the benefit
he would have been entitled to receive under the Prior Plan as
constituted on August 31, 1989, based on his average Compensation,
Vesting Service, and Credited Service on August 31, 1989, and taking
into consideration the actuarial factors for calculating optional forms
of benefits provided for in the Prior Plan.
4.07 MINIMUM BENEFITS
Effective September 1, 1987, for purposes of compliance with Section 415
of the Code (or any successor to said Section), the following
limitations on Plan benefits are hereby imposed:
(a) The retirement benefits payable to a Participant in any
Limitation Year shall not exceed an annual sum equal to the
least of:
(1) Ninety thousand dollars ($90,000) (or such other amount
as may be determined by Treasury regulations issued
pursuant to Section 415 of the Code).
(2) The Participant's average annual compensation (as
defined in Section 4.09) over the three (3) consecutive
calendar years during which his compensation (as defined
in Section 4.09) from the Employer or a Related Employer
was the highest.
-24-
<PAGE> 35
(3) If the Participant has less than ten (10) years of
participation in the Plan, the amount determined under
Section 4.07(a)(1) multiplied by a fraction, the
numerator of which is the number (not less than one (1))
of years (or parts thereof) of participation in the Plan
and the denominator of which is ten (10).
(4) If the Participant has less than ten (10) years of
Vesting Service, the amount determined under Section
4.07(a)(2) multiplied by a fraction, the numerator of
which is the Participant's number (not less than one
(1)) of years of Vesting Service and the denominator of
which is ten (10).
Notwithstanding the foregoing, in the event that a Participant
has never participated in any defined contribution plan
maintained by the Employer or a Related Employer, the annual
pension payable to such Participant shall not be deemed to
exceed the limitations of this section if it does not exceed ten
thousand dollars ($10,000) multiplied by a fraction, the
numerator of which is the number (not less than one (1)) of the
Participant's years of Vesting Service and the denominator of
which is ten (10).
Subparagraphs 4.07(a)(3) and (4) shall be applied separately
with respect to each change in the benefit structure of the
Plan.
Pensions payable in a form other than a straight life annuity
shall be adjusted to an actuarially equivalent
-25-
<PAGE> 36
straight life annuity before applying the limitations of this
Section 4.07. The interest rate assumption used to determine
actuarial equivalence for this purpose shall be the greater of
the interest rate specified in Section 1.02 of the Plan or five
percent (5%). No actuarial adjustment to the benefit is required
for the value of a Joint and Survivor Annuity form.
(b) If payments begin prior to a Participant's Social Security
Retirement Age, the limitation in subparagraph (a)(1) shall be
adjusted to the actuarial equivalent of such limitation as
follows. For benefit payments commencing on or after age
sixty-two (62), this adjustment will be made in such manner as
the Secretary of the Treasury may prescribe which is consistent
with the reduction for old age insurance benefits commencing
before the Social Security Retirement Age under the Social
Security Act. For benefit payments commencing prior to age
sixty-two (62), such limitation shall be adjusted so that it is
the actuarial equivalent of the limitation for benefits
commencing at age sixty-two (62). The interest rate assumption
used to determine actuarial equivalence for this purpose shall
be the greater of the interest rate determined under Section
1.02 of the Plan or five percent (5%). If benefit payments
begin after a Participant's Social Security Retirement Age,
the limitation in subparagraph (a)(1) shall be equal to the
actuarial equivalent of an annual benefit of ninety thousand
dollars ($90,000) commencing at the Social Security Retirement
Age multiplied by the Adjustment Factor. To determine actuarial
equivalence for purposes of the preceding sentence, the interest
-26-
<PAGE> 37
rate assumption shall be the lesser of the rate specified at
Section 1.02 of the Plan or five percent (5%).
(c) (1) For purposes of Section 4.07(b) of this Plan,
"Adjustment Factor" shall mean the cost-of-living
adjustment factor prescribed by the Secretary of the
Treasury under Section 415(d) of the Code for years
beginning on or after January 1, 1987 applied to such
items and in such manner as the Secretary shall
prescribe.
(2) For purposes of Section 4.07(b) of this Plan, "Social
Security Retirement Age" shall mean the age used as the
retirement age for the Participant under Section 216(1)
of the Social Security Act, except that such section
shall be applied without regard to the age increase
factor and as if the early retirement age under Section
216(l)(2) of such Act were sixty-two (62).
(d) If the Current Accrued Benefit of an individual who was a
Participant in the Prior Plan as of August 31, 1987 exceeds the
benefit limitations under Section 415(b) of the Code, as
modified by the foregoing provisions of this Section 4.07, then,
for purposes of Sections 415(b) and (e) of the Code, the
limitation set forth in Section 415(b)(1) of the Code with
respect to such individual shall be equal to such Current
Accrued Benefit.
(e) For purposes of Section 4.07(d), "Current Accrued Benefit"
shall mean a Participant's Accrued Benefit under the Prior Plan,
determined as if the Participant had
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<PAGE> 38
separated from service as of August 31, 1987, when expressed
as an annual benefit within the meaning of Section 415(b)(2)
of the Code. In determining the amount of a Participant's
Current Accrued Benefit, the following shall be disregarded:
(1) Any change in the terms and conditions of the Prior Plan
after May 5, 1986; and
(2) Any cost-of-living adjustment occurring after May 5,
1986.
4.08 COMBINED MAXIMUM LIMITATIONS
In the event any Participant is also participating in any other
qualified plan (within the meaning of Section 401 of the Internal
Revenue Code) maintained by an Employer or a Related Employer, then for
any Limitation Year the sum of the "Defined Benefit Plan Fraction" and
the "Defined Contribution Plan Fraction" for such Limitation Year shall
not exceed 1.0. For purposes of this Section 4.08, such sum shall be
determined in accordance with the following:
(a) The "Defined Benefit Plan Fraction" for any year is a fraction:
(1) The numerator of which is a projected annual benefit of
the Participant under each defined benefit plan
(determined as of the close of the year); and
(2) The denominator of which is the lesser of the maximum
dollar limitation in effect under
-28-
<PAGE> 39
Section 415(b)(1)(A) of the Code for such Limitation
Year times 1.25, or the amount which may be taken into
account under Section 415(b)(l)(B) of the Code for such
Limitation Year times 1.4.
(b) The "Defined Contribution Plan Fraction" for any year is a
fraction:
(1) The numerator of which is the sum of the annual
additions to the Participant's account under each
defined contribution plan as of the close of the year;
and
(2) The denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year
and each prior year of service with the Employer or a
Related Employer:
(A) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(c)(1)(A)
of the Code for such Limitation Year; or
(B) The product of 1.4 multiplied by the amount
which may be taken into account under Section
415(c)(1)(B) of the Code for such Limitation
Year.
The annual additions for any Limitation Year beginning before September
1, 1987 shall not be recomputed to treat all employee contributions as
annual additions.
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<PAGE> 40
For purposes of this Section 4.08, all defined benefit or defined contribution
plans shall be treated as one (1) plan by class. In the event the above
limitation would otherwise be exceeded in any Limitation Year, the Participant's
benefits under this Plan are to be limited, and the Retirement Plan Board shall
advise any affected Participant of any additional limitation on his annual
benefits required by this Section 4.08.
If the Plan satisfied the applicable requirements of Section 415 of the Code as
in effect for all Limitation Years beginning before September 1, 1987, an amount
shall be subtracted from the numerator of the Defined Contribution Plan
Fraction (not exceeding such numerator), as prescribed by the Secretary of the
Treasury, so that the sum of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction computed under Section 415(e)(1) of the Code does not
exceed one (1).
Effective 1/1/94, Section 4.09 is amended to read as follows (First Amendment to
the Plan):
4.09 DEFINITION OF COMPENSATION FOR PURPOSES OF SECTION 4.07 AND 4.08
Solely for the purpose of applying the limitations of Sections 4.07 and
4.08, the compensation of a Participant includes:
(a) A Participant's wages, salaries, fees for professional services,
and other amounts received (without regard to whether or not an
amount is paid in cash) for personal services actually rendered
in the course of employment with the Employer to the extent that
the amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for services
on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances);
(b) In the case of a Participant who is an employee within the
meaning of Section 401(c)(1) of the Code and the regulations
thereunder, the Participant's earned income (as described in
Section 401(c)(2) of the Code and the regulations thereunder);
-30-
<PAGE> 41
(Continuation from page 30) effective 1/1/94, Section 4.09 is amended to read as
follows (First Amendment to the Plan):
(c) Amounts described in Section 104(a)(3), 105(a), and 105(h) of
the Code, but only to the extent these amounts are includable in
the gross income of the Employee:
(d) Amounts paid or reimbursed by the Employer for moving expenses
incurred by an Employee, but only to the extent that these
amounts are not deductible by the Employee under Section 217 of
the Code:
(e) The value of a nonqualified stock option granted to an Employee
by the Employer, but only to the extent that the value of the
option is includable in the gross income of the Employee for the
taxable year in which granted; and
(f) The amount includable in the gross income of an Employee upon
making the election described in Section 83(b) of the Code.
Solely for the purpose of applying the limitations of Sections 4.07 and
4.08, the compensation of a Participant excludes:
(a) Employer contributions to a plan of deferred compensation which
are not not included in the Participant's gross income for the
taxable year in which contributed, Employer contributions under
a simplified employee pension plan to the extent such
contributions are excluded from the Participant's gross income,
or any distributions from a plan of deferred compensation;
(b) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
Participant either becomes freely transferable or is no longer
subject to substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange, or other disposition
of stock acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) toward the purchase of an annuity
described in Code Section 403(b) (whether or not the amounts are
actually excludable from the gross income of the Employee).
4.10 REEMPLOYMENT AFTER RECEIPT OF BENEFITS
Effective 1/1/94, Section 4.10 is amended in its entirety to read as follows
(First Amendment to the Plan):
(a) A Participant who terminates employment and is rehired without
having received retirement benefits and who once again becomes a
Participant in the Plan may later retire and receive benefits
based upon his entire period of Credited Service both before and
after termination and reemployment, to the extent not
disregarded under Section 1.40.
-31-
<PAGE> 42
(Continuation from page 31) ,effective 1/1/94, Section 4.10 is amended to read
as follows (First Amendment to the Plan):
(b) A Participant who retires and is rehired prior to his Normal
Retirement Date after receiving retirement benefits shall have
such payments suspended.
In the event that a reemployed, retired Participant accrues
further periods of Credited Service, he may later retire again
to receive benefits based upon his total period of Credited
Service both before and after such termination and
reemployment. However, the subsequent retirement benefits shall
be reduced by the Actuarial Equivalent of the benefits he
previously received prior to his reemployment.
(c) A Participant who retires and is rehired after his Normal
Retirement Date and after receiving retirement benefits shall
have such payments suspended. No payment shall be suspended
unless the Plan Administrator gives written noticed to the
Employee by personal delivery or first-class mail, during the
month in which his reemployment occurs, that he will not receive
any benefit for any calendar month of employment during which he
works forty (40) or more Hours of Service for the Employer or a
Related Employer or receives from the Employer or a Related
Employer payment for any Hours of Service performed on each of
eight (8) or more days in such month (or separate work shifts),
provided that the Plan has not determined or used the actual
number of Hours of Service. The benefit of such Participant
shall be actuarially increased to reflect the benefit payable to
such Participant for any calendar month during which he does not
complete forty (40) Hours of Service for the Employer or a
Related Employer or receive from the Employer or a Related
Employer payment for any Hours of Service performed on each of
eight (8) or more days in such month (or separate work shifts),
provided that the Plan has not determined or used the actual
number of Hours of Service. If such Participant dies before the
commencement of his benefit, as so increased, a single sum equal
to the aggregate benefit payable to the Participant for each
month after his Normal Retirement Date during which he did not
complete at least forty (40) Hours of Service for the Employer
or a Related Employer or receive from the Employer or a Related
Employer payment for any Hours of Service performed on each of
eight (8) or more days in such month (or separate work shifts),
provided that the Plan has not determined or used the actual
number of Hours of Service shall be paid to his surviving
spouse, and if none, to his estate. Hours of Service in this
subsection are hours as defined under Department of Labor
Regulation Section 2530.200b-2(a).
In the event that a reemployed, retired Participant accrues
further periods of Credited Service, he may later retire again,
to receive benefits based upon his total period of Credited
Service both before and after such termination and reemployment.
However, the subsequent retirement benefits shall be reduced by
the Actuarial Equivalent of the benefits he previously received
prior to his Normal Retirement Date.
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<PAGE> 43
4.11 TRANSFERS
A participant in another retirement plan maintained by or
contributed to by an Employer or a Related Employer who
becomes a Participant in this Plan shall be considered a
transferred employee.
Such transferred employee's benefit under the plan he was
previously a participant in shall be frozen as of his transfer
date. If such transferred employee is a Participant in this Plan
at the time of his death, termination of employment, disability,
or retirement, whichever first occurs, he, his spouse, or his
Beneficiary will receive any benefit due under this Plan. The
benefit
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<PAGE> 44
provided hereunder will be based on Final Average Earnings and
total Credited Service as an Employee of the Employer or Related
Employer reduced by any benefit such Participant was entitled to
under the plan in which he was previously a participant.
Final Average Earnings will be based on the Participant's
employment with an Employer in accordance with the Plan's
definition of Final Average Earnings.
Effective 1/1/94, Section 4.11 is amended by the addition of the following
language at the end thereof to read as follows (First Amendment to the Plan):
Notwithstanding the foregoing, in the case an individual hired
on or after May 31, 1987 who is a member of the collective
bargaining unit represented by Local 3713 of the United
Steelworkers of America who becomes a Participant in this Plan,
Credited Service shall be calculated beginning with his date of
Participant in this Plan. His period of employment as a
member of the collective bargaining unit represented by Local
3713 of the United Steelworkers of America shall not be
considered in determining his Credited Service hereunder.
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<PAGE> 45
ARTICLE V
FORM AND PAYMENT OF BENEFITS
5.01 NORMAL PENSION
If a Participant is unmarried as of his Annuity Starting Date, the
benefit payments determined under Article IV shall be in the form of a
Normal Pension, unless the Participant elects the optional form of
payment provided in the Plan in accordance with the procedures of
Section 5.03. The benefit formula in Section 4.01 yields payments in the
form of a Normal Pension.
5.02 JOINT AND SURVIVOR ANNUITY
If a Participant is married on his Annuity Starting Date, benefit
payments determined under Article IV shall be in the form of a Joint and
Survivor Annuity, unless the Participant, with the consent of the
Participant's spouse, elects either the Normal Pension or the optional
form of payment provided in the Plan in accordance with the procedures
of Section 5.04.
5.03 ELECTION NOT TO RECEIVE NORMAL PENSION
An unmarried Participant may elect in writing, during the ninety (90)
day period ending on his Annuity Starting Date, to waive the automatic
Normal Pension form of benefit described in Section 5.01 and to make a
qualified election of the optional form of payment permitted under the
Plan. No less than thirty (30) days and no more than ninety (90) days
prior to the Participant's Annuity Starting Date and consistent with
such regulations as the Secretary of the Treasury may prescribe, the
Retirement Plan Board shall provide the Participant with a written
explanation of:
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<PAGE> 46
(a) The terms and conditions of the Normal Pension;
(b) The Participant's right to make and the effect of an election to
waive the Normal Pension;
(c) The right of the Participant to revoke each such election and
the effect of such revocation; and
(d) The relative values of the various optional forms of benefit
available under the Plan.
5.04 ELECTION NOT TO RECEIVE JOINT AND SURVIVOR ANNUITY
(a) A Participant may, with his spouse's written consent, elect in
writing, during the ninety (90) day period ending on his Annuity
Starting Date, to waive the automatic Joint and Survivor
Annuity form of payment described in Section 5.02 and to make
a qualified election of either the Normal Pension or the
optional form of payment permitted under the Plan. The spouse's
consent must acknowledge the effect of such election and be
witnessed by a Plan representative or notary public. The spouse
must also consent both to the specific optional form of
benefit chosen and to the specific Beneficiary designated, if
applicable. Notwithstanding the foregoing, this paragraph (a)
shall not apply if it is established to the Retirement Plan
Board's satisfaction that the spouse cannot be located or that
other circumstances set forth in regulations promulgated under
Section 417 of the Code which preclude the necessity of the
spouse's consent are present with respect to the Participant.
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<PAGE> 47
(b) No less than thirty (30) days and no more than ninety (90) days
prior to the Participant's Annuity Starting Date and consistent
with such regulations as the Secretary of the Treasury may
prescribe, the Retirement Plan Board shall provide the
Participant with a written explanation of:
(1) The terms and conditions of the Joint and Survivor
Annuity;
(2) The Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity;
(3) The right of the Participant's spouse to consent to
any election to waive the Joint and Survivor Annuity;
(4) The right of the Participant to revoke such election and
the effect of such revocation; and
(5) The relative values of the various optional forms of
benefit available under the Plan.
5.05 PAYMENT IN OPTIONAL FORM ON RETIREMENT
(a) As an optional form of payment, a Participant may elect to have
his retirement income payable in the form of a contingent
annuitant option. A contingent annuitant option shall be a
monthly income payable for the lifetime of the Participant and
continuing thereafter in an amount fifty percent (50%) or one
hundred percent (100%)
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<PAGE> 48
as great, as elected by the Participant, to a Beneficiary designated in
writing by the Participant for such Beneficiary's life. The Participant's
monthly income under the contingent annuitant option shall be an amount equal to
the amount payable under the Normal Pension, multiplied by the applicable factor
shown below, based on the particular optional form elected and the age of the
Participant and that of his Beneficiary as of the date benefits commence under
the optional form:
<TABLE>
<CAPTION>
Factor
Factor for
for One
Fifty Hundred
Percent Percent
Based on Attained Ages, (50%) (100%)
Beneficiary Is Option Option
---------------------- ------- -------
<S> <C> <C> <C>
5 .925 .846
Years younger than 4 .928 .852
the Participant 3 .931 .858
2 .934 .864
1 .937 .870
0 .940 .876
1 .943 .882
Years older than 2 .946 .888
the Participant 3 .949 .894
4 .952 .900
5 .955 .906
</TABLE>
In the case of election of the fifty percent (50%) option, where the
Beneficiary is more than five (5) years younger or five (5) years older
than the Participant, the following rules apply:
(1) For each additional year beyond five (5) that the Beneficiary is
younger than the Participant, the factor shall be reduced by
.003 for
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<PAGE> 49
each such year from the factor of .925, but shall not be less
than a factor of .502.
(2) For each additional year beyond five (5) that the Beneficiary is
older than the Participant, the factor shall be increased by
.003 for each such year from the factor of .955, but shall not
be greater than a factor of .997.
In the case of election of the one hundred percent (100%) option, where
the Beneficiary is more than five (5) years younger or five (5) years
older than the Participant, the following rules apply:
(1) For each additional year beyond five (5) that the Beneficiary is
younger than the Participant, the factor shall be reduced by
.006 for each such year from the factor of .846, but shall not
be less than a factor of .502.
(2) For each additional year beyond five (5) that the Beneficiary is
older than the Participant, the factor shall be increased by
.006 for each such year from the factor of .906, but shall not
be greater than a factor of .996.
Distribution may be made over only one (1) of the following periods
(or a combination thereof):
(1) The life of the Participant;
(2) The life of the Participant and a designated Beneficiary;
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<PAGE> 50
(3) A period certain not extending beyond the life expectancy of the
Participant; or
(4) A period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
A Participant's life expectancy may be recalculated no more frequently
than annually; however, the life expectancy of a nonspouse Beneficiary
may not be recalculated. If a Participant's spouse is not the
designated Beneficiary, the method of distribution selected must assure
that at least fifty percent (50%) of the present value of the amount
available for distribution is paid within the life expectancy of the
Participant.
Effective 1/1/94. the following sentence shall be added at the end of Section
5.06(a) to read as follows (First Amendment to the Plan):
All distributions shall be made in accordance with Section 401(a)(9) of
the Code and regulations thereunder.
Effective January 1,1997, a new Subsection 5.05(b) is added to read as follows
(Second Amendment to the Plan);
(b) As an optional form of payment, if the single sum Actuarial
Equivalent value of his retirement income is ten thousand
dollars ($10,000) or less, a Participant may elect to have his
retirement income payable in the form of a single sum.
Effective January 1, 1997, existing Subsections 5.05(b), 5.05(c) and 5.05(d),
are renumbered as Subsections 5.05(c), 5.05(d) and 5.05(e), respectively
(Second Amendment to the Plan)
Effective January 1, 1997, existing Subsections 5.05(b), 5.05(c) and 5.05(d),
are renumbered as Subsections 5.05(c), 5.05(d) and 5.05(e), respectively
(Second Amendment to the Plan).
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<PAGE> 51
on or after his Annuity Starting Date, retirement income payments shall be made
in accordance with the optional form elected.
(e) If the single sum Actuarial Equivalent value of any benefit that
is not yet in pay status is three thousand five hundred dollars
($3,500) or less, the Retirement Plan Board shall direct the
Trustee to pay such benefit with respect to the terminated
Participant or Beneficiary as soon as practicable (whether or
not the Participant has reached a retirement date) in a single
sum cash payment which shall be the Actuarial Equivalent of the
retirement income otherwise payable. For purposes of this
paragraph, if the present value of a Participant's vested
Accrued Benefit is zero (0), the Participant shall be deemed
to have received a distribution of such vested Accrued Benefit
under this paragraph (d)
5.06 PRE-RETIREMENT SURVIVOR ANNUITY
If a Participant or former Participant dies after having earned a
nonforfeitable right to his Accrued Benefit, but prior to his Annuity
Starting Date, and if he is survived by a spouse to whom he has been
married throughout the twelve (12) month period preceding his death,
such spouse shall be eligible to receive a Preretirement Survivor
Annuity under this Section 5.06, payable as set forth in subsection (a)
or (b) below, whichever is applicable:
(a) If a Participant dies during employment on or after the
attainment of his Early Retirement Age, the Preretirement
Survivor Annuity shall be a monthly income payable for the life
of the spouse, commencing on the first day
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<PAGE> 52
of the month coinciding with or next following the Participant's
date of death, equal to the benefit that would have been payable
to the spouse had the deceased Participant retired on the day
before death and elected immediate commencement of benefits in
the one hundred percent (100%) contingent annuitant form under
Section 5.05, with his spouse named as his Beneficiary. The last
monthly payment shall be made for the month in which death of
such spouse occurs. The spouse may elect to defer commencement
of benefits, but not beyond the date the Participant would have
attained age seventy and one-half (70 1/2).
(b) If a Participant dies during employment but prior to the
attainment of his Early Retirement Age, or, in the case of the
death of a former Participant, the following rules shall apply:
(1) If a Participant or former Participant was eligible to
immediately commence receipt of his retirement income as
of the date of his death, the Pre-retirement Survivor
Annuity shall be a monthly income payable for the life
of the spouse, commencing on the first day of the month
coinciding with or next following the Participant's date
of death equal to the benefit that would have been
payable to the spouse had such Participant retired on
the day before death and elected immediate commencement
of benefits in the Joint and Survivor Annuity form. The
last monthly payment shall be made for the month in
which death of such spouse occurs. The spouse may elect
to defer
-42-
<PAGE> 53
Effective 1/1/94, the following subparagraph (c) shall be added at the end
of Section 5.06 to read as follows (First Amendment to the Plan):
(c) If a Participant dies prior to his Annuity Starting Date
and the single sum Actuarial Equivalent of the
Pre-Retirement Survivor Annuity exceeds, or at the time
of any prior distribution exceeded, three thousand five
hundred dollars ($3,500), the spouse must consent in
writing in order for payment to be made prior to the
date the Participant would have attained his Normal
Retirement Age.
<PAGE> 54
commencement of benefits, but not beyond the date the
Participant would have attained age seventy and one-half
(70 1/2).
(2) If a Participant or former Participant was not eligible
to immediately commence receipt of benefits hereunder
as of the date of his death, the Pre-retirement Survivor
Annuity shall be a monthly income payable for the life
of the spouse, beginning with the first day of the month
in which such Participant could have elected immediate
benefits had he survived, equal to the benefit that
would have been payable to such spouse had the
Participant terminated employment on his date of death
(except, where termination of employment occurred
prior to his death, the Participant's date of
termination of employment shall be used) and then
survived and retired on the first date upon which he
could have elected immediate benefits and elected
immediate commencement of benefits in the Joint and
Survivor Annuity form. The last monthly payment shall
be made for the month in which death of such spouse
occurs. The spouse may elect to defer commencement of
benefits, but not beyond the date the Participant would
have attained age seventy and one-half (70 1/2).
Effective January 1, 1997, Section 5.07 is amended to read as follows (Second
Amendment to the Plan):
5.07 PRE-RETIREMENT DEATH BENEFIT FOR UNMARRIED PARTICIPANTS
If a Participant or former Participant dies after having earned a
nonforfeitable right to his Accrued Benefit, but prior to his Annuity
Starting Date, and where no Pre-retirement Survivor Annuity is
-43-
<PAGE> 55
(Continued from page 43) effective January 1, 1997, Section 5.07 is amended to
read as follows (Second Amendment to the Plan);
payable under Section 5.06, his Beneficiary shall be entitled to a
pre-retirement in accordance with the following provisions:
(a) If a Participant dies during employment on or after the
attainment of his Early Retirement Age, or if a former
Participant was eligible to commence receipt of his retirement
income immediately as of the date of his death, such
pre-retirement death benefit shall be equal to the single sum
Actuarial Equivalent of the benefit that would have been payable
to the Beneficiary had such Participant retired on the date
before his death and begun receiving benefits in the form of a
Normal Pension. Payment shall be made as soon as practicable
following the Participant's death.
(b) If a Participant or former Participant was not eligible to
immediately commence receipt of benefit hereunder as of the date
of his death, such pre-retirement death benefit shall be equal
to the single sum Actuarial Equivalent of the benefit that would
have been payable to the Beneficiary had the Participant
terminated employment on the day before his death (except where
termination of employment occurred prior to his death, the
Participant's date of termination of employment shall be used)
then survived to the earliest date at which he would be entitled
to begin receiving benefits under the Plan, and began receiving
benefits in the form of a Normal Pension. Payment shall be made
as soon as practicable following the Participant's death.
Section (c) is gone.
-44-
<PAGE> 56
of the date of his death, such pre-retirement death benefit
shall be a monthly income payable for the life of the
Beneficiary, commencing on the first day of the month following
the Participant's date of death, equal to the Actuarial
Equivalent of the benefit that would have been payable to such
Beneficiary had the Participant terminated employment on the
day before his death (except, where termination of employment
occurred prior to his death, the Participant's date of
termination of employment shall be used), then survived until
the earliest date at which he would be entitled to begin
receiving benefits under the Plan, and elected immediate
commencement of benefits in a fifty percent (50%) contingent
annuitant form under Section 5.05. The last monthly payment
shall be made for the month in which death of such Beneficiary
occurs.
5.08 ADMINISTRATIVE POWERS RELATING TO PAYMENTS
If a Participant or Beneficiary is under a legal disability or, by
reason of illness or mental or physical disability, is unable, in the
opinion of the Retirement Plan Board, to attend properly to his personal
financial matters, the Trustee may make such payments in such of the
following ways as the Retirement Plan Board shall direct:
(a) Directly to such Participant or Beneficiary;
(b) To the legal representative of such Participant or Beneficiary;
or
(c) To some relative by blood or marriage, or friend, for the
benefit of such Participant or Beneficiary.
-45-
<PAGE> 57
Any payment made pursuant to this Section 5.08 shall be in complete
discharge of the obligation for such payment under the Plan.
5.09 NO GUARANTY OF BENEFITS
The benefits provided under the Plan shall be paid solely from the
assets of the Trust Fund. Nothing contained in the Plan or the Trust
Agreement shall constitute a guaranty by the Employer or the Trustee
that the assets of the Trust Fund will be sufficient to pay any benefit
to any person.
5.10 TIME OF PAYMENT
Unless the Participant elects otherwise, payment shall be made or shall
commence not later than the sixtieth day after the latest of the close
of the Plan Year in which:
(a) The Participant attains age sixty-five (65);
(b) The tenth anniversary of the year in which the Participant
commenced participation in the Plan occurs; or
(c) The Participant terminates his employment with an Employer.
Payment of retirement income to any Participant shall commence no later
than the April 1 of the calendar year following the calendar year in
which the Participant attains age seventy and one-half (70 1/2), whether
or not such Participant has retired. The preceding sentence shall not
apply to a Participant who:
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<PAGE> 58
(a) Has made a written election to receive his benefits under the
Plan at a later date in accordance with Section 242(b) of the
Tax Equity and Fiscal Responsibility Act of 1982; or
(b) Has attained age seventy and one-half (70 1/2) before
January 1, 1988 and was not a five percent (5%) owner of an
Employer or a Related Employer at any time during the Plan Year
ending with or within the calendar year in which such individual
attained age sixty-six and one-half (66 1/2) or any subsequent
Plan Year.
5.11 DEATH DISTRIBUTION REQUIREMENTS
In addition to any other requirements specified in the Plan, if the
Participant dies after his Annuity Starting Date, the remaining
portion of his retirement income will continue to be distributed at
least as rapidly as under the method of distribution being used prior to
the Participant's death.
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Effective 1/1/94, a new Section 5.12 shall be added as follows (First Amendment
to the Plan):
5.12 DIRECT ROLLOVERS
Effective January 1, 1993, a Distributee may elect, at the time and in
the manner prescribed by the Plan Administrator, to have any portion of
an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan in the form of a Direct Rollover. Notwithstanding the
above, an Eligible Rollover Distribution of less than two hundred
dollars ($200) is not eligible for a Direct Rollover. Further, a
Distributee may elect to have an Eligible Rollover Distribution paid to
only one Eligible Retirement Plan in a Direct Rollover.
For purposes of this Section 5.12, the following definitions apply:
(a) "Distributee" means a Participant or former Participant, his
surviving spouse, his spouse, or his former spouse who is the
Alternate Payee under a Qualified Domestic Relations Order.
(b) "Eligible Rollover Distribution" means any distribution of all
or any portion of the Participant's vested Accrued Benefit,
except that an Eligible Rollover Distribution does not include
any distribution that is one (1) of a series of substantially
equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the Participant, or the
joint lives (or joint life expectancies) of the Participant and
his designated Beneficiary, or for a specified period often (10)
years or more; any distribution to the extent such distribution
is required under Section 401 (a)(9) of the Code; and the
portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(c) "Eligible Retirement Plan" means and individual retirement
account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is limited to an
individual retirement account or individual retirement annuity.
(d) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
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Effective January 1, 1997, a new Section 5.13 is added to read as follows
(Second Amendment to the Plan);
5.13 ADDITIONAL RULES RELATING TO PAYMENTS
Notwithstanding the provisions of Section 5.03 and Section 5.04, the
following additional procedures shall apply to the distribution of
benefits hereunder. If the Participant, after having received the
written explanation of the Normal Pension or Joint and Survivor Annuity,
as applicable, affirmatively elects a form of distribution and the
spouse consents in writing to that form of distribution, if necessary,
the Annuity Staring Date may be less than thirty (30) days after the
written explanation was provided to the Participant, and the written
explanation may be provided after the Annuity Starting Date provided
that the following requirements are met:
(a) The Retirement Plan Board provides information to the
Participant clearly indicating that the Participant has a right
to at least thirty (30) days to consider whether to waive the
Normal Pension or Joint and Survivor Annuity and consent to an
alternative form of distribution. The Participant (and, if the
Participant is married, and if payment is to be made in a form
other than the Joint and Survivor Annuity or a contingent
annuitant option with the Participant's spouse as Beneficiary,
the Participant's spouse) affirmatively waives the requirement
that the written explanation be provided at least thirty (30)
days before the Annuity Starting Date. In such event, payment
may commence less than thirty (30) days after the written
explanation is provided to the Participant. If the written
explanation is provided after the Annuity Starting Date, the
Participant (and, if the Participant is married and if payment
is to be made in a form other than the Joint and Survivor
Annuity or a contingent annuitant option with the Participant's
spouse as Beneficiary, the Participant's spouse) affirmatively
waives the requirement that distribution must commence at least
thirty (30) days after the written explanation is provided. In
such event, payment may commence less than thirty (30) days
after the written explanation is provided to the Participant.
(b) The Participant is permitted to revoke an affirmative
distribution election at least until the Annuity Starting Date,
or, if later, at any time prior to the expiration of the
seven-day period that begins the day after the explanation of
the Normal Pension or Joint and Survivor Annuity is provided to
the Participant.
(c) Distribution in accordance with the affirmative election does
not commence before the expiration of the seven-day period that
begins the day after the explanation of the Normal Pension or
Joint and Survivor Annuity is provided to the Participant. If
the written explanation is provided after the Annuity Starting
Date, payments retroactive to such date shall be made to the
Participant when distribution commences.
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Effective 1/1/94, the following sentence shall be added after the fifth
sentence of Section 6.02, to read as follows (First Amendment to the Plan):
.........If challenged in court, such
determination shall not be subject to de novo review and shall not be overturned
unless proven to be arbitrary and capricious based upon the evidence considered
by the Plan Administrator at the time of such determination............The Plan
Administrator
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ARTICLE VI
PLAN ADMINISTRATION
6.01 PLAN ADMINISTRATOR
The Board has appointed the Retirement Plan Board as Plan Administrator
to administer the Plan and keep records of proceedings and claims. The
Board may appoint an investment manager or managers, as defined in
Section 3(38) of ERISA, to manage or control all or a part of the Trust
Fund. The Employer shall notify the Trustee of the representatives of
the Plan Administrator and of any changes that may take place from time
to time. The Board may change the Plan Administrator or any
representative thereof at any time with or without cause and may
designate a successor Plan Administrator, in its discretion. No
compensation will be paid the Plan Administrator from the Trust Fund
for service as such, but any reasonable expenses incurred pursuant to
such service will be reimbursed by the Employer or from the Trust Fund.
6.02 DUTIES
Subject to the limitations of the Plan and of the Trust Agreement, the
Plan Administrator will from time to time establish rules for the
administration of the Plan and the transaction of its business. The
Plan Administrator will rely on the records of the Employer with respect
to any and all factual matters dealing with the employment of an
Employee. The Plan Administrator will resolve any factual dispute,
giving due weight to all evidence available to it. The Plan
Administrator will interpret the Plan and determine all questions
arising in the administration, interpretation, and application of the
Plan. All such determinations shall be final, conclusive, and binding.
The Plan Administrator
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shall keep a permanent record of its meetings and actions and shall
establish reasonable procedures providing for the proper operation of
Section 414(p) of the Code with respect to "qualified domestic relations
orders," as defined therein, including, but not limited to, establishing
appropriate procedures, authorizing the establishment of new accounts,
and directing distributions from such accounts.
6.03 DIRECTIONS TO TRUSTEE
The Plan Administrator shall direct the Trustee, in writing, to make
payments from the Trust Fund to individuals who qualify for such
payments hereunder. Such written order to the Trustee shall specify the
individual's name, address, Social Security number, and the amount and
frequency of such payments.
6.04 NONDISCRIMINATION
The Plan Administrator shall not take action or direct the Trustee to
take any action with respect to any of the benefits provided hereunder
or otherwise in pursuance of the powers conferred herein upon the Plan
Administrator which would be discriminatory in favor of Employees who
are officers, shareholders, or highly compensated employees or which
would result in benefiting one (1) Employee, or group of Employees, at
the expense of another, or in the application of different rules to
substantially similar sets of facts.
6.05 AGENTS
The Plan Administrator may employ such counsel, accountants, and other
agents as it shall deem advisable. The Employer shall pay, or cause to
be paid from the Trust Fund, the compensation of such
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counsel, accountants, and other agents and any other expenses incurred
by the Plan Administrator in the administration of the Plan and Trust.
6.06 LIMITATIONS
In accordance with the provisions hereof, the Plan Administrator has
been delegated certain administrative functions relating to the Plan
with all powers necessary to enable it properly to carry out such
duties. The Plan Administrator, in its capacity as Plan Administrator,
shall have no power in any way to modify, alter, add to, or subtract
from any provisions of the Plan.
6.07 UNSTATED RULES AND PROCEDURES
Any rules, regulations, or procedures that may be necessary for the
proper administration or functioning of this Plan that are not covered
in this Plan or the Trust Agreement shall be promulgated and adopted by
the Plan Administrator.
6.08 NAMED FIDUCIARY
The Employer shall be the "Named Fiduciary" for purposes of ERISA. The
Secretary of the Employer shall be subject to service of process on
behalf of the Plan.
6.09 EXERCISE OF THE PLAN ADMINISTRATOR'S DUTIES
The Plan Administrator shall discharge its duties:
(a) For the exclusive purpose of providing benefits to Plan
Participants, former Participants and Beneficiaries; and
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(b) With the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims.
6.10 INDEMNIFICATION
The Employer shall indemnify the Plan Administrator against any and all
claims, loss, damage, expense, and liability arising from any act or
failure to act relating to the Plan Administrator's duties and powers
unless the same is judicially determined to be the result of the Plan
Administrator's gross negligence or willful misconduct.
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ARTICLE VII
CLAIMS PROCEDURES
7.01 CLAIMS REVIEW
Any Participant, former Participant or Beneficiary who wishes to request
a review of a claim for benefits or who wishes an explanation of a
benefit or its denial may direct to the Plan Administrator a written
request for such review. The Plan Administrator shall respond to the
request by issuing a notice to the claimant as soon as possible, but in
no event later than ninety (90) days from the date of receipt of the
request. This notice furnished by the Plan Administrator shall be
written in a manner calculated to be understood by the claimant and
shall include the following:
(a) The specific reason or reasons for any denial of benefits;
(b) The specific Plan provisions on which any denial is based;
(c) A description of any further material or information which is
necessary for the claimant to perfect his claim and an
explanation of why the material or information is needed; and
(d) An explanation of the Plan's claim appeals procedure.
If the claimant does not respond to the notice, posted by first-class
mail to the address of record of the claimant, within sixty (60) days
from the posting of the notice, the claim shall be considered
satisfied in all respects. If the Plan Administrator
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denies the claim or fails to respond to the claimant's written request
for a review within ninety (90) days of its receipt, the claimant shall
be entitled to proceed to the claim appeals procedure described in
Section 7.02.
7.02 APPEALS PROCEDURE
In the event that the claimant wishes to appeal the claim review denial,
the claimant or his duly authorized representative may submit to the
Plan Administrator, within sixty (60) days of the posting of the notice,
a written notification of appeal of the claim denial. The notification
of appeal of the claim denial shall permit the claimant or his duly
authorized representative to utilize the following claim appeals
procedures:
(a) To review pertinent documents; and
(b) To submit issues and comments in writing to which the Plan
Administrator shall respond.
The Plan Administrator shall furnish a written decision on the appeal
not later than sixty (60) days after receipt of the notification of
appeal, unless special circumstances require an extension of the time
for processing the appeal. In no event, however, shall the Plan
Administrator respond later than one hundred twenty (120) days after a
request for a formal review. The decision on the appeal shall be in
writing and shall include specific reasons for the decision, and shall
be written in a manner calculated to be understood by the claimant and
shall contain specific reference to the pertinent Plan provisions on
which the decision is based.
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Effective 1/1/94, Article VIII is amended to read as follows (First Amendment to
the Plan):
ARTICLE VIII
RESTRICTIONS ON BENEFITS
8.01 RESTRICTIONS ON PLAN TERMINATION
In event of Plan termination, the benefit of any Participant or former
Participant who is a highly compensated employee shall be limited to a
benefit that is nondiscriminatory under Section 401(a)(4) of the Code.
For purposes of this Article VIII, "highly compensated employee" shall
mean highly compensated employee as defined under Section 414(q) of the
Code.
8.02 RESTRICTION ON DISTRIBUTION
(a) The annual payments to a restricted Participant shall be limited
to an amount equal to the payments that would be made on behalf
of such restricted Participant under a single life annuity that
is the Actuarial Equivalent of the sum of the restricted
Participant's Accrued Benefit and other benefits under the Plan
Notwithstanding the foregoing, the restriction set forth in this
Section 8.02 shall not apply in the event that either of the
following requirements is met:
(1) The value of Plan assets equals or exceeds one hundred
ten percent (110%) of the value of the Plan's current
liabilities, as defined under Section 412(l)(7) of the
Code, after payment to a restricted Participant of his
"Benefits" as described in paragraph (b) below; or
(2) The value of "Benefits", as described in paragraph (b)
below, of a restricted Participant is less than one
percent (1%) of the value of the Plan's current
liabilities, as defined in Section 412(1)(7) of the
Code.
For purposes of this Section 8.02, "restricted Participant"
means a Participant or former Participant who is among the
twenty-five (25) highest paid highly compensated employees.
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(Continuation from page 54, effective 1/1/94, Article VIII is amended to read as
follows (First Amendment to the Plan):
(b) "Benefits," for purposes of this Section 8.02, include
loans in excess of the amounts set forth in Section
72(p)(2)(A) of the Code, any periodic income, the value
of any withdrawals made by the Participant, in the event
the Participant is still living, and any death benefits
not provided for by insurance on the Participant's life.
Subsequent pages 56, 57 & 58 will now become blank pages as all other language
is gone as the result of the new amendments.
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ARTICLE IX
AMENDMENT AND TERMINATION
9.01 RIGHT TO AMEND OR TERMINATE
The Employer reserves to itself the right at any time, by action of its
Board, to alter, amend, modify, revoke, or terminate in whole or in part
this Plan, and each Employer, in adopting this Plan, consents to any
such alteration, amendment, modification, revocation or termination. The
Employer, by resolution of the Board, may terminate the Plan with
respect to any or all Employers. Each Employer, by a resolution of its
Board of Directors, may terminate its participation in the Plan. If
the Plan is terminated by fewer than all Employers, it shall continue in
effect for Participants employed by the remaining Employers. Subject
to the provisions of ERISA, and without limiting the general
applicability of the preceding provisions of this section, the Employer
specifically reserves the right to amend the Plan to change:
(a) The requirements of or the dates upon which early or normal
retirement may occur;
(b) The factors and methods used to calculate early retirement
benefits; or
(c) The factors and methods used to calculate benefit options, in
all three (3) cases, to reflect changes in common or customary
practice or in the requirements for receipt of Social Security
benefits;
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provided, however, that no amendment:
(a) Shall have the effect of vesting in the Employer or any Related
Employer any interest in or control of any funds, securities or
other property subject to the terms of the Trust;
(b) Shall authorize or permit at any time any part of the corpus or
income of the Trust Fund to be used for or diverted to purposes
other than for the exclusive benefit of Participants and their
Beneficiaries, except as provided in Section 3.04;
(c) Shall have any retroactive effect as to deprive any Participant,
former Participant or Beneficiary of any benefit already
accrued, save only that no amendment made in conformance with
the provisions of the Code or any other statute relating to
employees' trusts, or of any official regulation or rulings
issued pursuant thereto, shall be considered prejudicial to the
rights of any Participant or Beneficiary; and
(d) Shall eliminate an optional form of benefit or decrease an
Accrued Benefit.
9.02 TERMINATION
(a) It is the expectation of each Employer that it will continue
this Plan and the payment of contributions hereunder
indefinitely, but the continuation of the Plan is not assumed as
a contractual obligation of an Employer, and the right is
reserved by each Employer at any time to discontinue permanently
its contributions
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hereunder. In the event that the Plan is terminated in whole or
in part or if contributions by the Employers are discontinued
completely, the benefits then accrued for all affected
Participants shall be fully vested and nonforfeitable
Notwithstanding the previous sentence, a person shall have
recourse in seeking satisfaction of his benefits against only
the Trust Fund and the PBGC. No Participant or Beneficiary shall
have a claim against any Employer, the Trust or any Plan
fiduciary for any benefit in excess of the amount funded on the
date of the Plan termination.
(b) This Plan may be terminated by the Board at any time, but the
Employer must notify the PBGC of its intention to terminate the
Plan. Such termination shall become effective as set forth in
ERISA.
(c) The funds are to be allocated in such manner as:
(1) To continue benefits which began to be paid three (3)
years before the termination date under the provisions
of the Plan in effect during the five (5) years prior to
termination which would provide the smallest benefit.
Benefits which would be in this category if the
Participant eligible for benefits had elected to begin
receipt of such benefit payments at least three (3)
years prior to the termination shall also be provided;
(2) Then to provide all other insured benefits guaranteed by
the PBGC, including benefits for
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a substantial owner who owns directly or indirectly
more than ten percent (10%) of the Employer's voting
stock;
(3) Then to provide all other nonforfeitable benefits;
(4) Then to provide all other benefits under the Plan; and
(5) Then to provide a return to the Employer of any balance
due to actuarial error if any assets remain after all
liabilities with respect to Participants, former
Participants and Beneficiaries have been satisfied.
This allocation is intended to fulfill the requirements of ERISA, and
assets shall be allocated on the basis of ERISA should the above
provisions and ERISA differ.
9.03 PARTIAL TERMINATION
In the event the Plan is partially terminated, the Participants affected
shall have a nonforfeitable right to the benefits accrued to the date of
the partial termination.
9.04 METHOD OF PAYMENT
Amounts allocated to affected individuals upon termination or partial
termination of the Plan shall be paid through the purchase of annuity
contracts; provided, however, that if the single sum value of an
individual's benefit is three thousand five hundred dollars ($3,500) or
less, payment shall be made in a single sum in cash.
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9.05 NOTICE OF AMENDMENT, TERMINATION, OR PARTIAL TERMINATION
Affected Participants shall be notified of an amendment, termination
or partial termination of the Plan as required by the applicable
provisions of ERISA. In the event that any amendment to the Plan would
change the provisions of Section 4.04 with respect to eligibility for a
nonforfeitable benefit, each Participant who has completed at least
three (3) years of Vesting Service shall be entitled to elect, in
accordance with ERISA, to have his right to a nonforfeitable benefit
computed under the Plan without regard to such amendment.
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ARTICLE X
MISCELLANEOUS
10.01 NO CONTRACT OF EMPLOYMENT
Nothing herein contained shall be construed to constitute a contract
of employment between any Employer and any Employee. The employment
records of the Employers and the Trustee's records shall be final and
binding upon all Employees as to liability and participation.
10.02 MERGER OR CONSOLIDATION OF PLAN, TRANSFER OF ASSETS
Any merger or consolidation of the Plan with another plan or transfer of
Plan assets or liabilities to any other plan shall be effected, in
accordance with such regulations, if any, as may be issued pursuant to
Section 208 of ERISA, in such a manner that each Participant in the Plan
would receive, if the merged, consolidated or transferred plan were
terminated immediately following such event, a benefit which is equal
to or greater than the benefit he would have been entitled to receive if
the Plan had terminated immediately before such event.
10.03 DATA
It shall be a condition precedent to the payment of all benefits under
the Plan that each Participant, former Participant and Beneficiary
must furnish to the Employer such documents, evidence or information as
the Employer considers necessary or desirable for the purpose of
administering the Plan, or to protect the Employer or the Trustee.
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10.04 RESTRICTIONS UPON ASSIGNMENTS AND CREDITORS' CLAIMS
Except as otherwise provided in the Plan, no Participant, former
Participant or any Beneficiary, or the estate of any such person, shall
have the power to assign, pledge, encumber or transfer any interest in
the Trust Fund while the same shall be in possession of the Trustee. Any
such attempt at alienation shall be void. No such interest shall be
subject to attachment, garnishment, execution, levy or any other legal
or equitable proceeding or process, and any attempt to do so shall be
void. The preceding shall apply also to the creation, assignment or
recognition of any right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is
determined to be a qualified domestic relations order, as defined in
Section 414(p) of the Code. A domestic relations order entered before
January 1, 1985 will be treated as a qualified domestic relations order
if payment of benefits pursuant to the order has commenced as of such
date and may be treated as a qualified domestic relations order if
payment of benefits has not commenced as of such date, even though the
order does not satisfy the requirements of Section 414(p) of the Code.
10.05 RESTRICTION OF CLAIMS AGAINST TRUST FUND
The Trust Fund under this Plan and Trust Agreement from its inception
shall be a separate entity aside and apart from each Employer and its
assets. The Trust and the corpus and income there of shall in no event
and in no manner whatsoever be subject to the rights or claims of any
creditor of an Employer. Neither the establishment of the Trust Fund,
the modification thereof, the creation of any fund or account nor
the payment of any benefits shall be construed as giving any Participant
or any other person
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whomsoever any legal or equitable rights against an Employer or the
Trustee unless the same shall be specifically provided for in this Plan.
10.06 BENEFITS PAYABLE BY TRUST FUND
All benefits payable under the Plan shall be paid or provided for solely
from the Trust Fund, and the Employer assumes no liability or
responsibility therefor.
10.07 SUCCESSOR TO EMPLOYER
In the event that any successor to an Employer, by merger,
consolidation, purchase or otherwise, shall elect to adopt the Plan,
such successor shall be substituted hereunder for that Employer upon
filing in writing with the Trustee its election to do so.
10.08 APPLICABLE LAW
The Plan shall be construed and administered in accordance with ERISA,
and any judicial review thereunder shall be governed by the "arbitrary
and capricious" standard, and with the laws of the Commonwealth of
Pennsylvania, to the extent that such laws are not preempted by ERISA.
10.09 INTERNAL REVENUE SERVICE APPROVAL
This amendment and restatement of the Plan shall be effective as of
September 1, 1989 provided that the Employer shall obtain a favorable
determination letter from the Internal Revenue Service that this Plan
and the related Trust Agreement qualify under Sections 401(a) and
501(a) of the Code, as amended. Any modification or amendment of this
Plan may be made retroactive as necessary or appropriate in order to
secure or maintain such qualification.
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ARTICLE XI
TOP-HEAVY PROVISIONS
11.01 GENERAL
Notwithstanding anything herein to the contrary, the following
provisions shall apply with respect to any Plan Year in which the Plan
is deemed to be Top-heavy.
11.02 DEFINITIONS
DETERMINATION DATE
With respect to any Plan Year, the last calendar day of the immediately
preceding Plan Year, or, in the case of the first Plan Year, the last
calendar day of the first Plan Year.
KEY EMPLOYEE
Any Employee or former Employee (and the Beneficiaries of such Employee)
who at any time during the Plan Year or any of the four (4) immediately
preceding Plan Years (or, if fewer, the total number of Plan Years
during which the Plan has been in effect) is
Effective 1/1/94, Paragraph (a) of the definition of "Key Employee" in Section
11.02 is amended to read as follows (First Amendment to the Plan):
(a) An officer of an Employer or a Related Employer who has
an annual compensation in excess of fifty percent (50%)
of the dollar limitation under Section 415(b)(1)(A) of
the Code for such Plan Year.
(b) An owner (or considered an owner under Section 318 of the Code)
of one (1) of the ten (10) largest interests
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in an Employer or a Related Employer if such individual's
compensation exceeds the dollar limitation under Section
415(c)(1)(A) of the Code;
(c) A, five percent (5%) owner of an Employer; or
(d) A one percent (1%) owner of an Employer who has an annual
compensation in excess of one hundred fifty thousand dollars
($150,000).
An officer is defined as an actual officer of an Employer or a Related
Employer, provided that not more than the greater of three (3) Employees
or ten percent (10%) of the Employees (but in no event more than fifty
(50) Employees) shall be considered as officers in determining whether
a plan is Top-heavy.
NON-KEY EMPLOYEE
Any Employee who is not included in the definition of Key Employee.
TOP-HEAVY PLAN
For any Plan Year, this Plan is Top-heavy if any of the following
conditions exist:
(a) If the Top-heavy Ratio for this Plan exceeds sixty percent
(60%) and this Plan is not a part of any Required Aggregation
Group or Permissive Aggregation Group of plans.
(b) If this Plan is a part of a Required Aggregation Group of plans
(but is not a part of a Permissive Aggregation
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Group of plans) and the Top-heavy Ratio for the group of plans
exceeds sixty percent (60%).
(c) If this Plan is a part of a Required Aggregation Group of plans
and a part of a Permissive Aggregation Group of plans and the
Top-heavy Ratio for the Permissive Aggregation Group of plans
exceeds sixty percent (60%).
TOP-HEAVY RATIO
(a) If an Employer maintains one (1) or more defined benefit plans
and an Employer has never maintained any defined contribution
plans (including any simplified employee pension plan) which,
during the five (5) year period ending on the Determination
Date, has or has had account balances, the Top-heavy Ratio for
this Plan alone or for the Required or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator of which
is the sum of the Present Value of accrued benefits of all Key
Employees under the aggregated defined benefit plans as of the
Determination Date (including any part of any accrued benefit
distributed in the five (5) year period ending on the
Determination Date), and the denominator of which is the sum of
the Present Value of all accrued benefits (including any part of
any accrued benefit distributed in the five (5) year period
ending on the Determination Date) of all Participants as of the
Determination Date, both computed in accordance with Section
416 of the Code. The numerator and denominator of the Top-heavy
Ratio shall be adjusted to reflect any contribution not
actually made as of the Determination Date, but which is
required to be taken into account on that date under Section 416
of the Code.
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(b) If an Employer maintains or has maintained one (1) or more
defined benefit plans and an Employer maintains or has
maintained one (1) or more defined contribution plans (including
any simplified employee pension plan) which, during the five (5)
year period ending on the Determination Date, has or has had any
account balances, the Top-heavy Ratio for any Required or
Permissive Aggregation Group, as appropriate, is a fraction,
the numerator of which is the sum of the account balances under
the aggregated defined contribution plans for all Key Employees
as of the Determination Date and the Present Value of accrued
benefits under the aggregated defined benefit plans for all Key
Employees as of the Determination Date, and the denominator of
which is the sum of the account balances under the aggregated
defined contribution plans for all Participants and the Present
Value of accrued benefits under the aggregated defined benefit
plans for all Participants as of the Determination Date,
determined in accordance with Section 416 of the Code. Both the
numerator and denominator of the Top-heavy Ratio shall be
adjusted for any distribution of an account balance or accrued
benefit made in the five (5) year period ending on the
Determination Date and any contributions due but unpaid as of
the Determination Date.
(c) For purposes of (a) and (b) above, the value of account balances
and the Present Value of accrued benefits shall be determined as
of the most recent Valuation Date occurring within the twelve
(12) month period ending on the Determination Date, except as
provided in Section 416 of the Code for the first and second
Plan Years of a defined benefit plan. The accrued benefits of
Non-key
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Employees shall be determined under the method which is used for
accrual purposes for all plans of the Employer or, if there is
no such method, then as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional
accrual rate of Code Section 411(b)(1)(C). The account balances
and accrued benefits of a Participant who is not a Key Employee
but who was a Key Employee in a prior year or, effective for
Plan Years beginning on or after September 1, 1985, who has not
performed services for the Employer at any time during the five
(5) Plan Year period ending on the Determination Date shall be
disregarded. The calculation of the Top-heavy Ratio and the
extent to which distributions, rollovers and direct transfers
are taken into account will be made in accordance with Section
416 of the Code. When aggregating plans, the value of account
balances and accrued benefits will be calculated with reference
to the Determination Dates that fall within the same calendar
year.
PERMISSIVE AGGREGATION GROUP
The Required Aggregation Group of plans plus any other plan or plans of the
Employer or a Related Employer which, when considered as a group with the
Required Aggregation Group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
REQUIRED AGGREGATION GROUP
(a) Each qualified plan of the Employer or a Related Employer in which at
least one (1) Key Employee participates; and
-71-
<PAGE> 86
(b) Any other qualified plan of the Employer or a Related Employer
which enables a plan described in (a) to meet the requirements
of Section 401(a)(4) or 410 of the Code.
PRESENT VALUE
Present Value will be determined on the basis of the actuarial assumptions then
being used for funding purposes.
VALUATION DATE
The same Valuation Date used for computing Plan costs for minimum funding,
regardless of whether an actuarial valuation is performed that year.
11.03 MINIMUM ACCRUED BENEFIT
(a) Notwithstanding any other provision in this Plan except
subparagraphs (c) and (e) below, for any Plan Year in which this
Plan is Top-heavy, each Participant who is not a Key Employee
and who has completed one thousand (1,000) Hours of Service will
accrue a benefit (to be provided solely by Employer
contributions and expressed as a life annuity commencing at
Normal Retirement Date) of not less than two percent (2%) of his
highest average compensation for the five (5) consecutive years
for which the Participant had the highest compensation. The
minimum accrual is determined without regard to any Social
Security contribution. The minimum accrual applies even though
under other Plan provisions the Participant would not
otherwise be entitled to receive an accrual, or would have
received a lesser accrual for the
-72-
<PAGE> 87
year because the Non-key Employee's compensation is less than a
stated amount, the Non-key Employee is not employed on the last
day of the accrual computation period or the Plan is integrated
with Social Security.
(b) For purposes of computing the minimum accrued benefit,
compensation will mean compensation as defined in Section 4.09
of the Plan.
(c) No additional benefit accruals shall be provided pursuant to
(a) above to the extent that the total accruals on behalf of the
Participant attributable to Employer contributions will provide
a benefit expressed as a life annuity commencing at Normal
Retirement Date that equals or exceeds twenty percent (20%)
of the Participant's highest average compensation for the five
(5) consecutive years for which the Participant had the highest
compensation.
(d) If the form of benefit is other than a life annuity, the
Employee must receive an amount that is the Actuarial Equivalent
of the minimum life annuity benefit. If the benefit commences at
a date other than at Normal Retirement Date, the Employee must
receive at least an amount. that is the Actuarial Equivalent of
the minimum life annuity benefit commencing at Normal Retirement
Date.
(e) The provisions in (a) above shall not apply to any Participant
to the extent that the Participant is covered under any other
plan or plans of the Employer and the Employer has provided that
the minimum benefit requirement applicable to this Top-heavy
Plan will be met in the other plan or plans.
-73-
<PAGE> 88
(f) The minimum accrued benefit required (to the extent required to
be nonforfeitable under Section 416(b) of the Code) may not be
forfeited or suspended under Section 411(a)(3)(B) or Section
411(a)(3)(D) of the Code.
11.04 VESTING REQUIREMENTS
With respect to any Plan Year that the Plan is a Top-heavy plan, the
Plan shall have the following vesting schedule:
<TABLE>
<CAPTION>
Years of Service
for Vesting Vested Percentage
----------------- -----------------
Less than 2 years 0%
<S> <C>
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years or more 100%
</TABLE>
The minimum vesting schedule applies to all benefits within the meaning
of Section 411(a)(7) of the Code except those attributable to employee
contributions, including benefits accrued before the effective date of
Section 416 of the Code and benefits accrued before the Plan became
Top-heavy. Further, no reduction in vested benefits may occur in the
event the Plants status as Top-heavy changes for any Plan Year. However,
this Section does not apply to the Accrued Benefits of any Employee who
does not have an Hour of Service after the Plan has initially become
Top-heavy, and such Employee's Accrued Benefits attributable to Employer
contributions will be determined without regard to this section.
This minimum vesting schedule applies only to the extent that it
provides more favorable vesting than the vesting schedule provided in
Section 4.04.
-74-
<PAGE> 89
11.05 SPECIAL 415 LIMITATIONS
For purposes of Section 4.08, in any Plan Year in which the Plan is
deemed to be a Top-heavy plan, the number 1.25 shall be replaced by
the number 1.0 to the extent required under Code Section 416(h);
provided, however, that such adjustment will not occur if the Top-heavy
Ratio does not exceed ninety percent (90%) and additional benefits are
provided for Non-key Employees in accordance with the provisions of
Section 416(h)(2)(A) and Section 416(h)(2)(B) of the Code. In such case,
the minimum accrued benefit provided in Section 11.03(a) shall be
increased to three percent (3%) of the Participant's average
compensation for the five (5) consecutive years for which the
Participant had the highest compensation and the maximum accrual
provided in Section 11.03(c) shall be increased to thirty percent (30%).
-75-
<PAGE> 1
Exhibit 10.15
SUPPLEMENTAL PENSION PLAN A
---------------------------
APPLICABLE TO
KEY EXECUTIVES
OF
WERNER HOLDING CO. (DE), INC., ITS PARENT AND ITS SUBSIDIARIES
AMENDED JULY 24, 1992
---------------------
1) PURPOSE:
a) To recognize unusual dedication, significant additional
longevity, superb effort, and outstanding personal
contributions of key executives.
b) To reward deserving elected key executives for outstanding
contributions to the Company's growth, success and profits.
c) To provide a method to compensate for unusual situations which
may develop under the qualified Retirement Plan for Salaried
Employees of the Company due to changes made from time to time
in the plan, limitations imposed on the administration of the
plan by ERISA, employment past age 65, significant longevity,
inflation and other factors.
d) To supplement the Company's qualified Retirement Plan for
Salaried Employees with a Supplemental Pension Plan, as
hereinafter set forth.
2) ELIGIBILITY:
For the purpose of this Supplemental Pension Plan, effective retroactively to
March 21, 1980, key executives shall be defined as members of the Company's
Management Committee, or its predecessor Executive Committee, not covered under
another Supplemental Pension Plan, whose years of service (N3) on the Management
Committee, or its predecessor Executive Committee, were at least 10 years.
Effective January 1, 1989, eligibility shall be further subject to periodic
specific designation by the Board of Directors of the Company of the individual
employee involved.
Service with Werner Holding Co. (DE), Inc., its parent Werner Holding Co. (PA),
Inc., or any of its subsidiaries shall satisfy the appropriate service
requirement provided, however, that each participating subsidiary must adopt
this Plan first. Service credit earned with different participating companies
shall be aggregated together to satisfy the necessary service requirements of
the Plan.
3) GENERAL:
a) The gross pension paid to any key executive shall consist of
any Retirement Benefit earned by the key executive under the
Retirement Plan for Salaried Employees of the Company and the
supplemental pension granted that individual hereunder.
-1-
<PAGE> 2
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
b) The Retirement Benefit shall be paid to the key executive by
the Affiliated National Bank-Boulder, Boulder, Colorado, or
any successor trustee, in accordance with the Retirement Plan
for Salaried Employees of the Company.
c) The supplemental pension shall be paid directly to the key
executive by the Company. This Supplemental Pension Plan is an
unfunded plan of deferred compensation, and the benefits
hereunder shall be paid from the general assets of the
Company.
d) Except as hereafter provided otherwise, the supplemental
pension shall be paid during the remaining lifetime of the key
executive upon retirement, commencing simultaneously with the
later of (1) payment of his Retirement Benefit under the
Retirement Plan for Salaried Employees of the Company or (2)
the first of the month next following the Effective Date.
e) In the event that a key executive dies while in the employ of
the Company and prior to his retirement, that portion of the
supplemental pension related to the full benefit supplement
(P2) shall be paid to his spouse or appropriate beneficiaries.
f) For each month that the individual remains eligible hereunder,
one-twelfth (1/12) of the yearly amount of the supplemental
pension shall be paid on the first business day of that month,
during the lifetime of the pensioner.
g) The supplemental pension shall terminate with the payment for
the month in which the death of the pensioner occurs except in
the event Sections 3(e), 3(n) and 4 (d) apply.
h) In the case of a supplemental pension payable because of the
key executive's early retirement, the supplemental pension
hereunder shall be actuarially reduced to reflect commencement
prior to normal retirement under the Retirement Plan for
Salaried Employees. Such actuarial reduction shall be at a
rate which is one-half (1/2) of the rate of actuarial
reduction applicable under the Retirement Plan for Salaried
Employees in the case of such early retirement.
i) In the case of a supplemental pension payable because of the
key executive's disability retirement, there shall be no
actuarial reduction of the supplemental pension hereunder to
reflect commencement prior to normal retirement under the
Retirement Plan for Salaried Employees. The payment of
supplemental pension benefits in the case of a disability
retirement shall continue only so long as the otherwise
eligible individual continues to be disabled, as determined
under the Retirement Plan for Salaried Employees.
-2-
<PAGE> 3
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
j) Supplemental pension benefits shall not be contingent upon any
pensioner performing any consulting services for the Company
after retirement, nor shall any pensioner be required to do
so.
k) To be eligible for a supplemental pension, and to maintain
continued eligibility, under this Supplemental Pension Plan,
each key executive shall execute and comply with the terms of
a Non-Compete Agreement in the form attached hereto as Exhibit
A. Non-compliance with the terms of the Non-Compete Agreement,
as determined by the Board of Directors, shall result in the
loss of all benefits hereunder.
1) In the event a retired key executive again becomes an employee
of the Company, such person's benefit payments hereunder shall
be suspended for the duration of such re-employment. Upon
subsequent retirement, the benefit payments hereunder shall be
recomputed to give credit for such period of re-employment and
the compensation earned during such re-employment. Provided,
however, that, (except in the case of an individual returning
from disability retirement, unless such subsequent retirement
is again because of disability) if such recomputation would
result in the payment of a lesser benefit than the benefit
which was suspended, the benefit which was suspended will
again be payable upon subsequent retirement.
m) Notwithstanding any other clause herein contained, benefits
payable under this Plan shall not be duplicated in any way
either with respect to this Plan or any other Plan funded by
the Company, its parent, Werner Holding Co. (PA), Inc. or any
of its subsidiaries.
n) Notwithstanding any other clause herein contained, that part
of the supplemental pension which represents the full benefit
supplement (P2), see Section 4(d)) shall be paid to the
designated beneficiary under the Qualified Pension Plan, if
the key executive is otherwise eligible but dies while in the
Company's employ rather than after retirement.
o) It is intended that the Supplemental Pension Plan be
appropriately coordinated with the latest version of the
Qualified Pension Plan. Therefore, in interpreting the
Supplemental Plan any necessary adjustments to reflect
references to the latest version of the Qualified Pension Plan
shall be made. However, the intentions of the Supplemental
Plan shall be maintained with any questions to be resolved in
accordance with Section 12.
-3-
<PAGE> 4
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
4) SUPPLEMENTAL PENSION:
a) A special pension calculation shall be prepared appropriately
timed to the retirement date of a key executive using the
adjustment factors hereinafter outlined. This calculated
special pension shall become that individual's supplemental
pension hereunder.
b) The supplemental pension for key executives shall include:
(1) Full service credit at 1.5% for service beyond both
30 and 35 years (P1) See 4(c).
(2) A full benefit supplement where benefits under the
Retirement Plan for Salaried Employees are
statutorily limited (P2) - See 4(d).
(3) A special service adjustment in the case of
disability and early retirements (P3) - See 4(e).
c) The Supplemental Pension Plan shall include credit at the rate
of 1.5% of average earnings (5) for all years of credited
service beyond 30 years, with no limit to the maximum years of
service. In contract, the Retirement Plan for Salaried
Employees provides for credit at the rate of 1% of Covered
Compensation (C.C.) and 1.5% of average earnings (S) in excess
of covered compensation (C.C.) for a maximum of 35 years of
service plus credit for post 35 years service at 1% of
average earnings (S). "Average Earnings", "Covered
Compensation" and "Credited Service" shall be as defined in
the Retirement Plan for Salaried Employees.
Therefore:
P1 = [0.5% x (C.C.)] x N1B + [0.5% x (S)] x N greater than 35
= $/Yr.
NIB = N1 - 30 Where 30 less than or equal to
N1 but for these purposes N1 is
limited to a maximum of 35.
N greater than 35 = N1 - 35 Where N1 greater than or equal
to 35 Years Service
-4-
<PAGE> 5
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
d) The supplemental pension benefit shall include a full benefit
supplement when a key executive's benefit under the Retirement
Plan for Salaried Employees is limited by any statutorily
imposed maximum benefit limitation applying to such Plan. The
full benefit supplement shall be equal to the difference
between the benefit which would be paid under such Plan
without application of the maximum benefit limitation and the
benefit actually being paid under such Plan as a result of
application of the maximum benefit limitation.
Therefore: P2 = PE - P
The full benefit supplement (P2) shall be provided to those
eligible key executives upon their retirement or to their
beneficiaries in the event of their death while in the employ
of the Company prior to retirement. The purpose of this
benefit (P2) is to insure that such key executives receive the
full amount of their qualified pension despite the limitations
imposed by Federal statutes. For purposes of implementation,
the beneficiaries shall be those designated by the key
executive under the Retirement Plan for Salaried Employees, or
in the absence of such specific designation the rules of said
Plan shall apply.
e) The supplemental pension for a key executive who takes a
disability retirement or early retirement under the terms of
the Retirement Plan for Salaried Employees shall include a
special service adjustment to recognize the additional years
of credited service (N1E) such person would have had if he
would have worked until attainment of age sixty-five (65)
rather than taking disability retirement or early retirement.
To be eligible the minimum credited service (N1) shall be 25
years and the minimum service as a key executive (N2) shall be
10 years.
Therefore: P3 = [(1% x C.C.) + 1.5% x (S - C.C.)] N1E = $/Yr.
N1E = N1D - N1
f) The total supplemental pension for key executives (PSC) shall
be the sum of the aforesaid adjustments in 4(c) and, where
applicable, 4(d) and 4(e), where PSC = P1 and, where
applicable, + P2 + P3.
5) FORMULAE & DEFINITIONS:
Company - "Company" shall mean Werner Holding Co. (DE), Inc.,
its parent, Werner Holding Co. (PA), Inc., and/or any
participating subsidiary Company. Any subsidiary which adopts
this Plan shall be deemed a participating subsidiary Company.
-5-
<PAGE> 6
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
C.C. - Covered compensation as defined and established from
time to time by the Social Security Administration.
N1 - Years of credited service as defined in the
Retirement Plan for Salaried Employees.
N less than 35 - Years-of credited service limited to a
maximum of thirty-five (35) years.
N less than 35 = N1 where N1 less than or equal to 35
N1B - Years of credited service in excess of thirty (30)
years and not more than thirty-five (35) years.
N1B = N1 - 30 where 30 less than or equal to N1 but
for these purposes N1 is limited to 35
Otherwise N1B = 0
N greater than 35 - Years of credited service in excess of
thirty-five (35) years.
N greater than 35 = N1 - 35 where 35 is less than or
equal to N1
Otherwise N greater than 35 = 0
N1D - Total years of credited service a key executive
would have had under the Retirement Plan for
Salaried Employees if he had worked until attaining
age sixty-five (65) rather than taking a disability
retirement or early retirement.
N1E - The additional years of credited service a key
executive would have had under the Retirement Plan
for Salaried Employees if he had worked until
attaining age sixty-five (65) rather than taking a
disability retirement or early retirement.
N1E = N1D - N1
N3 - Years of service as a member of the Company's
Management Committee.
P - Annual pension benefit payment under the Retirement
Plan for Salaried Employees pension benefit annual
payment, subject to applicable statutorily imposed
maximum benefit limitation.
-6-
<PAGE> 7
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
P = (1% x C.C.) x N less than 35 + 1.5% (S - C.C.) x
N less than 35 + (1% x S) x N greater than 35 = $/Yr. but
limited to the applicable statutorily imposed maximum
benefit limitation under applicable IRS regulations.
P1 - Supplemental pension adjustment to reflect full
service maximum 1-1/2% benefit credit for post thirty
(30) and thirty-five (35) years service.
P1 = [0.5% x C.C.] x N1B + [0.5% x S] x
N greater than 35 = $/Yr.
P2 - Supplemental pension adjustment to reflect full
benefit supplement where benefits under the
Retirement Plan for Salaried Employees are subject to
a statutorily imposed maximum benefit limitation.
P2 = PE - P
P3 - Supplemental pension adjustment to reflect special
service adjustment for disability retirement or early
retirement.
P3 = (1% x C.C.) x N1E + [1.5% x (S - C.C.)] x
N1E = $/Yr.
PE - Annual pension benefit payment under the Retirement
Plan for Salaried Employees without regard to the
statutorily imposed maximum benefit limitation.
PE = (1% x C.C.) x N less than 35 + [1.5% x (S - C.C.)]
x N less than 35 + [1% x S] x N greater than 35 = $/Yr.
N less than 35 = N1 where N1 less than or
equal to 35 years service
N greater than 35 = N1 - 35 where N1 = years
service
PSC - Total supplemental pension for key executives.
PSC = P1 and, where applicable + P2 and + P3
S - Average earnings based on the method used in the
Retirement Plan for Salaried Employees using the best
three (3) consecutive full years out of the last ten
(10) years before retirement.
-7-
<PAGE> 8
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
6) CONSULTING ASSIGNMENTS:
a) From time to time the Company may offer and a
pensioner covered by this Supplemental Pension Plan
may undertake consulting assignments.
b) The specific assignment, remuneration, and the
compensable time involved, shall be established as
the need arises.
c) A pensioner is under no obligation to accept such an
assignment, but may elect to do so at his option. The
acceptance of such an assignment shall not affect the
right to continue to receive benefits hereunder and
shall not affect the amount of such benefits.
7) NON-COMPETE AGREEMENT:
a) As a condition precedent to the receipt of any
benefit payments hereunder, a key executive shall be
required to execute and comply with a Non-Compete
Agreement in the form attached hereto as Exhibit A.
b) If the Board of Directors determines that an
individual has violated any provision of the
Non-Compete Agreement, such violation will result in
the immediate forfeiture of his supplemental pension
benefits under this Supplemental Pension Plan.
8) Actions Resulting in Forfeiture of Rights and Interest
Hereunder
Notwithstanding any other provision of this Supplemental
Pension Plan to the contrary, if the Board of Directors
determines that any key executive or former key executive has
committed any act against or infidelity with respect to the
interests of the Company or has been convicted for the
commission of an illegal act, all such person's rights and
interests in and to any payments under this Supplemental
Pension Plan shall be terminated and forfeited.
9) Effect of This Plan
a) Neither the establishment of this Supplemental
Pension Plan nor the payment of any benefit hereunder
shall be construed as giving any key executive or
other person any legal or equitable right against the
Company, any employee or owner thereof, or the Board
of Directors, except as specifically provided herein.
-8-
<PAGE> 9
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
b) Neither the establishment of this Supplemental
Pension Plan nor the payment of any benefit hereunder
shall be construed as a contract of continuing
employment or give any key executive or other
employee of the Company any right to be retained in
the service of the Company. Said individuals remain
subject to discharge or severance to the same extent
as if this Supplemental Pension Plan were never
adopted.
10) Amendment and Termination
a) This Supplemental Pension Plan may be amended from
time to time and at any time, in whole or in part, by
action of the Board of Directors. Except as
hereinafter provided, any such amendment may be made
retroactive and any amendment shall be made effective
as of the date set forth in such amendment; provided,
however, that, except to the extent specifically set
forth in such amendment (and then only to the extent
necessary to comply with any applicable law or to
increase a benefit then in pay status), no such
amendment shall affect any benefit in pay status at
the time the amendment is adopted.
b) This Supplemental Pension Plan may be terminated at
any time by action of the Board of Directors. No such
termination shall affect any benefit in pay status at
the time the Board of Directors approves such
termination. However, upon termination of the Plan,
the Company, at its sole option, shall have the right
to make a lump sum payment to any pensioner of the
actuarial value of the future. payments of the
benefits then in pay status.
11) Spendthrift Clause:
None of the payments hereunder shall be subject to the claim
of any creditor of any key executive, and to the fullest
extent permitted by law shall be free from any attachment,
garnishment or other legal or equitable process. No key
executive shall have any right to alienate, anticipate,
commute, pledge, encumber or assign any benefit payable
hereunder, and the Company shall not be under any duty to
honor any such action.
-9-
<PAGE> 10
SUPPLEMENTAL PENSION PLAN A AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
12) Interpretations:
a) When necessary the Board of Directors of the Company
shall issue interpretations and rulings concerning
the application and meaning of any provision of this
Supplemental Pension Plan and such interpretations
and rulings shall be conclusive and binding on all
parties with any interest herein. To the extent the
application of any law becomes relevant, this
Supplemental Pension Plan shall be construed and
administered according to the laws of the
Commonwealth of Pennsylvania.
b) Whenever any words are used herein in the masculine,
where applicable they shall be construed as though
they were also used in the feminine or neuter, and
whenever any words are used herein in the singular or
plural, where applicable they shall also be construed
as though they were also used in the plural or
singular.
-10-
<PAGE> 11
EXHIBIT "A"
-----------
NON-COMPETE AGREEMENT
THIS NON-COMPETE AGREEMENT is entered into as of the _____ day of , 19__
by and between _______________________ (the "Company") and _____________________
(the "Employee").
WHEREAS the Company has adopted Supplemental Pension Plan A for
Key Executives of the Company (the "Plan") and
WHEREAS the Plan expressly provides that as a condition precedent to the
receipt of any benefit payments under the Plan an eligible key executive must
execute and comply with an agreement in the form hereof and
WHEREAS the Employee is eligible for benefit payments under the Plan:
NOW THEREFORE this Agreement witnesseth that, for good and valuable
consideration receipt of which is hereby acknowledged and intending to be
legally bound hereby, and as an inducement to the Company to make benefit
payments under the Plan to the Employee, the Company and the Employee agree as
follows:
1. The Company shall make benefit payments under and in accordance with
the provisions of the Plan to the Employee so long as the Employee complies with
the provisions of this Agreement and so long as the Employee's rights and
interests in and to any payments under the Plan have not been terminated or
forfeited.
2. The Employee shall not, for a period of five years after the day and
year first above written, without the express prior written consent of the
Company engage, directly or indirectly (as officer, director, owner, employee,
agent, consultant, partner or other participant whatsoever), in any activity in
competition with the Company nor shall the Employee at any time reveal to any
individual person, firm, corporation, partnership, joint venture or other
<PAGE> 12
entity any of the Company's trade secrets, private processes, confidential
records, confidential documents, customer lists or other confidential
information. If the Board of Directors of the Company determines that the
Employee is in violation of this Agreement the Company shall so notify the
Employee. If within fourteen (14) days following such notification the Employee
has not ceased and desisted the activity which the Board of Directors has
determined to be in violation of this Agreement the Employee's rights and
interests in and to any payments under the Plan shall be terminated and
forfeited.
3. This Agreement has been executed and delivered in the Commonwealth of
Pennsylvania and for all purposes shall be construed and enforced in accordance
with the laws of said Commonwealth.
IN WITNESS WHEREOF the Company and the Employee have executed and
delivered this Agreement as of the day and year first above written.
Attest: ___________________________________________
(Company Name)
By
________________________________ _________________________________________
Secretary Title:
(Corporate Seal) _______________________(Seal)
EMPLOYEE
-2-
<PAGE> 1
EXHIBIT 10.16
SUPPLEMENTAL PENSION PLAN B
---------------------------
APPLICABLE TO
ELECTED SALARIED CORPORATE OFFICERS
OF
WERNER HOLDING CO. (DE), INC., ITS PARENT AND ITS SUBSIDIARIES
AMENDED JULY 24, 1992
---------------------
Section 1 - Purpose:
- --------------------
a) To recognize unusual dedication, significant additional longevity,
superb effort, and outstanding personal contributions of elected
salaried Corporate officers.
b) To reward deserving elected salaried Corporate officers for outstanding
contributions to the Company's growth, success and profits.
c) To provide a method to compensate for unusual situations which may
develop under the qualified Retirement Plan for Salaried Employees of
the Company due to changes made from time to time in the plan,
limitations imposed on the administration of the plan by ERISA,
employment past age 65, significant longevity, inflation and other
factors.
d) To supplement the Company's qualified Retirement Plan for Salaried
Employees with a Supplemental Pension Plan, as hereinafter set forth.
Section 2 - Eligibility:
- ------------------------
Effective March 21, 1980, all elected salaried Corporate officers actively
employed on the Effective Date or elected salaried Corporate officers
retired prior to the Effective Date and, in both cases, whose years of
service (N2) as an elected salaried Corporate officer were at least 10
years.
Effective January 1, 1986, all elected salaried Corporate officers actively
employed on the Effective Date, Elected Salaried Corporate officers employed
after the Effective date, or elected salaried Corporate officers retired
prior to the Effective Date and, in each case, whose years of service (N2)
as an elected salaried Corporate officer were at least 10 years.
Effective January 1, 1989, eligibility shall be further subject to periodic
specific designation by the Board of Directors of the Company of the
individual employee involved.
Effective January 1, 1992, eligibility for the Inflation Adjustment shall be
limited to those retired elected salaried corporate officers participating
in this Supplemental Pension Plan B who have also served as a corporate
director of Werner Holding Co. (DE), Inc., its parent or its subsidiaries
for an aggregate length of total directorship service of not less than ten
years. Service as either an inside director (ie, while as corporate
employee) or an outside director shall satisfy this requirement.
-1-
<PAGE> 2
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(CONTINUED)
For the purpose of this Supplemental Pension Plan, elected salaried
Corporate officers shall be defined as those individuals who have held
or hold the positions of Chairman or Vice-Chairman of the Board of
Directors, President, any Corporate Vice-President, but shall not
include any Assistant Vice-Presidents, Secretaries or Assistant
Secretaries, Treasurers or Assistant Treasurers or any
Non-Corporate-Level Vice-Presidents. Applicable service with Werner
Holding Co. (DE), Inc., its parent, Werner Holding Co. (PA), Inc. and/or
any of its subsidiaries shall satisfy the appropriate service
requirement provided, however, that each participating subsidiary must
adopt this Plan first. Service credit earned with different
participating companies shall be aggregated together to satisfy the
necessary service requirements of the Plan.
Section 3 - General:
- --------------------
a) The gross pension paid to any elected salaried Corporate officer
shall consist of any Retirement Benefit earned by the elected
salaried Corporate officer under the Retirement Plan for Salaried
Employees of the Company and the supplemental pension granted that
individual hereunder.
b) The Retirement Benefit shall be paid to the elected salaried
Corporate officer by the Affiliated National Bank-Boulder, Boulder,
Colorado, or any successor trustee, in accordance with the
Retirement Plan for Salaried Employees of the Company.
c) Except as hereafter provided otherwise, the supplemental pension
shall be paid directly to the elected salaried Corporate officer by
the Company. This Supplemental Pension Plan is an unfunded plan of
deferred compensation, and the benefits hereunder shall be paid from
the general assets of the Company.
d) Except as hereafter provided otherwise, the supplemental pension
shall be paid during the remaining lifetime of the elected salaried
Corporate officer upon retirement, commencing simultaneously with
the later of (1) payment of his Retirement Benefit under the
Retirement Plan for Salaried Employees of the Company or (2) the
first of the month next following the Effective Date.
e) In the event that an elected salaried Corporate officer dies while
in the employ of the Company and prior to his retirement, that
portion of the supplemental pension related to the full benefit
supplement (P3) shall be paid to his spouse or appropriate
beneficiaries.
f) For each month that the individual remains eligible hereunder,
one-twelfth (1/12) of the yearly amount of the supplemental pension
shall be paid on the first business day of that month, during the
lifetime of the pensioner.
-2-
<PAGE> 3
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(CONTINUED)
g) Except as provided in Section 13 hereof, the supplemental pension
shall terminate with the payment for the month in which the death of
the pensioner occurs.
h) In the case of a supplemental pension payable because of the elected
salaried Corporate officer's early retirement, the supplemental
pension hereunder shall be actuarially reduced to reflect
commencement prior to normal retirement under the Retirement Plan
for Salaried Employees. Such actuarial reduction shall be at a rate
which is one-half (1/2) of the rate of actuarial reduction
applicable under the Retirement Plan for Salaried Employees in the
case of such early retirement.
i) In the case of a supplemental pension payable because of the elected
salaried Corporate officer's disability retirement, there shall be
no actuarial reduction of the supplemental pension hereunder to
reflect commencement prior to normal retirement under the Retirement
Plan for Salaried Employees. The payment of supplemental pension
benefits in the case of a disability retirement shall continue only
so long as the otherwise eligible individual continues to be
disabled, as determined under the Retirement Plan for Salaried
Employees.
j) Supplemental pension benefits shall not be contingent upon any
pensioner performing any consulting services for the Company after
retirement, nor shall any pensioner be required to do so.
k) To be eligible for a supplemental pension, and to maintain continued
eligibility, under this Supplemental Pension Plan, each elected
salaried Corporate officer shall execute and comply with the terms
of a Non-Compete Agreement in the form attached hereto as Exhibit A.
Non-compliance with the terms of the Non- Compete Agreement, as
determined by the Board of Directors, shall result in the loss of
all benefits hereunder.
l) In the event a retired elected salaried Corporate officer again
becomes an employee of the Company, such person's benefit payments
hereunder shall be suspended for the duration of such re-employment.
Upon subsequent retirement, the benefit payments hereunder shall be
recomputed to give credit for such period of re-employment and the
compensation earned during such re-employment. Provided, however,
that, (except in the case of an individual returning from disability
retirement, unless such subsequent retirement is again because of
disability) if such recomputation would result in the payment of a
lesser benefit than the benefit which was suspended, the benefit
which was suspended will again be payable upon subsequent
retirement.
Provided, further, that the benefit of an elected salaried Corporate
officer whose benefit prior to re-employment had been paid in a
joint and survivor option form shall continue to be paid in such
form upon subsequent retirement. In the event
-3-
<PAGE> 4
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(CONTINUED)
such elected salaried Corporate officer dies while re-employed and
prior to subsequent retirement, his spouse shall be eligible to
receive the survivor benefit she would have received under the joint
and survivor option previously in effect as if the elected salaried
Corporate officer's subsequent retirement had occurred on his date
of death. However, in the event such elected salaried Corporate
officer's spouse dies prior to his subsequent retirement, upon
subsequent retirement his recomputed benefit will be paid in the
normal form unless he is again married at subsequent retirement, in
which event the joint and survivor option elections will again be
available.
m) Notwithstanding any other clause herein contained, benefits payable
under this Plan shall not be duplicated in any way either with
respect to this Plan or any other Plan funded by the Company, its
parent, Werner Holding Co. (PA), Inc. or any of its subsidiaries.
n) Notwithstanding any other clause herein contained, that part of the
supplemental pension which represents the full benefit supplement
(P3), see Section 4(e), shall be paid to the designated beneficiary
under the Qualified Pension Plan, if the officer is otherwise
eligible but dies while in the Company's employ rather than after
retirement.
o) It is intended that the Supplemental Pension Plan be appropriately
coordinated with the latest version of the Qualified Pension Plan.
Therefore, in interpreting the Supplemental Plan any necessary
adjustments to reflect references to the latest version of the
Qualified Pension Plan shall be made. However, the intentions of the
Supplemental Plan shall be maintained with any questions to be
resolved in accordance with Section 12.
p) A periodic Inflation Adjustment shall be determined in accordance
with Section 14. Its intent is to appropriately adjust the aggregate
combined payout under the Qualified Pension Plan and this
Supplemental Pension Plan to reflect the effects of ongoing
inflation since retirement.
q) The recipients of a Supplemental Pension shall be furnished with an
explanation of the calculations used to determine their payments.
The aforesaid information shall be due with their first Supplemental
Pension check and whenever an adjustment is made to reflect any
changes contemplated by this Plan. When adjustments reflect both
ongoing and catch-up payments, this information shall be clearly
explained.
r) To the maximum extent possible, once recipients are advised of the
amounts due them, the number of monthly Supplemental Pension Plan
benefit check issued shall be minimized.
-4-
<PAGE> 5
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(CONTINUED)
Section 4 - Supplemental Pension:
- ---------------------------------
a) A special pension calculation shall be prepared appropriately timed
to the retirement date of an elected salaried Corporate officer
using the adjustment factors hereinafter outlined. This calculated
special pension shall become that individual's supplemental pension
hereunder.
b) The supplemental pension for elected salaried Corporate officers
shall include:
(1) Full service credit at 1.5% for service beyond both pre- and
post 35 years (P1) - See 4(c).
(2) An officership adjustment (P2) - See 4(d).
(3) A full benefit supplement where benefits under the Retirement
Plan for Salaried Employees are statutorily limited (P3) - See
4(e).
(4) A special service adjustment in the case of disability and early
retirements (P4)- See 4(f).
c) The Supplemental Pension Plan shall include credit at the rate of
1.5% of average earnings (S) for all years of credited service
beyond 30 years, with no limit to the maximum years of service. In
contract, the Retirement Plan for Salaried Employees provides for
credit at the rate of 1 % of Covered Compensation (C.C.) and 1.5% of
average earnings (S) in excess of covered compensation (C.C.) for a
maximum of 35 years of service plus credit for post 35 years service
at 1% of average earnings (S). "Average Earnings", "Covered
Compensation" and "Credited Service" shall be as defined in the
Retirement Plan for Salaried Employees.
Therefore:
P1 = [0.5% x (C.C.)] x N1B + [0.5% x (5)] x N greater than
35 = $/Yr.
N1B = N1 - 30 Where 30 is less than or equal to N1 but for
these purposes N1 is limited to a maximum of
35.
N greater than
35 = N1 - 35 Where N1 is greater than or equal to 35 Years
Service
-5-
<PAGE> 6
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(CONTINUED)
d) The supplemental pension benefit for elected salaried Corporate
officers shall include credit at the rate of 0.5% of average annual
compensation for the years of service as an elected salaried
Corporate officer. "Average Annual Compensation" (C) and "years of
service" as an elected salaried Corporate officer (N2) shall be
determined using the Company payroll records and parallel methods as
those for "average earnings" and "credited service" as defined in
the Retirement Plan for Salaried Employees.
Therefore: P2 = 0.5% (C) (N2) = $/Yr.
e) The supplemental pension benefit shall include a full benefit
supplement when an elected salaried Corporate officer's benefit
under the Retirement Plan for Salaried Employees is limited by any
statutorily imposed maximum benefit limitation applying to such
Plan. The full benefit supplement shall be equal to the difference
between the benefit which would be paid under such Plan without
application of the maximum benefit limitation and the benefit
actually being paid under such Plan as a result of application of
the maximum benefit limitation.
Therefore: P3 = PE - P
The full benefit supplement (P3) shall be provided to those eligible
elected salaried Corporate officers upon their retirement or to
their beneficiaries in the event of their death while in the employ
of the Company prior to retirement. The purpose of this benefit (P3)
is to insure that such officers receive the full amount of their
qualified pension despite the limitations imposed by Federal
statutes. For purposes of implementation, the beneficiaries shall be
those designated by the officer under the Retirement Plan for
Salaried Employees, or in the absence of such specific designation
the rules of said Plan shall apply.
f) The supplemental pension for an elected salaried Corporate officer
who takes a disability retirement or early retirement under the
terms of the Retirement Plan for Salaried Employees shall include a
special service adjustment to recognize the additional years of
credited service (N1E) such person would have had if he would have
worked until attainment of age sixty-five (65) rather than taking
disability retirement or early retirement. To be eligible the
minimum credited service (N1) shall be 25 years and the minimum
service as an elected salaried Corporate officer (N2) shall be 10
years.
Therefore: P4 = [(1% x C.C.) + 1.5% x (S - C.C.)] N1E = $/Yr.
N1E = N1D - N1
-6-
<PAGE> 7
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
g) The total supplemental pension for elected salaried Corporate
officers (PSO) shall be the sum of the aforesaid adjustments in
4(c)-(e), and, where applicable, 4(f), where PSO = P1 + P2 + P3 and,
where applicable, + P4.
Section 5 - Formulae & Definitions:
- -----------------------------------
C - Average annual compensation for years while an elected
salaried Corporate officer, based on the same method as used
in the Retirement Plan for Salaried Employees to compute
average earnings. For these purposes, compensation shall be
determined using Company payroll records and shall include
salary, including salary paid in lieu of holiday or vacation,
bonuses and any other regular compensation payment, but shall
not include any other taxable income from the Company which is
required to be reported on the annual W-2 forms to the U.S.
Government for Federal Income Tax purposes, such as by way of
illustration and not limitation, the currently taxable portion
of any fringe benefit or coverage by a fringe benefit program.
C.C.- Covered compensation as defined and established from time to
time by the Social Security Administration.
Company - "Company" shall mean Werner Holding Co. (DE), Inc., its parent, Werner
Holding Co. (PA), Inc. or any participating subsidiary company. Any subsidiary
which adopts this Plan shall be deemed a participating subsidiary company.
N1 - Years of credited service as defined in the Retirement Plan for Salaried
Employees.
N less than 35 - Years of credited service limited to a maximum of
thirty-five (35) years.
N less than 35 = N1 where N1 less than or equal to 35
N1B - Years of credited service in excess of thirty (30) years and not more
than thirty-five (35) years.
N1B = N1 - 30 where 30 less than or equal to N1 but for these purposes
N1 is limited to 35
Otherwise N1B = 0
N greater than 35 - Years of credited service in excess of thirty-five (35)
years.
N greater than 35 = N1 - 35 where 35 less than or equal to N1
Otherwise N greater than 35 = 0
-7-
<PAGE> 8
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
N1D - Total years of credited service an elected salaried Corporate
officer would have had under the Retirement Plan for Salaried
Employees if he had worked until attaining age sixty-five (65)
rather than taking a disability retirement or early retirement.
N1E - The additional years of credited service an elected salaried
Corporate office would have had under the Retirement Plan for
Salaried Employees if he had worked until attaining age sixty-five
(65) rather than taking a disability retirement or early
retirement.
N1E = N1D - N1
N2 - Years of service as an elected salaried Corporate officer.
P - Annual pension benefit payment under the Retirement Plan for
Salaried Employees subject to applicable statutorily imposed
maximum benefit limitation.
P = (1% x C.C.) x N less than 35 + 1.5% (5- C.C.) x N less than
35 + (1% x 5) x N greater than 35 = $/Yr. but limited to the
applicable statutorily imposed maximum benefit limitation under
applicable IRS regulations.
P1 - Supplemental pension adjustment to reflect full service maximum
1-1/2% benefit credit for post thirty (30) and thirty-five (35)
years service.
P1 = [0.5% x C.C.) x N1B + [0.5% x 5] x N greater than 35 =
$/Yr.
P2 - Supplemental pension adjustment to reflect special credit for
years of service as an elected salaried Corporate officer.
P2 = 0.5%(C)(N2)
P3 - Supplemental pension adjustment to reflect full benefit
supplement where benefits under the Retirement Plan for Salaried
Employees are subject to a statutorily imposed maximum benefit
limitation.
P3 = PE - P
P4 - Supplemental pension adjustment to reflect special service
adjustment for disability retirement or early retirement.
P4 = [1% x C.C.) x N1E + [1.5% x (S - C.C.) x N1E = $/Yr.
-8-
<PAGE> 9
PE - Annual pension benefit payment under the Retirement Plan for
Salaried Employees without regard to the statutorily imposed
maximum benefit limitation.
PE = (1% x C.C.) x N less than 35 + [1.5% x (S - C.C.)] x
N less than 35 + [1% x S] x N greater than 35
= $1Yr.
N less than 35 = N1 where N1 less than or equal to 35
years service
N greater than 35 = N1 - 35 where N1 = years service
PSO - Total supplemental pension for elected salaried Corporate
officers.
PSO = P1 + P2 + P3 and, where applicable P4
S - Average earnings based on the method used in the Retirement Plan
for Salaried Employees using the best three (3) consecutive full
years out of the last ten (10) years before retirement.
Section 6 - Consulting Assignments:
- -----------------------------------
a) From time to time the Company may offer and a pensioner covered by
this Supplemental Pension Plan may undertake consulting
assignments.
b) The specific assignment, remuneration, and the compensable time
involved, shall be established as the need arises.
c) A pensioner is under no obligation to accept such an assignment,
but may elect to do so at his option. The acceptance of such an
assignment shall not affect the right to continue to receive
benefits hereunder and shall not affect the amount of such
benefits.
Section 7 - Non-Compete Agreement:
- ----------------------------------
a) As a condition precedent to the receipt of any benefit payments
hereunder, an elected salaried Corporate officer shall be required
to execute and comply with a Non-Compete Agreement in the form
attached hereto as Exhibit A.
b) If the Board of Directors determines that an individual has
violated any provision of the Non-Compete Agreement, such
violation will result in the immediate forfeiture of his
supplemental pension benefits under this Supplemental Pension
Plan.
-9-
<PAGE> 10
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
Section 8 - Actions Resulting in Forfeiture of Rights and Interest Hereunder:
- -----------------------------------------------------------------------------
Notwithstanding any other provision of this Supplemental Pension Plan to
the contrary, if the Board of Directors determines that any elected
salaried Corporate officer or former elected salaried Corporate officer
has committed any act against or infidelity with respect to the interests
of the Company or has been convicted for the commission of an illegal
act, all such person's rights and interests in and to any payments under
this Supplemental Pension Plan shall be terminated and forfeited.
Section 9 - Effect of This Plan:
- --------------------------------
a) Neither the establishment of this Supplemental Pension Plan nor
the payment of any benefit hereunder shall be construed as giving
any elected salaried Corporate officer or other person any legal
or equitable right against the Company, any employee or owner
thereof, or the Board of Directors, except as specifically
provided herein.
b) Neither the establishment of this Supplemental Pension Plan nor
the payment of any benefit hereunder shall be construed as a
contract of continuing employment or give any elected salaried
Corporate officer or other employee of the Company any right to be
retained in the service of the Company. Said individuals remain
subject to discharge or severance to the same extent as if this
Supplemental Pension Plan were never adopted.
Section 10 - Amendment and Termination:
- ---------------------------------------
a) This Supplemental Pension Plan may be amended from time to time
and at any time, in whole or in part, by action of the Board of
Directors. Except as hereinafter provided, any such amendment may
be made retroactive and any amendment shall be made effective as
of the date set forth in such amendment; provided, however, that,
except to the extent specifically set forth in such amendment (and
then only to the extent necessary to comply with any applicable
law or to increase a benefit then in pay status), no such
amendment shall affect any benefit in pay status at the time the
amendment is adopted.
b) This Supplemental Pension Plan may be terminated at any time by
action of the Board of Directors. No such termination shall affect
any benefit in pay status at the time the Board of Directors
approves such termination. However, upon termination of the Plan,
the Company, at its sole option, shall have the right to make a
lump sum payment to any pensioner of the actuarial value of the
future payments of the benefits then in pay status.
-10-
<PAGE> 11
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
Section 11 - Spendthrift Clause:
- --------------------------------
None of the payments hereunder shall be subject to the claim of any
creditor of any elected salaried Corporate officer, and to the fullest
extent permitted by law shall be free from any attachment, garnishment or
other legal or equitable process. No elected salaried Corporate officer
shall have any right to alienate, anticipate, commute, pledge, encumber
or assign any benefit payable hereunder, and the Company shall not be
under any duty to honor any such action.
Section 12 - Interpretations:
- -----------------------------
a) When necessary the Board of Directors of the Company shall issue
interpretations and rulings concerning the application and meaning
of any provision of this Supplemental Pension Plan and such
interpretations and rulings shall be conclusive and binding on all
parties with any interest herein. To the extent the application of
any law becomes relevant, this Supplemental Pension Plan shall be
construed and administered according to the laws of the
Commonwealth of Pennsylvania.
b) Whenever any words are used herein in the masculine, where
applicable they shall be construed as though they were also used
in the feminine or neuter, and whenever any words are used herein
in the singular or plural, where applicable they shall also be
construed as though they were also used in the plural or singular.
Section 13 - Elected Salaried Corporate Officers - Joint and Survivor Option:
- -----------------------------------------------------------------------------
a) With respect to benefit payments going into pay status on January
1, 1981 and thereafter, an elected salaried Corporate officer who
is married at the time of retirement may elect, in the manner
hereafter set forth, to have his supplemental pension converted
into a joint and survivor form of payment with his spouse as the
surviving beneficiary. For so long as the pensioner remains
eligible for receipt of supplemental pension payments hereunder,
the joint and survivor form of payment will provide a reduced
benefit to the pensioner, and upon his death, if the spouse
survives, the same amount or one-half (1/2) that amount (as chosen
by the elected salaried Corporate officer in the manner described
hereafter) will continue to be paid to the spouse for the spouse's
lifetime. The payments to the spouse will be made as of the first
business day of each month following the death of the pensioner
and will terminate with the payment for the month in which the
death of the spouse occurs.
-11-
<PAGE> 12
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
b) In the event the election of a specific form of payment of the
supplemental pension has not been made, the rules incorporated in
the Retirement Plan for Salaried Employees concerning such matters
shall apply to the Supplemental Pension Plan as well. Unless a
specific election has been made to the contrary, when an elected
Corporate officer has a spouse during his employment or at the
time of retirement, the 100% joint and survivor option shall be
the presumed election. Further, in the event of his death prior to
retirement and while in the employment of the Company, if a spouse
survives the employee it will be presumed that the 100% joint and
survivor option election was made, consistent with the Qualified
Pension Plan regulations.
c) If the joint and survivor option is elected, the supplemental
pension otherwise payable to the elected salaried Corporation
officer will be reduced to reflect the fact that the supplemental
pension generally will be payable for his lifetime and the
lifetime of his spouse. The reduced supplemental pension will be
the actuarial equivalent of the supplemental pension otherwise
payable. The actuarial equivalent factors will be the same factors
which would be applicable at the time of retirement to an
identical joint and survivor benefit under the Retirement Plan for
Salaried Employees. In the event benefit payments commence in the
form of a joint and survivor option and the spouse pre-deceases
the retired elected salaried Corporate officer, no survivor
benefits will be paid upon the death of the elected salaried
Corporate officer and, except as otherwise provided in Section
3(1) hereof, he shall continue to receive the reduced supplemental
pension for his lifetime if he otherwise remains eligible for
receipt of supplemental benefits.
d) Election of the joint and survivor option must be made in writing
on a form provided by the Company except for the automatic
election per 13(b). The election must specify whether the spouse
is to receive the same reduced amount payable to the retired
elected salaried Corporate officer or one-half (1/2) of that
amount. The election may be made either prior to or upon
retirement by filing the above-referenced form with the Company
Treasurer.
e) If an election is to be made upon retirement, the elected salaried
Corporate officer shall have ten (10) days following actual
retirement to make the election. If the election is not made
within such ten (10) day period, the supplemental benefit shall be
paid in the normal form.
-12-
<PAGE> 13
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
f) Without consent of the spouse, an election made prior to
retirement may be revoked by the elected salaried Corporate
officer's filing a written revocation with the Company Treasurer
at any time prior to retirement. An election made prior to
retirement or an election made at retirement (in the relevant ten
(10) day period) shall become irrevocable at retirement if the
elected salaried Corporate officer is married at the time of
retirement. No election shall be of any effect if the elected
salaried Corporate officer is not married at the time of
retirement.
g) The joint and survivor option election only becomes effective upon
retirement, and no survivor benefit will be payable in the event
of the death of an elected salaried Corporate officer prior to
retirement regardless of any election which may have become
effective upon such elected salaried Corporate officer's
retirement except as provided for in Sections 4(e) and 13(b)
concerning death while holding an officership and the full benefit
supplement portion (P3). In addition, except as specifically
provided otherwise in Sections 3(l) hereof and 13(h) below, the
joint and survivor option will remain applicable after retirement
only so long as the elected salaried Corporate officer remains
eligible for receipt of supplemental benefits hereunder and if he
was receiving such benefits at the time of his death.
h) Any joint and survivor option election (made as provided herein)
of an elected salaried Corporate officer who takes early
retirement under the Retirement Plan for Salaried Employees but
elects to defer commencement of benefits becomes effective upon
his retirement. In the event of his death prior to commencement
of benefits but while otherwise satisfying the eligibility
requirement for receipt of benefits hereunder, his spouse shall be
eligible to receive the survivor benefit she would have received
under the joint and survivor option in effect as if his benefit
payments had commenced as of the first day of the month in which
his death occurred. Any actuarial reduction or equivalency factors
provided for herein in the event of early commencement of benefits
or election of the joint and survivor option shall be determined
and applied as of the date benefit payments to the elected
salaried Corporate officer commence or are deemed to have
commenced.
i) As used herein, spouse means only the person to whom the elected
salaried Corporate officer was married at the time of his
retirement or his death prior to his retirement, regardless of
circumstances occurring thereafter.
-13-
<PAGE> 14
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
Section 14 - Elected Salaried Corporate Officers/Corporate Directors - Inflation
- --------------------------------------------------------------------------------
Adjustment:
- -----------
a) The Inflation Adjustment is to be determined on an ongoing basis,
retroactive to each subsequent fifth year anniversary since
retirement (ie, 5th, 10th, 15th, 20th, etc.). However, starting
during calendar year 1992, two special determinations shall be
made for any eligible retirees who have been retired for more than
five (5) years. The first determination is to establish their
aggregate Inflation Adjustment up to and including their 1992
anniversary date. The second determination, to be done at the
appropriate time, is to establish their aggregate Inflation
Adjustment as of their next-most fifth anniversary of their
retirement date (ie, 10th, 15th, 20th, 25th, etc.). The Inflation
Adjustment so determined shall be considered part of the
Supplemental Pension and paid directly by the Company.
b) The Inflation Adjustment shall consist of two parts, Part A and
Part B. Part A shall be the Qualified Pension Plan Inflation
Adjustment. Part B shall be the Supplemental Pension Plan
Inflation Adjustment.
Part A benefits shall be paid to the eligible retired elected
salaried corporate officer/corporate director, his spouse or
appropriate beneficiaries in accordance with the election(s) made
under the Qualified Pension Plan. Part B benefits shall be paid to
the eligible retired elected salaried corporate officer/corporate
director, his spouse or appropriate beneficiaries in accordance
with the election(s) made under Section 3 and Section 13 of this
Plan.
c) The Inflation Adjustment factor (IAF) shall be measured by
determining the relative increase since retirement of the U.S.
Department of Labor, Bureau of Labor Statistics Consumer Price
Index - All Items for Urban Wage Earners and Clerical Workers (BLS
Consumer Price Index). The statistics for the month and year of
retirement shall establish the baseline value (Baseline CPI). The
statistics for the month and year of the appropriate fifth year
period since retirement shall be used for the current value. When
calculating the subsequent fifth year updates, the most recent
applicable values for the BLS Consumer Price Index shall be used
in lieu of earlier values as the current value (current CPI).
d) The Inflation Adjustment Factor (IAF) shall be calculated in
accordance with the following formula:
IAF = (Current SPI divided by Baseline CPI] - 1.000
The Consumer Price Index values are to be expressed to one decimal
place and the resulting Inflation Adjustment Factor to three
decimal place accuracy.
-14-
<PAGE> 15
SUPPLEMENTAL PENSION PLAN B AS AMENDED JULY 24, 1992
----------------------------------------------------
(Continued)
The source for the BLS Consumer Price Index statistics shall be
the publications by the Bureau of National affairs, Inc. Since the
Bureau of Labor Statistics will periodically change the base years
and the specific components of the BLS Consumer Price Index, as
well as the Index itself, the administrators of the Supplemental
Plan shall use their best efforts and judgment to employ the most
equivalent and appropriate information available from time to time
in preparing the calculation. Their determinations shall be
consistent with the practices followed in establishing the
original supplemental pension and shall be subject to appropriate
Board of Directors' approval before initial payment. Initial
payment will always be in arrears of the pertinent retirement
anniversary date due to the late availability of BLS Consumer
Price Index data. When baseline values of the BLS Consumer Price
Index are not available for specific months, then the annual value
for the year of retirement shall be used instead.
e) The Part A Inflation Adjustment benefit shall be determined as the
product of the original Qualified Pension Plan benefit paid times
the Inflation Adjustment Factor. The Part B Inflation Adjustment
benefit shall be determined as the product of the original
Supplemental Pension Plan benefit paid times the Inflation
Adjustment Factor. It is contemplated that any ongoing adjustment
made to the original payment amounts of either the Qualified
Pension or the Supplemental Pension due to elections made or any
other aspects of each plan which affect the amount of payment
shall also apply to the Inflation Adjustment Benefit. For example,
such an adjustment might be due to early retirement, the joint and
survivor option reductions, the beneficiary reductions, etc.
f) It is contemplated that the recipients under the Qualified Pension
Plan and this Supplemental Pension Plan may differ. If so, then
the Part A Benefits cannot be combined with the Part B Benefits.
The Part B Benefits shall be combined with the initial
Supplemental Pension benefit for payment and whenever possible so
shall the Plan A Benefits.
-15-
<PAGE> 16
EXHIBIT "A"
-----------
NON-COMPETE AGREEMENT
THIS NON-COMPETE AGREEMENT is entered into as of the ____ day of
________ 19 by and between _______________________ (the "Company") and
_______________________ (the "Employee").
WHEREAS the Company has adopted Supplemental Pension Plan B for Elected
Salaried Corporate Officers of the Company (the "Plan") and
WHEREAS the Plan expressly provides that as a condition precedent to the
receipt of any benefit payments under the Plan an eligible elected salaried
Corporate officer must execute and comply with an agreement in the form hereof
and
WHEREAS the Employee is eligible for benefit payments under the Plan:
NOW THEREFORE this Agreement witnesseth that, for good and valuable
consideration receipt of which is hereby acknowledged and intending to be
legally bound hereby, and as an inducement to the Company to make benefit
payments under the Plan to the Employee, the Company and the Employee
agree as follows:
1. The Company shall make benefit payments under and in accordance with
the provisions of the Plan to the Employee so long as the Employee complies with
the provisions of this Agreement and so long as the Employee's rights and
interests in and to any payments under the Plan have not been terminated or
forfeited.
2. The Employee shall not, for a period of five years after the day and
year first above written, without the express prior written consent of the
Company engage, directly or indirectly (as officer, director, owner, employee,
agent, consultant, partner or other participant whatsoever), in any activity in
competition with the Company nor shall the Employee at any time reveal to any
individual person, firm, corporation, partnership, joint venture or other
<PAGE> 17
entity any of the Company's trade secrets, private processes, confidential
records, confidential documents, customer lists or other confidential
information. If the Board of Directors of the Company determines that the
Employee is in violation of this Agreement the Company shall so notify the
Employee. If within fourteen (14) days following such notification the Employee
has not ceased and desisted the activity which the Board of Directors has
determined to be in violation of this Agreement the Employee's rights and
interests in and to any payments under the Plan shall be terminated and
forfeited.
3. This Agreement has been executed and delivered in the Commonwealth of
Pennsylvania and for all purposes shall be construed and enforced in accordance
with the laws of said Commonwealth.
IN WITNESS WHEREOF the Company and the Employee have executed and
delivered this Agreement as of the day and year first above written.
Attest: ________________________________
(Company Name)
By
_____________________________________ _____________________________
Secretary Title:
(Corporate Seal) ______________________(Seal)
EMPLOYEE
-2-
<PAGE> 18
ELECTED SALARIED CORPORATE OFFICER'S OPTIONAL JOINT
AND SURVIVOR ELECTION UNDER THE SUPPLEMENTAL
PENSION PLAN FOR ELECTED SALARIED CORPORATE OFFICERS
OF _____________________________________
I, ___________________________, an elected salaried Corporate officer of
________________________ do hereby elect that upon my retirement my benefits
under the Supplemental Pension Plan be paid in the form of a joint and survivor
option as described in Section 13 of the Supplemental Pension Plan B.
I elect that upon my death following retirement my spouse, identified
below, receive:
the same reduced supplemental benefit I was receiving during my
lifetime.
one-half (1/2) the reduced supplemental benefit I was receiving
during my lifetime.
Spouse's Full Name ________________________________________
Spouses's Social Security Number __________________________
Spouse's Address __________________________________________
__________________________________________
(City) (State) (Zip Code)
I understand and agree that:
<PAGE> 19
a) no survivor benefit will be payable in the event that I cease to be
eligible for receipt of supplemental benefits following retirement and, EXCEPT
IN THE EVENT OF MY DEATH FOLLOWING EARLY RETIREMENT DURING A PERIOD WHEN I
ELECTED TO DEFER COMMENCEMENT OF BENEFITS, if I am not receiving supplemental
benefit payments at the time of my death.
b) if this election is made prior to my retirement, the election will
become effective only upon my retirement and only if I am married at the time of
retirement to the spouse designated above, unless a new election is made with
regard to a different spouse at the time of retirement. In the event I die prior
to retirement, no survivor benefit will be paid to my spouse under the
Supplemental Pension Plan (except were I to die while re-employed after
retirement or in accordance with c) below).
c) notwithstanding a) and b) above, in accordance with Sections 3(e),
3(n) and 4(e) of Supplemental Pension Plan B, a survivor benefit will be payable
in the event of my death prior to retirement reflecting that part of my
qualified pension which exceeds the maximum pension limitation payable under
ERISA and/or other federal statutes (the full benefit supplement, P3). The P3
benefit shall be paid to my beneficiary or beneficiaries I have designated under
the Retirement Plan for Salaried Employees or in the absence of such specific
designation the rules of said Plan shall apply.
d) an election made at retirement can only be made within the ten (10)
day period following actual retirement. Such an election is irrevocable once
made. If the election is not made within such ten (10) day period no joint and
survivor option will be available and no survivor benefits will be paid under
the Supplemental Pension Plan.
-2-
<PAGE> 20
e) to make an election, this fully completed form must be filed with the
Company Treasurer and an election will be given no effect unless so filed (and
unless so filed within the relevant ten (10) day period, if applicable).
f) to revoke an election made prior to retirement I must file a written
revocation of such election with the Company Treasurer. Such revocation does not
need the consent of my spouse but must be filed prior to retirement.
I certify that I fully understand the foregoing provisions and election
and that the election is made of my own free will and intent, as evidenced by my
signature in the presence of a witness on the date indicated below.
________________________________________ _________________________________
(Witness Signature) (Signature)
Date:___________________________________ _________________________________
Print Name
The foregoing election was received on the ______ day of ___________ 19__.
________________________________
Company Treasurer
-3-
<PAGE> 21
SUPPLEMENTAL PENSION PLAN B
---------------------------
WORKSHEET FOR CALCULATING INFLATION ADJUSTMENT
----------------------------------------------
Name: __________________________ S.S. No. ___________________
Retirement Date: ________________ Inflation Adjustment Effective ________
Date: _____________
Directorships and Years of Service: ___________________________________________
_______________________________________________________________________________
_______________________________ Aggregate Directorship Service: ________ years
Qualified Officerships: _______________________________________________________
Pertinent Qualified Pension Benefit: $____________ / Month (1)
Payout Election: __________
Pertinent Supplemental Pension Benefit (Pre-inflation Adjustment):
$___________ / Month (2)
Payout Election: ___________
BLS Consumer Price Index Date: (all cities, urban wage earners
and clerical workers-revised)
a) At month/year of retirement:
Month: Year: ______ Base Year(s): ____ BLS CPI Value: ______
(Baseline)
b) At intermediate point where applicable:
Month: ______ Year: _______ Base Year(s): _____ BLS CPI Value: _____
(Current)
c) At month/year of Inflation Adjustment Effective:
Month: Year: _______ Base Year(s): _____ BLS CPI Value: _____
(Current)
Calculation of Inflation Adjustment Factor (IAF):
- -------------------------------------------------
IAF = [Current CPI Value + Baseline CPI Value] - 1.000
[AF = ____________________ (3)
-1-
<PAGE> 22
WORKSHEET FOR CALCULATING INFLATION ADJUSTMENT
----------------------------------------------
(Continued)
Calculation of Inflation Adjustment:
a) Part A - Qualified Pension Plan Portion:
(1) X (3)
Part A Benefit: $________ /Month (4)
b) Part B - Supplemental Pension Plan Portion:
(2) X (3)
Part B Benefit: $________ /Month (5)
c) Total Monthly Benefit
(4) + (5)
Total Benefit: $________ /Month
Prepared by: ________________________ Date: ___________________
Approved by:
CFO: _______________________ Date: _____________________
CEO: _______________________ Date: _____________________
-2-
<PAGE> 23
SUPPLEMENTAL PENSION PLAN B
---------------------------
WORKSHEET FOR CALCULATING INFLATION ADJUSTMENT
----------------------------------------------
Name: ___________________________ S.S. No. ____________________
Retirement Date: _______________ Inflation Adjustment Effective Date: ________
Directorships and Years of Service: ___________________________________________
________________________________ Aggregate Directorship Service: _______ years
Qualified Officerships: _______________________________________________________
Pertinent Qualified Pension Benefit: $____________ / Month (1)
Payout Election: ___________
Pertinent Supplemental Pension Benefit (Pre-inflation Adjustment):
$__________ / Month (2)
Payout Election: ___________
BLS Consumer Price Index Date: (all cities, urban wage earners and clerical
workers-revised)
a) At month/year of retirement:
Month: _____ Year: ______ Base Year(s): BLS CPI Value: ______
(Baseline)
b) At intermediate point where applicable:
Month: _____ Year: ______ Base Year(s): _____ BLS CPI Value:
(Current)
c) At month/year of Inflation Adjustment Effective:
Month: _____ Year: _____ Base Year(s): ____ BLS CPI Value: ____
(Current)
Calculation of Inflation Adjustment Factor (IAF):
- -------------------------------------------------
IAF = [Current CPI Value divided by Baseline CPI Value] - 1.000
[AF = _____________(3)
-1-
<PAGE> 24
WORKSHEET FOR CALCULATING INFLATION ADJUSTMENT
----------------------------------------------
(Continued)
Calculation of Inflation Adjustment:
a) Part A - Qualified Pension Plan Portion:
(1) X (3)
Part A Benefit: $________ /Month (4)
b) Part B - Supplemental Pension Plan Portion:
(2) X (3)
Part B Benefit: $_______ /Month (5)
c) Total Monthly Benefit
(4) + (5)
Total Benefit: $________ /Month
Prepared by: __________________________ Date: ____________________
Approved by:
CFO: __________________________ Date: _____________________
CEO: __________________________ Date: _____________________
-2-
<PAGE> 1
Exhibit 10.17
AMENDMENT TO
SUPPLEMENTAL PENSION PLAN B
APPLICABLE TO
ELECTED SALARIED CORPORATE OFFICERS OF
WERNER HOLDING CO. (DE), INC., ITS PARENT AND ITS SUBSIDIARIES
WHEREAS, Werner Holding Co. (DE), Inc. (the "Company" maintains
Supplemental Pension Plan B Applicable to Elected Salaried Corporate Officers of
Werner Holding Co. (DE), Inc., its Parent and its Subsidiaries ("supplemental
Plan B"); and
WHEREAS, in anticipation of the retirement of certain key executives,
the benefits of Supplemental Plan B have been reviewed, and the Company now
wishes to assure for these executives a minimum benefit by establishing a
minimum pension in Supplemental Plan B; and
WHEREAS, Section 10 of Supplemental Plan B expressly reserves to the
board of directors of the Company the authority to amend Supplemental Plan B
from time to time and at any time, with limitations not here relevant.
NOW, THEREFORE, Supplemental Plan B is amended as follows, effective
upon adoption of this amendment by the board of directors of the Company:
1. Section 4 - Supplemental Pension is amended by adding at the end
thereof the following new subsection (h):
h) Notwithstanding the foregoing, a minimum supplemental pension
shall be provided under the Supplemental Pension Plan to Richard
L. Werner, Robert I. Werner, Donald M. Werner and Howard L. Solot
by operation of this subsection (h). Under this subsection (h),
each of the named individuals shall be entitled to an additional
element of supplemental pension (P5) (if any is produced by the
following formula) in such amount as is necessary to bring the
total of the pension under the Qualified Pension Plan (P) and the
pension otherwise payable under the Supplemental Pension Plan
(P50) up to a pension equal to 1.25% of average annual
compensation while an elected salaried Corporate officer (C) for
all years of credited service (N1), provided that the additional
element of supplemental pension provided under this subsection (h)
(P5) shall not exceed that amount which, if paid in the form of a
lump sum under Section 15, would produce a lump sum of one million
dollars.
Subject to the limitation of a lump sum equivalent of one
million dollars, therefore: P5 = (1.25% x C x N1) -P-P50
<PAGE> 2
2. A new Section 15 is added at the end of Supplemental Plan B as
follows:
Section 15 - Elected Salaried Corporate Officers - Lump Sum Option:
- -------------------------------------------------------------------
a) With respect to benefit payments going into pay status on or after
the effective date of this Section 15 of the Supplemental Pension
Plan, an elected salaried Corporate officer may elect, in the
manner hereafter set forth, to have that portion (if any) of the
supplemental pension which is provided under Section 4(h)
converted into a lump sum payment. The amount available for
conversion to a lump sum shall be only that portion (if any)
payable under Section 4(h), namely, P5, not any portion of
P50. Absent an effective election under this Section 15, that
portion of the supplemental pension which is provided under
Section 4(h) (if any) shall be paid in the same form as the
balance of the supplemental pension.
b) The amount of the lump sum shall be calculated based on the
benefit payable at actual retirement using interest at the rate of
7.5% (unless the Board of Directors of the Company determines
otherwise) and mortality as specified in the 1983 Group Annuity
Mortality Table for males with a 2-year setback. Because the
calculation is made as of the date of retirement, no inflation
adjustment under Section 14 shall be applicable or taken into
account.
c) An election of a lump sum under this section shall be effective
only if made irrevocably in writing (on such form as may be
prescribed) and filed with the Company Treasurer prior to the
occurrence of any event that gives the elected salaried Corporate
officer a right to payment of benefits under the Supplemental
Pension Plan.
d) Payment of a lump sum under this Section 15 shall be made as soon
as administratively possible after occurrence of the first event
that gives the elected salaried Corporate officer a right to
payment of benefits under the Supplemental Pension Plan.
IN WITNESS WHEREOF, this amendment to Supplemental Plan B has been
executed this 16th day of April, 1997, by the appropriate officer of the Company
pursuant to resolution of the board of directors of the Company authorizing the
same.
Eve Werner
__________________________________
Chief Administrative Officer,
Secretary, General Counsel &
Corporate Ethics Officer
__________________________________
Title
-2-
<PAGE> 3
SUPPLEMENTAL PENSION PLAN B
APPLICABLE TO ELECTED SALARIED CORPORATE OFFICERS
OF WERNER HOLDING CO. (DE), INC., ITS PARENT AND ITS SUBSIDIARIES
Lump Sum Election
for Portion Payable under Section 4(h)
--------------------------------------
I, ___________________________________, an elected salaried Corporate officer of
____________________________ , do hereby elect that, upon my retirement, that
portion of my benefits under the Supplemental Pension Plan which is payable by
reason of Section 4(h) thereof--the additional pension amount necessary to raise
my benefits under the Supplemental Pension Plan to the minimum specified in
Section 4(h)--be paid in the form of a lump sum in accordance with Section 15
of the Supplemental Pension Plan.
I understand and agree that this election is irrevocable and that
payment of such lump sum completely and forever discharges any and all liability
for supplemental pension payments under Section 4(h) of the Supplemental Pension
Plan.
______________________________________ _____________________________________
(Witness signature) (Signature)
Date: ________________________________ _____________________________________
Print Name
The foregoing election was received on the ____ day of
_____________________, 19 .
_____________________________________
Company Treasurer
<PAGE> 1
Exhibit 10.18
WERNER HOLDING CO. (DE), INC.
EMPLOYEE SAVINGS PLAN
EFFECTIVE JANUARY 1, 1991
<PAGE> 2
CONTENTS
Page
INTRODUCTION v
ARTICLE I DEFINITIONS 1
ARTICLE II ELIGIBILITY AND PARTICIPATION
2.01 Eligibility 9
2.02 Termination and Reemployment 10
ARTICLE III SERVICE
3.01 Definitions 11
3.02 Applicable Computation Period 13
ARTICLE IV CONTRIBUTIONS
4.01 Company Matching Contributions 15
4.02 Salary Reduction Contributions 15
4.03 Voluntary Employee Contributions 25
4.04 Company Contribution 26
ARTICLE V ALLOCATIONS, ACCOUNTING, AND ADJUSTMENTS
5.01 Composition of Trust Fund 28
5.02 Allocation of Earnings to Accounts 28
5.03 Timing of Allocation of Company Contributions
and Company Matching Contributions 28
5.04 Allocation of Other Contributions 29
5.05 Maximum Annual Additions 29
5.06 Participation in Defined Benefit Plan 33
5.07 Allocation of Company Contributions and
Company Matching Contributions 35
5.08 Participant Election of Investment Funds 42
i
<PAGE> 3
CONTENTS
(continued)
Page
ARTICLE VI VESTING
6.01 Company Contribution Account 44
6.02 Termination of Employment 44
6.03 Effect of Breaks in Service 46
6.04 Salary Reduction Contribution Account and
Voluntary Employee Contribution Account 46
ARTICLE VII TIME AND METHOD OF PAYMENT
7.01 Manner of Payment 47
7.02 Optional Forms of Payment 48
7.03 Time of Payment 51
7.04 Payments to Beneficiaries 52
7.05 Distribution of Unallocated Contributions 58
7.06 Certain Retroactive Payments 58
ARTICLE VIII LOANS AND OTHER WITHDRAWALS
8.01 Availability of Loans 59
8.02 Multiple Loans Prohibited 63
8.03 Hardship Withdrawal 63
8.04 Withdrawals After Age Fifty-Nine and
One-Half (59 1/2) 66
8.05 Voluntary Employee Contributions 66
8.06 Spousal Consent to Withdrawals 66
ARTICLE IX ROLLOVERS AND TRANSFERS
9.01 Rollovers 68
9.02 Transfers 69
9.03 Rollover Account 69
ii
<PAGE> 4
CONTENTS
(continued)
Page
ARTICLE X TOP-HEAVY PROVISIONS
10.01 Effective Date 70
10.02 Definitions 70
10.03 Special Code Section 415 Limitations 75
10.04 Minimum Allocation Requirements 75
10.05 Minimum Vesting Requirements 76
ARTICLE XI MANAGEMENT OF FUNDS
11.01 Appointment of Trustee 78
11.02 Assets of Trust 78
11.03 Reversion of Company Contributions 78
ARTICLE XII ADMINISTRATION OF PLAN
12.01 Plan Administrator 80
12.02 Rights, Powers, and Duties of Plan Administrator 80
12.03 Exercise of Plan Administrator's Duties 82
12.04 Indemnification of Fiduciaries 82
12.05 Compensation 83
ARTICLE XIII CLAIMS PROCEDURES
13.01 Claims Review 84
13.02 Appeals Procedure 85
ARTICLE XIV AMENDMENT AND TERMINATION
14.01 Termination 86
14.02 Right to Amend, Modify, Change, or Revise Plan 87
14.03 Merger and Consolidation of Plan; Transfer
of Plan Assets 88
iii
<PAGE> 5
CONTENTS
(continued)
Page
ARTICLE XV MISCELLANEOUS
15.01 No Contract of Employment 89
15.02 Restrictions Upon Assignments and Creditors'
Claims 89
15.03 Restriction of Claims Against Trust 90
15.04 Benefits Payable by Trust 90
15.05 Successor to Company 90
15.06 Applicable Law 90
15.07 Data 91
15.08 Internal Revenue Service Approval 91
iv
<PAGE> 6
WERNER HOLDING CO. (DE), INC.
EMPLOYEE SAVINGS PLAN
Effective August 1, 1987, R. D. Werner Co., Inc. (hereinafter referred to as the
"Sponsoring Company"), a corporation organized and existing under the laws of
the State of Pennsylvania, adopted the R. D. Werner Co., Inc. Salaried Employees
Savings Plan. Effective December 31, 1989, the name of the R. D. Werner Co.,
Inc. Salaried Employees Savings Plan was changed to the Werner Holding Co. (DE),
Inc. Salaried Employees Savings Plan.
Effective December 31, 1989, Florida Ladder Company, Gold Medal Ladder Co.,
Manufacturers Indemnity and Insurance Company of America, Kentucky Ladder
Company, and Werner Management Inc. adopted the Werner Holding Co. (DE), Inc.
Salaried Employees Savings Plan and assets relating to salaried employees from
prior plans were transferred to the Werner Holding Co. (DE), Inc. Salaried
Employees Savings Plan.
Effective January 2, 1990, Phoenix Management Services, Inc. adopted the Werner
Holding Co. (DE), Inc. Salaried Employees Savings Plan.
Effective June 1, 1987, the Sponsoring Company adopted the R. D. Werner Co.,
Inc. Employees Savings Plan For Employees Covered Under the USWA Local 3713,
Greenville, Pennsylvania, Collective Bargaining Agreement (the "Local 3713
Plan").
Effective October 1, 1987, the Sponsoring Company adopted the R. D. Werner Co.,
Inc. Employees Savings Plan For Employees Covered Under IAM & AW Local 2032
Collective Bargaining Agreement (the "Local 2032 Plan").
Effective October 1, 1987, the Sponsoring Company adopted the R. D. Werner Co.,
Inc. Employees Savings Plan For Employees Covered Under Teamsters Local 261
Collective Bargaining Agreement (the "Local 261 Plan").
v
<PAGE> 7
Effective June 30, 1989, the Sponsoring Company adopted the R. D. Werner Co.,
Inc. Employee Savings Plan For Employees Covered Under the S.M.W. Local 170,
Bell, California, Collective Bargaining Agreement (the "Local 170 Bell Plan").
Effective November 30, 1989, the Sponsoring Company adopted the R. D. Werner
Co., Inc. Anniston Division Hourly Employee 401(k) Plan (the "Anniston Plan").
Effective August 1, 1987, Florida Ladder Company adopted the Florida Ladder
Company Employee Savings Plan (the "Florida Ladder Plan").
Effective September 1, 1989, Kentucky Ladder Company adopted the Kentucky Ladder
Company Hourly Employee 401(k) Pension Plan (the "Kentucky Ladder Plan").
Effective August 1, 1987, Gold Medal Ladder Co. adopted the Gold Medal Ladder
Co. Employee Savings Plan (the "Gold Medal Ladder Plan").
Effective January 1, 1991, Werner Holding Co. (DE), Inc. hereby adopts the
Werner Holding Co. (DE), Inc. Employee Savings Plan (the "Plan") and the assets
of the Werner Holding Co. (DE), Inc. Salaried Employees Savings Plan are
transferred to and merged with the Plan.
Effective January 1, 1991, R. D. Werner Co., Inc., Florida Ladder Company, Gold
Medal Ladder Co., Manufacturers Indemnity and Insurance Company of America,
Kentucky Ladder Company, Werner Management Inc., and Phoenix Management
Services, Inc. adopt the Werner Holding Co. (DE), Inc. Employee Savings Plan.
Effective January 1, 1991, the assets of the Local 3713 Plan, the Local 2032
Plan, the Local 261 Plan, the Local 170 Bell Plan, the Anniston Plan, the
Florida Ladder Plan, the Gold Medal Ladder Plan, and the Kentucky Ladder Plan
are transferred to and merged with the Werner Holding Co. (DE), Inc. Employee
Savings Plan.
vi
<PAGE> 8
ARTICLE I
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and phrases
shall have the meanings stated below unless a different meaning is plainly
required by context. For purposes of construction of this Plan, the masculine
term shall include the feminine and the singular shall include the plural in all
cases in which they could thus be applied.
ACCOUNT(S) means the separate Account or Accounts which are maintained for the
benefit of each Participant.
ACCOUNT BALANCE(S) means, for each Participant, the total balance standing to
his Account or Accounts under the date of reference determined in accordance
with valuation procedures described in Section 5.02.
AFFILIATE means any corporation or other business entity which is included in a
controlled group of corporations within which the Company is also included, as
provided in Section 414(b) of the Code (as modified, for purposes of Sections
5.05 and 5.06 of the Plan, by Section 415(h) of the Code); or which is a trade
or business under common control with the Company, as provided in Section 414(c)
of the Code (as modified, for purposes of Sections 5.05 and 5.06 of the Plan, by
Section 415(h) of the Code); or which constitutes a member of an affiliated
service group within which the Company is also included, as provided in Section
414(m) of the Code; or which is required to be aggregated with the Company
pursuant to regulations issued under Section 414(0) of the Code.
ALTERNATE PAYEE means any spouse, former spouse, child, or other dependent of a
Participant who is recognized by a Domestic Relations Order as having a right to
receive all or a portion of a Participant's benefits payable under the Plan.
1
<PAGE> 9
ANNISTON DIVISION means the Anniston division of R. D. Werner Co., Inc.
ANNUITY STARTING DATE means the first day of the first period for which a
benefit is payable.
APPROVED ABSENCE means an absence from work approved by the Participating
Employer under uniform rules and conditions for all Employees, and shall include
a military leave.
BENEFICIARY means the person or persons or other entity designated by a
Participant to receive any benefits under the Plan which may be due upon the
Participant's death.
BREAK IN SERVICE means an interruption in service as defined in Section 3.01.
CODE means the Internal Revenue Code of 1986, as amended from time to time.
COMPANY means Werner Holding Co. (DE), Inc.
COMPANY CONTRIBUTION ACCOUNT means the separate Account which shall be
maintained by the Trustee for each Participant to reflect all Company
Contributions and all Company Matching Contributions made on behalf of such
Participant and any earnings thereon.
COMPANY CONTRIBUTIONS means the amount the Participating Employer may pay to the
Trust on behalf of each Participant for each Plan Year, as set forth in Section
4.04 of the Plan.
COMPANY MATCHING CONTRIBUTIONS means the amount the Participating Employer may
pay to the Trust on behalf of a Nonunion Employee Participant for each Plan
Year, as set forth in Section 4.01 of the Plan.
COMPENSATION means the total amount of cash compensation paid to or accrued for
an Employee by the Participating Employer in a Plan Year for Federal
2
<PAGE> 10
income tax purposes, including commissions, bonuses, overtime, and amounts
deferred under a salary reduction agreement pursuant to Section 401(k) or
Section 125 of the Code, but excluding any other extraordinary remuneration. If
an Employee becomes a Participant during a Plan Year, his Compensation in such
Plan Year, for purposes of determining the amount of the Company Contributions
contributed on his behalf pursuant to Section 4.04 of the Plan, shall be his
Compensation for the full Plan Year multiplied by a fraction, the numerator of
which shall be his months of Plan participation and the denominator of which
shall be twelve (12). For all other purposes, if an Employee becomes a
Participant during a Plan Year, his Compensation shall be his Compensation for
the full Plan Year. Effective for Plan Years beginning January 1, 1989 and
thereafter, Compensation in excess of two hundred thousand dollars ($200,000)
(or such other amount as may be established by the Secretary of the Treasury)
shall be disregarded.
DOMESTIC RELATIONS ORDER means any judgment, decree, or order (including
approval of a property settlement agreement) that relates to the provision of
child support, alimony payments, or marital property rights to an Alternate
Payee and is made pursuant to a state domestic relations law, including a
community property law.
EARLY RETIREMENT AGE means the age at which the Participant terminates his
employment on or after he completes five (5) Years of Service and has attained
age fifty-five (55).
EFFECTIVE DATE means January 1, 1991.
EMPLOYEE means a person employed by the Company or any Affiliate and shall
include any leased employee deemed to be an Employee as provided in Section
414(n) of the Code.
ENTRY DATE means the first day of the month coincident with or next following
fulfilling the eligibility requirements of Section 2.01.
3
<PAGE> 11
FORFEITURE means the portion of a Participant's Company Contribution Account to
which he is not entitled, as determined under Section 6.02.
HOUR OF SERVICE means:
(a) Each hour for which an Employee is paid or entitled to payment for the
performance of duties for the Participating Employer, the Company, or
an Affiliate. These hours shall be credited to the Employee for the
computation period or periods in which the duties are performed; and
(b) Each hour for which an Employee is paid or entitled to payment by the
Participating Employer, the Company, or an Affiliate on account of a
period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury duty,
military duty, or Approved Absence. No more than five hundred one (501)
Hours of Service shall be credited under this paragraph (b) for any
single continuous period (whether or not such period occurs in a single
computation period). Hours of Service under this paragraph (b) shall be
calculated and credited pursuant to Section 2530.200b-2 of the
Department of Labor Regulations, which are incorporated herein by this
reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Participating Employer, the Company,
or an Affiliate. The same Hours of Service shall not be credited both
under paragraph (a) or paragraph (b), as the case may be, and under
this paragraph (c). These hours shall be credited to the Employee for
the computation period or periods to which the award, agreement, or
payment pertains rather than the computation period in which the award,
agreement, or payment is made.
4
<PAGE> 12
(d) In the event that records are not kept which accurately reflect the
number of hours worked, an Employee will be credited with forty-five
(45) Hours of Service for each week in which he would be credited with
at least one (1) Hour of Service.
LIFE ANNUITY means an annuity for the life of the Participant which is the
actuarial equivalent of the Participant's vested Account Balance.
LIMITATION YEAR means the Plan Year.
NONUNION EMPLOYEE means an Employee who is not a Union Employee.
NORMAL RETIREMENT AGE means a Participant's sixty-fifth birthday.
PARTICIPANT means an Employee who fulfills the eligibility requirements as
provided in Article II and who continues to qualify as a Participant.
PARTICIPATING EMPLOYER means the Company and any Affiliate which adopts this
Plan with the approval of the Company.
PLAN means the Werner Holding Co. (DE), Inc. Employee Savings Plan.
PLAN ADMINISTRATOR means the Company, which shall serve pursuant to the terms of
Article XII.
PLAN YEAR means the twelve (12) month period which begins on January 1 and which
ends on December 31.
PRIOR PLAN means any of the following plans:
(a) The Werner Holding Co. (DE), Inc. Salaried Employees Savings Plan;
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<PAGE> 13
(b) The R. D. Werner Co., Inc. Employees Savings Plan For Employees Covered
Under the USWA Local 3713, Greenville, Pennsylvania, Collective
Bargaining Agreement;
(c) The R. D. Werner Co., Inc. Employees Savings Plan For Employees Covered
Under IAM & AW Local 2032 Collective Bargaining Agreement;
(d) The R. D. Werner Co., Inc. Employees Savings Plan For Employees Covered
Under Teamsters Local 261 Collective Bargaining Agreement;
(e) The R. D. Werner Co., Inc. Employees Savings Plan For Employees Covered
Under the S.M.W. Local 170, Bell, California, Collective Bargaining
Agreement;
(f) The R. D. Werner Co., Inc., Anniston Division Hourly Employee 401(k)
Plan;
(g) The Kentucky Ladder Company Hourly Employee 401(k) Pension Plan;
(h) The Florida Ladder Company Employees Savings Plan; and
(i) The Gold Medal Ladder Co. Employee Savings Plan.
QUALIFIED DOMESTIC RELATIONS ORDER means any Domestic Relations Order that
creates, recognizes, or assigns to an Alternate Payee the right to receive all
or a portion of a Participant's benefits payable hereunder and meets the
requirements of Section 414(p) of the Code.
QUALIFIED JOINT AND SURVIVOR ANNUITY means an annuity for the life of the
Participant with a survivor annuity for the life of the Participant's surviving
spouse equal to fifty percent (50%) of the amount of the annuity which
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<PAGE> 14
is payable during the joint lives of the Participant and his surviving spouse.
The Qualified Joint and Survivor Annuity shall be the actuarial equivalent of
the Participant's vested Account Balance.
QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY means an annuity for the life of the
surviving spouse of the Participant which is the actuarial equivalent of the
Participant's vested Account Balance.
ROLLOVER ACCOUNT means the separate Account which shall be maintained for a
Participant or Employee to reflect any Rollover Contributions made by the
Participant or Employee, and any earnings thereon.
ROLLOVER CONTRIBUTIONS means the contributions made by a Participant or
Employee, as set forth in Section 9.01 of the Plan.
SALARY REDUCTION CONTRIBUTION ACCOUNT means the separate Account maintained for
each Participant who elects a salary reduction pursuant to Section 4.02 of the
Plan to reflect all of his Salary Reduction Contributions and any earnings
thereon.
SALARY REDUCTION CONTRIBUTIONS means the contributions made by the Participating
Employer that are attributable to the reduction in salary a Participant agrees
to accept from the Participating Employer each Plan Year, as set forth in
Section 4.02 of the Plan.
TOTAL AND PERMANENT DISABILITY means a Participant is unable for physical or
mental reasons for the foreseeable future to perform his normal work for the
Participating Employer or any other work for which he is qualified by reason of
education, training, or experience, as determined by a competent physician
chosen by the Plan Administrator or upon adjudication by the Social Security
Administration that the Participant is disabled within the meaning of the Social
Security Act. Uniform standards shall apply to Participants in similar
conditions.
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<PAGE> 15
TRUST AGREEMENT or TRUST means, respectively, the trust agreement establishing
the Werner Holding Co. (DE), Inc. Employee Savings Trust, as amended from time
to time, and the trust established thereunder.
TRUST FUND means all cash, securities, real estate, or any other property held
by the Trustee pursuant to the terms of the Trust Agreement, together with
income therefrom.
TRUSTEE means the person, persons, or entity appointed by the Company as
provided under Section 11.01 of the Plan to act as Trustee of the Trust.
UNION EMPLOYEE means an Employee who is a member of the USWA Local 3713, the IAM
& AW Local 2032, the Teamsters Local 261, the S.M.W. Local 170, or the
Textile Processors Service Trades, Health Care, Professional and Technical
Employees International Union #218 (FLC).
VALUATION DATE means each day of the Plan Year.
VOLUNTARY EMPLOYEE CONTRIBUTION ACCOUNT means the separate Account maintained
for each Participant who elects to make a Voluntary Employee Contribution
pursuant to Section 4.03 of the Plan to reflect all of his Voluntary Employee
Contributions and any earnings thereon.
VOLUNTARY EMPLOYEE CONTRIBUTIONS means the contributions made to the Trust as
set forth in Section 4.03 of the Plan.
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<PAGE> 16
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 ELIGIBILITY
Each Employee who was a Participant in a Prior Plan on the day prior to
the Effective Date shall continue to participate in the Plan on the
Effective Date if still employed by a Participating Employer on that
date.
Each other Employee of a Participating Employer shall become a
Participant in the Plan as follows:
(a) A nonsalaried Employee of Florida Ladder Company, Kentucky
Ladder Company, Gold Medal Ladder Company, and the Anniston
Division shall become a Participant in the Plan on his Date of
Employment. The preceding sentence notwithstanding, such an
Employee shall not be eligible to make Salary Reduction
Contributions pursuant to Section 4.02 until the Entry Date
coincident with or next following completion of Six (6) Months
of Service after his Date of Employment or Reemployment, if
applicable.
(b) A Union Employee who is a member of the S.M.W. Local 170 or
USWA Local 3713 shall become a Participant in the Plan on his
Date of Employment. The preceding sentence notwithstanding,
such an Employee shall not be eligible to make Salary
Reduction Contributions pursuant to Section 4.02 until the
Entry Date coincident with or next following completion of Six
(6) Months of Service after his Date of Employment or
Reemployment, if applicable.
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<PAGE> 17
(c) All other Employees shall become a Participant in the Plan on
the Entry Date coincident with or next following completion of
Six (6) Months of Service after his Date of Employment or
Reemployment, if applicable.
2.02 TERMINATION AND REEMPLOYMENT
(a) A Participant who terminates employment and is subsequently
reemployed shall become a Participant on the Entry Date
coincident with or next following his Date of Reemployment.
(b) An Employee who terminates employment before becoming a
Participant and is reemployed before incurring a Break in
Service shall become a Participant when he satisfies the
eligibility requirements of Section 2.01, based on his
original Date of Employment.
(c) An Employee who terminates employment before becoming a
Participant and is reemployed after incurring a Break in
Service shall become a Participant when he satisfies the
eligibility requirements of Section 2.01, based on his Date of
Reemployment.
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ARTICLE III
SERVICE
3.01 DEFINITIONS
ANNIVERSARY YEAR means the twelve (12) consecutive month period
commencing on an Employee's Date of Employment or Date of Reemployment,
if applicable, and anniversaries of such date.
BREAK IN SERVICE means a one (1) year period, commencing on an
Employee's Severance From Service, during which such Employee does not
perform duties for a Participating Employer or an Affiliate.
DATE OF EMPLOYMENT or DATE OF REEMPLOYMENT means the date on which an
Employee first completes an Hour of Service after employment or
reemployment with a Participating Employer, if applicable.
MID-YEAR ANNIVERSARY DATE means the date which is the first day
following the six (6) month period commencing on the Participant's Date
of Employment or Date of Reemployment, if applicable.
MONTHS OF SERVICE means any calendar month in which an Employee
completes at least one (1) Hour of Service.
SEVERANCE FROM SERVICE means the earlier of the following dates:
(a) The date on which an Employee terminates employment, is
discharged, retires, or dies; or
(b) The first anniversary of the first day of a period in which an
Employee remains absent from service (with or without pay)
from the Company or an Affiliated Company for any reason other
than a reason listed in paragraph (a).
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An Employee who fails to return to employment at the
expiration of a leave of absence approved by the Employer
shall be deemed to have incurred a Severance From Service on
the first to occur of the expiration of his leave or the first
anniversary of the first day of his absence.
Notwithstanding anything herein to the contrary, for purposes of
determining whether a one (1) year Break in Service has occurred, an
Employee shall not incur a Severance From Service due to an absence for
maternity or paternity reasons until the second anniversary of the
first date of such absence. For purposes of this paragraph, an absence
from work for maternity or paternity reasons means an absence:
(a) By reason of the pregnancy of the individual;
(b) By reason of a birth of a child of the individual; or
(c) By reason of the placement of a child with the individual in
connection with the adoption of such child by such individual.
SIX (6) MONTHS OF SERVICE means a computation period in which an
Employee completes at least five hundred (500) Hours of Service.
YEAR OF VESTING SERVICE means a unit of service credited to an Employee
for purposes of determining the nonforfeitable balance of the
Participant's Accounts.
(a) An Employee shall be credited with one (1) Year of Vesting
Service for each full year in the period commencing on his
Date of Employment or Date of Reemployment and ending on his
Severance From Service. An Employee also shall be credited
with one three-hundred-sixty-fifth (1/365) of a
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<PAGE> 20
Year of Vesting Service for each additional day in such period
for which he did not receive credit pursuant to the preceding
sentence.
(b) A former Employee who is reemployed and who performs duties
for the Company or an Affiliated Company within twelve (12)
calendar months of his Severance From Service shall be
credited with the entire period of his absence as if he had
worked each day during such period.
3.02 APPLICABLE COMPUTATION PERIOD
(a) For purposes of determining whether an Employee has completed
Six (6) Months of Service, the applicable computation period
shall be the six (6) consecutive month period commencing on
(1) the Participant's Date of Employment or Date of
Reemployment, if applicable, and (2) the Participant's
Mid-Year Anniversary Date, and anniversaries of such dates.
(b) For purposes of determining an Employee's Years of Vesting
Service, the following rules shall apply:
(1) Years of Vesting Service for Nonunion Employees,
other than Nonunion Employees of the Anniston
Division, shall not include computation periods prior
to the effective date of a Prior Plan in which such
individual was eligible to participate.
(2) For Union Employees who are members of the IAM & AW
Local 2032 or the Teamsters Local 261. Years of
Vesting Service shall not include periods prior to
the effective date of a Prior
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<PAGE> 21
Plan in which such individual was eligible to
participate.
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<PAGE> 22
ARTICLE IV
CONTRIBUTIONS
4.01 COMPANY MATCHING CONTRIBUTIONS
Each Plan Year, the Participating Employer shall contribute to the
Trust Fund on behalf of each Nonunion Employee of such Participating
Employer a Company Matching Contribution equal to fifty percent (50%)
of such individual's Salary Reduction Contribution for such year. In
applying the Company Matching Contribution percentage specified above,
Salary Reduction Contributions in excess of four percent (4%) of
Compensation shall be disregarded. Company Matching Contributions shall
be paid to the Trustee monthly, but not later than the time prescribed
by law for filing the Company's Federal income tax return for the year,
including any extensions thereof. Notwithstanding the above, Company
Matching Contributions, Company Contributions, and Salary Reduction
Contributions for any year shall not exceed the maximum amount
deductible by the Participating Employer for such year for Federal
income tax purposes under Section 404 of the Code. All Company Matching
Contributions, Company Contributions, and Salary Reduction
Contributions are specifically conditioned on their deductibility under
Section 404 of the Code.
4.02 SALARY REDUCTION CONTRIBUTIONS
(a) Each Participant shall have the option to enter into a written
salary reduction agreement with the Participating Employer
which shall be applicable to all Compensation received
thereafter. The salary reduction agreements shall provide that
the Participant agrees to accept a reduction in salary from
the Participating Employer equal to between one percent (1%)
and fifteen percent (15%) of his Compensation in integral
percentages, as elected by
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<PAGE> 23
the Participant. In addition, subject to the limitations
contained in Sections 4.02(e), 4.02(f), and 5.05 of the Plan,
a Participant may elect to have the Company contribute all or
any portion of any bonus as a Salary Reduction Contribution.
The Participating Employer shall contribute to the Trust Fund,
as soon as practicable after the end of each payroll period,
but not later than thirty (30) days after the end of the Plan
Year, an amount equal to the Salary Reduction Contributions of
all Participants of such Participating Employer for such Plan
Year.
(b) Each Participant may change the rate of his Salary Reduction
Contribution by filing a new salary reduction agreement with
the Participating Employer. The new rate shall become
effective as soon as practicable after receipt of the new
salary reduction agreement by the Participating Employer. Such
new salary reduction agreement shall be applicable to all
Compensation received thereafter.
(c) Each Participant may discontinue his Salary Reduction
Contributions by notifying the Participating Employer in
writing. The discontinuance will become effective as soon as
practicable after receipt of such written notice by the
Participating Employer.
(d) The Company shall direct the Trustee to establish and maintain
a Salary Reduction Contribution Account in the name of each
Participant who elects to enter into a salary reduction
agreement.
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<PAGE> 24
(e) Notwithstanding the above, the maximum amount of Salary
Reduction Contributions which can be made on behalf of each
Participant in any calendar year shall not exceed seven
thousand dollars ($7,000) or such other amount as may be
established by the Secretary of the Treasury pursuant to
Section 402(g) of the Code. In the event that a Participant's
Salary Reduction Contributions for any calendar year exceed
the maximum permissible amount (and/or in the event that the
Participant has had more than such amount of such
contributions made on his behalf under this Plan and any other
qualified plans of any employer or any other plans subject to
Section 402(g) of the Code in which he is covered and has, by
writing, communicated to the Plan Administrator prior to March
1 of the year following the year for which such contributions
were made the amount of such excess contributions which are to
be attributed to this Plan), such excess amount shall be
included in such Participant's taxable earnings for such year.
Such excess contributions (and income) shall be distributed to
the Participant prior to April 15 of the year following the
year to which the excess contributions relate and shall be
designated by the Plan as a distribution of excess
contributions (and income) under Section 402(g) of the Code.
When excess contributions are distributed, the amount to be
distributed shall be increased by earnings thereon or reduced
by losses thereon for the calendar year and for the period
between the end of the calendar year and the date of
distribution. (Earnings and losses shall be determined without
regard to whether there has been realized appreciation or
loss.)
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<PAGE> 25
The earnings or losses allocable to the excess contributions
for the calendar year are determined by multiplying net
earnings or losses for the calendar year in the Participant's
Salary Reduction Contribution Account by a fraction. The
numerator of the fraction is the amount of the excess
contributions on behalf of the Participant for the calendar
year. The denominator of the fraction is the total balance of
the Participant's Salary Reduction Contribution Account as of
the last day of the calendar year, reduced by the gain
allocable to such Account for the calendar year or increased
by the loss allocable to such Account for the calendar year.
The earnings or losses for the period between the end of the
calendar year and the date of the corrective distribution
shall be equal to ten percent (10%) of the earnings or losses
allocable to excess contributions for the calendar year
multiplied by the number of calendar months that have elapsed
since the end of the calendar year. For purposes of
determining the number of calendar months that have elapsed, a
distribution occurring on or before the 15th day of the month
will be treated as having been made on the last day of the
preceding month and the distribution occurring after such 15th
day will be treated as having been made on the first day of
the next month.
In the event that amounts are to be distributed to
Participants as a result of excess contributions under this
paragraph (e) and in the event that amounts have been
distributed previously to Participants as a result of excess
contributions under paragraph (f) below, the excess
contributions (plus earnings or reduced by losses thereon) for
purposes of this paragraph shall be reduced by any excess
contributions (plus earnings or reduced by losses
18
<PAGE> 26
thereon) described in paragraph (f) below which have been
distributed previously.
(f) The Participating Employer may amend or revoke any salary
reduction agreement entered into by a Participant at any time
if the Participating Employer determines that such amendment
or revocation is necessary to ensure that the additions to a
Participant's Accounts for any Plan Year shall not exceed the
limitations set forth in Section 5.05 of the Plan, or to
ensure that one (1) of the following nondiscrimination tests
contained in Section 401(k) of the Code is satisfied for any
Plan Year:
(1) The actual deferral percentage for the Plan Year for
eligible Participants who are highly compensated
Employees as a group is not more than one and
one-quarter (1 1/4) times the actual deferral
percentage for the Plan Year for all other eligible
Participants as a group; or
(2) The actual deferral percentage for the Plan Year for
eligible Participants who are highly compensated
Employees as a group is not more than two (2)
percentage points (or such lesser amount as the
Secretary of the Treasury shall prescribe to prevent
the multiple use of this alternative limitation with
respect to any highly compensated Employee) greater
than, and not more than two (2) times, the actual
deferral percentage for the Plan Year for all other
eligible Participants as a group.
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Section 4.02, in the event no officer of the
Participating Employer or Affiliate received
compensation from the Participating Employer and
Affiliates in excess of fifty percent (50%) of the
amount in effect under Section 415(b)-(1)(A) of the
Code for such Plan Year, the highest paid officer
shall be treated as highly compensated. Further, no
more than fifty (50) Employees (or, if lesser, the
greater of three (3) Employees or ten percent (10%)
of the Employees) shall be treated as officers for
purposes of this Section 4.02 in determining a highly
compensated Employee.
In the case of the Plan Year for which the determination is
made, an Employee not described in (2), (3), or (4) above for
the preceding year (without regard to this sentence) shall not
be treated as described in (2), (3), or (4) above unless such
Employee is a member of the group consisting of the one
hundred (100) Employees paid the greatest compensation during
the Plan Year for which the determination is being made.
If any individual is the spouse, lineal ascendant, lineal
descendant, or spouse of a lineal ascendant or descendant of a
five percent (5%) owner or of a highly compensated Employee in
the group consisting of the ten (10) highly compensated
Employees paid the greatest compensation during the year, then
such individual shall not be treated as a separate Employee,
and any compensation paid to such individual (and any Salary
Reduction Contribution on behalf of such individual) shall be
treated as if paid to (or on behalf of) the five percent (5%)
owner or highly compensated Employee.
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(3) Deferral percentages shall be rounded to the nearest
one-hundredth of one percentage point (1/100).
For purposes of this paragraph (f), a "highly compensated
Employee" for a Plan Year is any Employee who, during such
Plan Year or the immediately preceding Plan Year:
(1) Was at any time a five percent (5%) owner of the
Participating Employer (within the meaning of Section
416(i)(1) of the Code);
(2) Received compensation from the Participating Employer
and Affiliates in excess of seventy-five thousand
dollars ($75,000) (or such other amount as determined
under Section 414(q) of the Code);
(3) Received compensation from the Participating Employer
and Affiliates in excess of fifty thousand dollars
($50,000) (or such other amount as determined under
Section 414(q) of the Code) and was in the top twenty
percent (20%) of the group of Employees determined
under Section 414(q)(8) of the Code when ranked on
the basis of compensation in such Plan Year; or
(4) Was at any time an officer of the Participating
Employer or Affiliate and received compensation from
the Participating Employer and Affiliates in excess
of fifty percent (50%) of the amount in effect under
Section 415(b)(1)(A) of the Code for such Plan Year.
For purposes of this
20
<PAGE> 29
A former Employee who had a separation year prior to the Plan
Year for which the determination is made who was a highly
compensated Employee for either such former Employee's final
year of employment or any determination year ending on or
after the Employee's fifty-fifth birthday shall be included as
a highly compensated Employee.
All determinations of highly compensated Employees shall be
made in accordance with Section 414(q) of the Code.
For purposes of this paragraph (f), the "actual deferral
percentage" for a Plan Year for a group of eligible
Participants is the average of the ratios (calculated
separately for each eligible Participant in such group) of the
amount of Salary Reduction Contributions credited to an
eligible Participant's Salary Reduction Contribution Account
for such Plan Year to the eligible Participant's compensation,
as defined in Section 414(s) of the Code, for such Plan Year.
The actual deferral percentage of an eligible Participant who
is a "highly compensated Employee" for the Plan Year and who
is eligible to make salary reduction contributions under two
(2) or more plans or arrangements described in Section 401(k)
of the Code that are maintained by a Participating Employer or
Affiliate shall be determined as if all such salary reduction
contributions were made under a single arrangement. If an
eligible highly compensated Employee is subject to the family
aggregation rules because he is either a five percent (5%)
owner or one (1) of the ten (10) most highly compensated
Employees, the actual deferral percentage for the family group
(which is treated as one (1) highly compensated Employee)
shall be deter-
22
<PAGE> 30
mined by combining the Salary Reduction Contributions and
compensation of all eligible family members.
For purposes of this paragraph (f), an "eligible Participant"
is any Employee of a Participating Employer who is authorized
under the terms of the Plan to make Salary Reduction
Contributions for the Plan Year.
In the event that one (1) of the tests set forth above is not
satisfied for any Plan Year, the excess Salary Reduction
Contributions (within the meaning of Section 401(k)(8)(B) of
the Code), along with the earnings of the Trust Fund allocable
to such amount, must be distributed to the affected
Participant before the last day of the immediately following
Plan Year. The amount of excess Salary Reduction Contributions
for a highly compensated Employee for a Plan Year shall be
determined by the leveling method described in Regulation
Section 1.401(k)-1(f)(2). If an eligible highly compensated
Employee is subject to the family aggregation rules because he
is either a five percent (5%) owner or one (1) of the ten (10)
most highly compensated Employees, the amount of excess Salary
Reduction Contributions for the family group (determined by
the leveling method described in Regulation Section
1.401(k)-(1)(f)(2)) shall be allocated among the family
members in proportion to the Salary Reduction Contribution of
each family member that is combined to determine the actual
deferral percentage.
The earnings or losses allocable to the excess contributions
for the Plan Year are determined by multiplying net earnings
or losses for the Plan Year in the Participant's Salary
Reduction Contribution Account by a fraction. The numerator of
the fraction is the amount of the excess
23
<PAGE> 31
contributions on behalf of the Participant for the Plan Year.
The denominator of the fraction is the total balance of the
Participant's Salary Reduction Contribution Account as of the
last day of the Plan Year, reduced by the gain allocable to
such Account for the Plan Year or increased by the loss
allocable to such Account for the Plan Year.
The earnings or losses for the period between the end of the
Plan Year and the date of the corrective distribution shall be
equal to ten percent (10%) of the earnings or losses allocable
to excess contributions for the Plan Year multiplied by the
number of calendar months that have elapsed since the end of
the Plan Year. For purposes of determining the number of
calendar months that have elapsed, a distribution occurring on
or before the 15th day of the month will be treated as having
been made on the last day of the preceding month and the
distribution occurring after such 15th day will be treated as
having been made on the first day of the next month.
The amount of excess Salary Reduction Contributions to be
distributed under this paragraph (f) with respect to a
Participant for a Plan Year shall be reduced by any Salary
Reduction Contributions in excess of the amount established by
the Secretary of the Treasury pursuant to Section 402(g) of
the Code which were previously distributed to such Participant
for the Participant's taxable year ending with or within such
Plan Year.
(g) The distribution of a Participant's Salary Reduction
Contribution Account shall not commence prior to his
attainment of age fifty-nine and one-half (59 1/2), death,
Total and Permanent Disability, or other termination of
24
<PAGE> 32
(employment except upon his demonstration of financial
hardship in accordance with the provisions of Section 8.03.
Notwithstanding the foregoing, in the event of a termination
of the Plan without establishment of a successor plan or upon
the occurrence of other circumstances defined in Section
401(k)(10) of the Code, the distribution of a Participant's
Salary Reduction Account shall be permitted.
4.03 VOLUNTARY EMPLOYEE CONTRIBUTIONS
(a) Each Plan Year each Participant may elect to contribute to the
Trust Fund as a Voluntary Employee Contribution an amount
equal to between one percent (1%) and eight percent (8%) of
his Compensation in integral percentages. A Participant who
elects to make Voluntary Employee Contributions shall complete
an authorization form as prescribed by the Plan Administrator.
The Participating Employer shall deduct each Participant's
Voluntary Employee Contribution from his Compensation for each
pay period.
(b) Each Participant may change the rate of his Voluntary Employee
Contributions by filing a new authorization form with the
Participating Employer. The new rate shall become effective as
soon as practicable after receipt of the new authorization
form by the Participating Employer.
(c) Each Participant may discontinue his Voluntary Employee
Contributions at any time by notifying the Participating
Employer. The discontinuance will become effective as soon as
practicable following receipt of such notice by the
Participating Employer.
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<PAGE> 33
(d) The Company shall direct the Trustee to establish and maintain
a Voluntary Employee Contribution Account in the name of each
Participant who elects to make Voluntary Employee
Contributions pursuant to this Section 4.03.
(e) The Voluntary Employee Contributions shall satisfy one (1) of
the nondiscrimination tests described in Section 5.07(b) of
the Plan.
4.04 COMPANY CONTRIBUTION
(a) Each Plan Year, the Participating Employer shall contribute to
the Trust Fund, on behalf of each Participant who is a
nonsalaried Employee of Florida Ladder Company, Kentucky
Ladder Company, and Gold Medal Ladder Company, a Company
Contribution equal to five cents ($.05) per Hour of Service of
each such Participant.
(b) Each Plan Year, the Participating Employer shall contribute to
the Trust Fund, on behalf of each Participant who is a Union
Employee and a member of the S.M.W. Local 170, a Company
Contribution equal to five cents ($.05) per Hour of Service of
each such Participant.
(c) Each Plan Year, the Participating Employer shall contribute to
the Trust Fund, on behalf of each Participant who is a
nonsalaried Employee of the Anniston Division, a Company
Contribution equal to two percent (2%) of such individual's
gross pay for such year.
(d) Each Plan Year, the Participating Employer shall contribute to
the Trust Fund, on behalf of each Participant who is a Union
Employee and a member of USWA Local 3713,
26
<PAGE> 34
a Company Contribution equal to twenty cents ($.20) per Hour
of Service of each such Participant.
(e) Each Plan Year, the Participating Employer shall contribute to
the Trust Fund, on behalf of each Participant who is a
salaried Employee, such amount as the Participating Employer
shall determine.
(f) Company Contributions shall be paid to the Trustee monthly,
but not later than the time prescribed by law for filing the
Company's Federal income tax return for the year, including
any extensions thereof.
(g) Notwithstanding the above, Company Contributions, Company
Matching Contributions, and Salary Reduction Contributions for
any year shall not exceed the maximum amount deductible by the
Participating Employer for such year for Federal income tax
purposes under Section 404 of the Code. All Company
Contributions, Company Matching Contributions, and Salary
Reduction Contributions are specifically conditioned on their
deductibility under Section 404 of the Code.
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ARTICLE V
ALLOCATIONS, ACCOUNTING, AND ADJUSTMENTS
5.01 COMPOSITION OF TRUST FUND
All amounts contributed to the Plan, as increased or decreased by
income, expenditure, appreciation, and depreciation, shall constitute a
single fund known as the Trust Fund. A separate Company Contribution
Account shall be maintained for each Participant. Additional Accounts
shall be maintained for each Participant as required by Article IV and
Article IX.
5.02 ALLOCATION OF EARNINGS TO ACCOUNTS
Earnings shall be allocated to the Accounts of all Participants daily
by credit or deduction therefrom, as the case may be, of a portion of
the increase or decrease in the value of the respective investment
funds of the Trust Fund since the preceding day attributable to
interest, dividends, changes in market value, expenses, and gains and
losses realized from the sale of assets. Such allocation shall be made
in the proportion that the opening balance of each such Account
invested in such investment fund bears to the total of the opening
balances of all such Accounts invested in the investment fund.
5.03 TIMING OF ALLOCATION OF COMPANY CONTRIBUTIONS AND COMPANY MATCHING
CONTRIBUTIONS
At the time the contributions are received by the Trustee, the Company
Contributions and Company Matching Contributions for such month shall
be allocated according to the allocation procedures in Section 5.07.
Notwithstanding the preceding sentence, Company Contributions
attributable to a Plan Year received by the Trustee
28
<PAGE> 36
after the end of such Plan Year shall be considered allocated as of the
end of such Plan Year for purposes of Sections 5.05 and 5.06.
5.04 ALLOCATION OF OTHER CONTRIBUTIONS
At the time the contributions are received by the Trustee, Salary
Reduction Contributions and Voluntary Employee Contributions made to
the Plan during such month by or on behalf of each Participant shall be
credited to such Participant's appropriate Account. Notwithstanding the
preceding sentence, Salary Reduction Contributions and Voluntary
Employee Contributions attributable to a Plan Year received by the
Trustee after the end of such Plan Year shall be considered allocated
as of the end of such Plan Year for purposes of Sections 5.05 and 5.06.
5.05 MAXIMUM ANNUAL ADDITIONS
(a) The sum of the following additions to a Participant's Accounts
in any Limitation Year shall not exceed the lesser of (1) the
greater of thirty thousand dollars ($30,000) or one-fourth
(14) of the dollar limitation in effect under Section
415(b)(1)(A) of the Code, or (2) twenty-five percent (25%) of
the Participant's compensation for such Limitation Year:
(1) The Company Contributions and Company Matching
Contributions allocated to such Participant's Company
Contribution Account.
(2) The Salary Reduction Contributions allocated to such
Participant's Salary Reduction Contribution Account.
29
<PAGE> 37
(3) The Forfeitures, if any, allocated to such
Participant's Company Contribution Account.
(4) The Voluntary Employee Contributions allocated to
such Participant's Voluntary Employee Contribution
Account.
(b) If, as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's annual compensation, or
such other facts and circumstances to which Internal Revenue
Service Regulation 1.415-6 would be applicable, the additions
to a Participant's Accounts under Section 5.05(a) in any
Limitation Year would be in excess of the maximum annual
limits, his Voluntary Employee Contributions shall be returned
to him to the extent necessary to bring the additions within
the required limits. If the additions to such Participant's
Accounts would still remain in excess of the maximum annual
limits, his Salary Reduction Contributions otherwise allocable
shall be allocated to a suspense account to the extent
necessary to bring the additions within the required limits.
Such suspense account shall share in the allocation of
earnings under Section 5.02 and shall be allocated to the
Salary Reduction Contribution Account of such Participant in
future Limitation Years. If the additions to such
Participant's Accounts would still remain in excess of the
maximum annual limits, amounts otherwise allocable to the
Company Contribution Account of such Participant for such
Limitation Year shall be allocated to a suspense account in an
amount necessary to bring the additions within the maximum
annual limits which shall share in the allocation of earnings
under Section 5.02 and shall be allocated to the Company
Contribution Account of such Participant in future Limitation
Years or
30
<PAGE> 38
as otherwise provided by Internal Revenue Service Regulation
Section 1.415-6.
(c) For purposes of this Section 5.05, this Plan and any other
qualified defined contribution plan maintained by the Company,
a Participating Employer, or an Affiliate shall be considered
as a single defined contribution plan if a Participant is a
participant in both plans. Amounts allocated in Limitation
Years beginning after March 31, 1984 to a Participant's
individual medical benefit account, as defined in Section
415(l)(1) of the Code, which is part of a defined benefit plan
maintained by the Company, a Participating Employer, or an
Affiliate shall be treated as annual additions to a defined
contribution plan. Amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after
such date, which are attributable to post-retirement medical
benefits allocated to the separate account of a Participant
who is a key employee, as defined in Section 419A(d) of the
Code, under a welfare benefit fund, as defined in Section
419(e) of the Code, maintained by the Company, a Participating
Employer, or an Affiliate, shall be treated as annual
additions to a defined contribution plan. Notwithstanding the
foregoing, the compensation limit described above shall not
apply to any contribution for medical benefits (within the
meaning of Section 419A(f)(2) of the Code) after separation
from service which is otherwise treated as an annual addition
under Section 415(l)(1) of the Code. If a reduction is
necessary under paragraph (b), then the reduction shall first
be made to the annual additions under this Plan.
(d) For purposes of determining the maximum contribution
limitations pursuant to this Section 5.05, "compensation"
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<PAGE> 39
means a Participant's earned income, wages, salaries, fees for
professional services, and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the Participating Employer to the extent that
the amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, tips,
bonuses, fringe benefits, reimbursements, and expense
allowances), and excluding the following:
(1) Participating Employer contributions to a plan of
deferred compensation which are not includable in the
Participant's gross income for the taxable year in
which contributed, or any distributions from a plan
of deferred compensation;
(2) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property)
held by the Participant either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(3) Amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock
option; and
(4) Other amounts which receive special tax benefits, or
contributions made by the Participating Employer
(whether or not under a salary reduction agreement)
towards the purchase of an annuity described in
Section 403(b)
32
<PAGE> 40
of the Code (whether or not the amounts are actually
excludable from the gross income of the Participant).
5.06 PARTICIPATION IN DEFINED BENEFIT PLAN
(a) If any Participant has also participated in any qualified
defined benefit plan maintained by the Company, a
Participating Employer, or an Affiliate, the sum of the
defined benefit plan fraction and the defined contribution
plan fraction for any Limitation Year shall not exceed 1.0. In
the event this limitation would otherwise be exceeded in any
Limitation Year, the Participant's benefits under the defined
benefit plan shall be limited to the extent necessary.
(b) The defined contribution plan fraction for any Limitation Year
is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Accounts as of the close of the
Limitation Year under this Plan and the denominator of which
is the sum of the lesser of the following amounts determined
for such Limitation Year and each prior year of service with
the Company, Participating Employer, or Affiliate:
(1) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(c)(1)(A) of
the Code for such Limitation Year; or
(2) The product of 1.4 multiplied by the amount which may
be taken into account under Section 415(c)(l)(B) of
the Code for such Limitation Year.
33
<PAGE> 41
The annual additions for any Limitation Year beginning before
January 1, 1987 shall not be recomputed to treat all Employee
Contributions as annual additions.
(c) The defined benefit plan fraction for any Limitation Year is a
fraction, the numerator of which is the projected annual
benefit of the Participant under such plan (determined as of
the close of its limitation year) and the denominator of which
is the lesser of:
(1) The product of 1.25 multiplied by the maximum dollar
limitation in effect under Section 415(b)(1)(A) of
the Code for such Limitation Year; or
(2) The product of 1.4 multiplied by the amount which may
be taken into account under Section 415(b)(l)(B) of
the Code for such Limitation Year.
(d) If the Plan satisfied the applicable requirements of Section
415 of the Code as in effect for all Limitation Years
beginning before January 1, 1987, an amount shall be
subtracted from the numerator of the defined contribution plan
fraction (not exceeding such numerator), as prescribed by the
Secretary of the Treasury, so that the sum of the defined
benefit plan fraction and the defined contribution plan
fraction computed under Section 415(e)(1) of the Code does not
exceed one (1).
(e) For purposes of this Section 5.06, all defined benefit or
defined contribution plans shall be treated as one (1) plan by
class.
34
<PAGE> 42
5.07 ALLOCATION OF COMPANY CONTRIBUTIONS AND COMPANY MATCHING CONTRIBUTIONS
(a) The Company Contributions and Company Matching Contributions
shall be allocated as follows:
(1) The Company Contributions shall be allocated to the
Company Contribution Accounts of eligible
Participants who are entitled to a Company
Contribution pursuant to Section 4.04. Such
allocation shall be based on the contribution rates
set forth in Section 4.04. Notwithstanding the
preceding sentence, a Participant eligible to share
in Company Contributions made pursuant to Section
4.04(e) shall share such Company Contributions in the
proportion that his Compensation bears to the
Compensation of all Participants eligible for such
Company Contribution for the Plan Year.
(2) The Company Matching Contributions shall be allocated
to the Company Contribution Accounts of eligible
Participants who made Salary Reduction Contributions
for such Plan Year. Such allocation shall be based on
the contribution rate set forth in Section 4.01 of
the Plan.
(b) The Company Matching Contributions and any Voluntary Employee
Contributions for any Plan Year shall satisfy one (1) of the
following nondiscrimination tests contained in Section 401(m)
of the Code:
(1) The contribution percentage for the Plan Year for
eligible Participants who are highly com-
35
<PAGE> 43
pensated Employees as a group is not more than one
and one-quarter (1 1/4) times the contribution
percentage for the Plan Year for all other eligible
Participants as a group; or
(2) The contribution percentage for the Plan Year for
eligible Participants who are highly compensated
Employees as a group is not more than two (2)
percentage points (or such lesser amount as the
Secretary of the Treasury shall prescribe to prevent
the multiple use of this alternative limitation with
respect to any highly compensated Employee) greater
than, and not more than two (2) times, the
contribution percentage for the Plan Year for all
other eligible Participants as a group.
(c) For purposes of this Section 5.07, the following definitions
shall apply:
(1) A "highly compensated Employee" for a Plan Year is
any Employee who, during such Plan Year or the
immediately preceding Plan Year:
(A) Was at any time a five percent (5%) owner of
the Participating Employer (within the
meaning of Section 416(i)(1) of the Code);
(B) Received compensation from the Participating
Employer and Affiliates in excess of
seventy-five thousand dollars ($75,000) (or
such other amount
36
<PAGE> 44
as determined under Section 414(q) of the
Code);
(C) Received compensation from the Participating
Employer and Affiliates in excess of fifty
thousand dollars ($50,000) (or such other
amount as determined under Section 414(q) of
the Code) and was in the top twenty percent
(20%) of the group of Employees determined
under Section 414(q)(8) of the Code when
ranked on the basis of compensation in such
Plan Year; or
(D) Was at any time an officer of the
Participating Employer or Affiliate and
received compensation from the Participating
Employer and Affiliates in excess of fifty
percent (50%) of the amount in effect under
Section 415(b)(1)(A) of the Code for such
Plan Year. For purposes of this Section
5.07, in the event no officer of the
Participating Employer or Affiliate received
compensation from the Participating Employer
and Affiliates in excess of fifty percent
(50%) of the amount in effect under Section
415(b)(l)(A) of the Code for such Plan Year,
the highest paid officer shall be treated as
highly compensated. Further, no more than
fifty (50) Employees (or, if lesser,
37
<PAGE> 45
the greater of three (3) Employees or ten
percent (10%) of the Employees) shall be
treated as officers for purposes of this
Section 5.07 in determining a highly
compensated Employee.
In the case of the Plan Year for which the
determination is made, an Employee not described in
(B), (C), or (D) above for the preceding year
(without regard to this sentence) shall not be
treated as described in (B), (C), or (D) above unless
such Employee is a member of the group consisting of
the one hundred (100) Employees paid the greatest
compensation during the Plan Year for which the
determination is being made.
If any individual is the spouse, lineal ascendant,
lineal descendant, or spouse of a lineal ascendant or
descendant of a five percent (5%) owner or of a
highly compensated Employee in the group consisting
of the ten (10) highly compensated Employees paid the
greatest compensation during the year, then such
individual shall not be treated as a separate
Employee, and any compensation paid to such
individual (and any Voluntary Employee Contribution
and Company Matching Contribution made on behalf of
such individual) shall be treated as if paid to (or
on behalf of) the five percent (5%) owner or highly
compensated Employee.
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<PAGE> 46
A former Employee who had a separation year prior to
the Plan Year for which the determination is made who
was a highly compensated Employee for either such
former Employee's final year of employment or any
determination year ending on or after an Employee's
fifty-fifth birthday shall be included as a highly
compensated Employee.
All determinations of highly compensated Employees
shall be made in accordance with Section 414(q) of
the Code.
(2) The "contribution percentage" for a Plan Year for a
group of eligible Participants is the average of the
ratios (calculated separately for each eligible
Participant in such group) of the Company Matching
Contributions allocated to an eligible Participant's
Company Contribution Account plus the Voluntary
Employee Contributions credited to an eligible
Participant's Voluntary Employee Contribution Account
for the Plan Year to the eligible Participant's
compensation, as defined in Section 414(s) of the
Code, for the Plan Year. The contribution percentage
of an eligible Participant who is a "highly
compensated Employee" for the Plan Year and who is
eligible to make employee contributions or to receive
matching contributions, as defined in Section
401(m)(4) of the Code, under two (2) or more plans
described in Section 401(a) of the Code that are
maintained by the Participating Employer or an
Affiliate shall be determined as if all such
contributions were
39
<PAGE> 47
made under a single plan. If an eligible highly
compensated Employee is subject to the family
aggregation rules because he is either a five percent
(5%) owner or one (1) of the ten (10) most highly
compensated Employees, the contribution percentage
for the family group (which is treated as one (1)
highly compensated Employee) shall be determined by
combining the Company Matching Contributions, the
Voluntary Employee Contributions, and the
compensation of all eligible family members.
An "eligible Participant" is any Employee who is authorized to
receive Company Matching Contributions or is authorized to
make Voluntary Employee Contributions under the terms of the
Plan for the Plan Year.
(d) In the event that one (1) of the tests set forth in paragraph
(b) is not satisfied for any Plan Year, the excess aggregate
Company Matching Contributions and Voluntary Employee
Contributions (within the meaning of Section 401(m)(6)(B) of
the Code), along with the earnings of the Trust Fund allocable
to such amount, shall, before the last day of the immediately
following Plan Year:
(1) To the extent not vested, be forfeited and allocated,
after all other Forfeitures under the Plan, in the
same manner as such other Forfeitures; and
(2) To the extent vested, be distributed to the affected
Participant.
40
<PAGE> 48
Notwithstanding the foregoing, no Forfeitures arising under
this paragraph shall be allocated to the Company Contribution
Account of any eligible Participant who is a highly
compensated Employee.
The amount of excess aggregate Company Matching Contributions
and Voluntary Employee Contributions for a highly compensated
Employee for a Plan Year shall be determined by the leveling
method described in Proposed Regulation Section
1.401(m)-1(e)(2). If an eligible highly compensated Employee
is subject to the family aggregation rules because he is
either a five percent (5%) owner or one (1) of the ten (10)
most highly compensated Employees, the amount of excess
aggregate Company Matching Contributions and Voluntary
Employee Contributions for the family group (determined by the
leveling method described in Regulation (Section
1.401(m)-(1)(e)(2)) shall be allocated among the family
members in proportion to the Company Matching Contribution and
Voluntary Employee Contributions of each family member that is
combined to determine the contribution percentage.
The earnings or losses allocable to the excess aggregate
contributions for the Plan Year are determined by multiplying
net earnings or losses for the Plan Year in the Participant's
Company Contribution Account and Voluntary Employee
Contribution Account by a fraction. The numerator of the
fraction is the amount of the excess aggregate contributions
on behalf of the Participant for the Plan Year. The
denominator of the fraction is the total balance of the
Participant's Company Contribution Account and Voluntary
Employee Contribution Account as of the last day of the Plan
Year, reduced by the gain allocable to
41
<PAGE> 49
such Account for the Plan Year or increased by the loss
allocable to each such Account for the Plan Year.
The earnings or losses for the period between the end of the
Plan Year and the date of reallocation or corrective
distribution shall be equal to ten percent (10%) of the
earnings or losses allocable to excess aggregate contributions
for the Plan Year multiplied by the number of calendar months
that have elapsed since the end of the Plan Year. For purposes
of determining the number of calendar months that have
elapsed, a distribution occurring on or before the 15th day of
the month will be treated as having been made on the last day
of the preceding month and the distribution occurring after
such 15th day will be treated as having been made on the first
day of the next month.
5.08 PARTICIPANT ELECTION OF INVESTMENT FUNDS
Each Participant in the Plan may elect the investment fund or funds in
which his Accounts shall be invested. Each such election shall be made
in writing on forms to be furnished by the Plan Administrator and shall
specify that portion of the Participant's existing Account Balance on
the date of such election to be invested in each respective investment
fund established by the Company. Each of the Participant's Accounts
shall be invested in the same proportions in each investment fund.
Changes in the Account Balances invested in the specified funds due to
earnings and losses shall not require reallocation of the Account
Balances in the specified proportions unless subsequently elected by
the Participant.
A Participant may change his investment fund elections regarding
existing Account Balances and future contributions and Forfeitures
42
<PAGE> 50
in accordance with procedures established by the Plan Administrator.
Such change shall be effective as of the close of business on the day
appropriate notice is provided.
If no election form has been executed by the Participant and submitted
to the Trustee by the Plan Administrator, the entire Account shall be
invested in the investment fund designated by the Plan Administrator.
43
<PAGE> 51
ARTICLE VI
VESTING
6.01 COMPANY CONTRIBUTION ACCOUNT
A Participant shall have a fully vested, nonforfeitable interest in his
Company Contribution Account on the first to occur of the following
events (regardless of the number of completed Years of Vesting Service):
(a) His attainment of Early Retirement Age or Normal Retirement Age;
(b) The date on which he shall be determined to have a Total and
Permanent Disability;
(c) The date of his death; or
(d) Upon the completion of the number of Years of Vesting Service
required for full vesting.
6.02 TERMINATION OF EMPLOYMENT
(a) If a Participant terminates employment with all Participating
Employers and Affiliates for any reason other than Total and
Permanent Disability or death and before his Early or Normal
Retirement Age, he shall be vested in the percentage of his
Company Contribution Account set forth in the following table:
44
<PAGE> 52
<TABLE>
<CAPTION>
Completed Years
of Vesting Service Vested Percentage
------------------ -----------------
<S> <C> <C>
Less than 5 0%
5 100%
</TABLE>
(b) The portion of the Participant's Company Contribution Account in
which he is not vested at his termination of employment shall be
declared a Forfeiture upon the occurrence of a Break in Service.
Such Forfeiture shall be used first to restore previously
forfeited amounts to other Participants, and then to reduce the
Company's future contributions. Any person who terminates
employment with no vested interest in his Accounts shall be deemed
to have had an immediate distribution of the vested portion of his
Accounts at the time of his termination of employment. If the
Participant who is reemployed before incurring five (5)
consecutive Breaks in Service shall again terminate his employment
under circumstances in which he is not fully vested in his Company
Contribution Account, such Participant's vested balance in his
Company Contribution Account shall be determined by adding to the
amount actually held by the Trust any amount previously
distributed to him. The vested percentage shall be applied to this
total, the amount of any previous distributions shall be
subtracted, and the remaining amount shall be his vested balance
in his Company Contribution Account.
(c) If the Participant returns to the employ of a Participating
Employer or Affiliate before he incurs five (5) consecutive Breaks
in Service, the portion of his Company Contribution Account that
had been forfeited shall be reinstated to his Company Contribution
Account in full, unadjusted b any gains or losses occurring
subsequent to the Valuation Date
45
<PAGE> 53
immediately preceding his termination of employment, by using the
Forfeitures during the Plan Year in which his reemployment
occurred. If the Forfeitures in the year of reemployment are
insufficient to restore the forfeited amount, the remainder shall
be restored by a Company Contribution. Such a Participant shall
continue vesting in such Account. If the Participant incurs five
(5) consecutive Breaks in Service, he shall not regain any
interest in any Forfeiture.
6.03 EFFECT OF BREAKS IN SERVICE
If a Participant or Employee incurs five (5) or more consecutive
Breaks in Service and is thereafter reemployed by a Participating
Employer or Affiliate, he shall regain his Years of Vesting Service
earned before such Breaks in Service upon such reemployment. However, he
shall not regain any interest in any Forfeiture. If a Participant or
other Employee incurs fewer than five (5) consecutive Breaks in Service
and is thereafter reemployed by a Participating Employer or Affiliate,
he shall regain his Years of Vesting Service earned before such Breaks
in Service and any Forfeiture shall be restored pursuant to Section
6.02.
6.04 SALARY REDUCTION CONTRIBUTION ACCOUNT AND VOLUNTARY EMPLOYEE
CONTRIBUTION ACCOUNT
A Participant shall at all times have a fully vested, nonforfeitable
interest in his Salary Reduction Contribution Account and Voluntary
Employee Contribution Account.
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<PAGE> 54
ARTICLE VII
TIME AND METHOD OF PAYMENT
7.01 MANNER OF PAYMENT
(a) Whenever the Plan Administrator shall direct the Trustee to make
payment to a Participant upon termination of the Participant's
employment (whether by reason of retirement, Total and Permanent
Disability, or for any other reason other than death), the Plan
Administrator shall direct the Trustee to pay the vested
percentage of the Participant's Account Balance (determined as of
the Valuation Date preceding his Annuity Starting Date) to or for
the benefit of the Participant as of the payment date and in such
of the following ways as the Participant ant shall elect:
(1) In a lump sum; or
(2) In the form of an annuity.
Notwithstanding the foregoing, if the vested value of the
Participant's Account Balance (determined as of the Valuation Date
preceding his termination of employment) is three thousand five
hundred dollars ($3,500) or less, payment shall be made as soon as
practicable in one (1) lump sum. If the Participant does not make
an election of form of payment, payment shall be made in a lump
sum.
(b) If the Participant elects payment in the form of an annuity, the
provisions of this paragraph (b) and Section 7.02 shall apply. If
a Participant is legally married on the Annuity Starting Date,
payment to the Participant shall be made in the form of a
Qualified Joint and
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<PAGE> 55
Survivor Annuity, unless an optional form of payment is selected
pursuant to a qualified election, as described in Section 7.02.
If a Participant is not married on the Annuity Starting Date,
payment to the Participant shall be made in the form of a Life
Annuity, unless an optional form of payment is selected pursuant
to a qualified election, as described in Section 7.02.
Notwithstanding the foregoing, if the value of the Participant's
vested Account Balance (determined as of the Valuation Date
preceding his termination of employment) is three thousand five
hundred dollars ($3,500) or less, payment shall be made as soon
as practicable in one (1) lump sum.
7.02 OPTIONAL FORMS OF PAYMENT
(a) Any Participant may choose to receive payment of his vested
Account Balance in a form of annuity other than the applicable
normal form following his termination of employment by making a
qualified election, as described in paragraph (b) below.
In addition, a married Participant may choose to receive payment
in the form of a Life Annuity by making a qualified election, as
described in paragraph (b) of this Section 7.02. Notwithstanding
the foregoing, distribution may not be made over any period that
exceeds:
(1) The life of the Participant;
48
<PAGE> 56
(2) The life of the Participant and a designated Beneficiary;
(3) A period certain not extending beyond the life expectancy
of the Participant; or
(4) A period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
(b) To make a qualified election, a married Participant must waive his
right to the Qualified Joint and Survivor Annuity within the
ninety (90) day period ending on the Annuity Starting Date. An
unmarried Participant must waive his right to the Life Annuity in
the same manner as if it were a waiver of the Qualified Joint and
Survivor Annuity. A married Participant's spouse must consent to
his waiver of the Qualified Joint and Survivor Annuity. The
spouse's consent to the waiver must be in writing, must
acknowledge the effect of the waiver, and must specify both the
optional form of benefit selected and the specific Beneficiary
designated, if applicable.
In order to be valid, the spousal consent must be witnessed by a
Plan representative or a notary public. Such spousal consent
shall be revocable by the spouse at any time prior to the Annuity
Starting Date.
Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of the Plan Administrator that
such written consent may not be obtained because there is no
spouse or the spouse cannot be located, a waiver will be deemed a
qualified election. In the event that the spouse of a Participant
is legally
49
<PAGE> 57
incompetent to give consent, such consent may be given by the
spouse's legal guardian, which shall include the Participant in
the event the Participant is the legal guardian of the spouse. In
the event the Participant is legally separated or has been
abandoned, as provided by a court order, spousal consent shall not
be required, except where otherwise provided by a Qualified
Domestic Relations Order.
Any consent necessary under this provision will be valid only with
respect to the spouse who signs the consent or, in the event of a
deemed qualified election, the designated spouse. A revocation of
a prior waiver may be made by a Participant without the consent of
the spouse at any time before the Annuity Starting Date. The
number of revocations shall not be limited.
(c) The Plan Administrator shall provide to each Participant, no less
than thirty (30) days and no more than ninety (90) days prior to
the Annuity Starting Date, a written explanation of:
(1) The terms and conditions of a Qualified Joint and Survivor
Annuity or Life Annuity, as appropriate;
(2) The Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor Annuity
or Life Annuity form of payment, as appropriate;
(3) The rights of the Participant's spouse;
50
50
<PAGE> 58
(4) The right to make and the effect of a revocation of a
previous election to waive the Qualified Joint and Survivor
Annuity or Life Annuity, as appropriate; and
(5) The relative values of the various forms of benefit
available under the Plan.
If a Participant dies after election of an optional form but
before the Annuity Starting Date, payment shall be made in
accordance with Section 7.04 of the Plan.
(d) A Participant's life expectancy may be recalculated no more
frequently than annually; however, the life expectancy of a
nonspouse Beneficiary may not be recalculated. For calendar years
beginning before January 1, 1989, if a Participant's spouse is not
the designated Beneficiary, the method of distribution selected
must assure that at least fifty percent (50%) of the present value
of the amount available for distribution is paid within the life
expectancy of the Participant. For calendar years beginning after
December 31, 1988, distributions shall be made in accordance with
Proposed Regulation Section 1.401(a)9-2.
7.03 TIME OF PAYMENT
Subject to the provisions of Section 7.06, payment shall be made or
shall commence as of the later of: (1) the date the Participant attains
(or would have attained) Normal Retirement Age, or (2) sixty (60) days
after the close of the Plan Year in which the employment of the
Participant terminate ant terminates, unless the Participant, or his
Beneficiary in the event of his death, requests payment at an earlier
date. In such event, payment shall be made or shall
51
<PAGE> 59
commence as of the date requested. If the Participant's vested Account
Balance exceeds three thousand five hundred dollars ($3,500) and payment
is to be made prior to the Participant's Normal Retirement Age, the
Participant must consent in writing to the distribution before payment
of any portion of the distribution commences. In such a case, the
Participant's spouse also must consent in writing to the timing of the
distribution unless payment is made in the form of a Qualified Joint and
Survivor Annuity. Notwithstanding the foregoing, effective January 1,
1989, in all cases payment shall be made or shall commence by the April
1 immediately following the year in which the Participant attains the
age of seventy and one-half (70 1/2), even if he has not retired. The
preceding sentence shall not apply to a Participant who:
(a) Has made a written election to receive his benefits under the Plan
at a later date in accordance with Section 242(b) of the Tax
Equity and Fiscal Responsibility Act of 1982; or
(b) Has attained age seventy and one-half (70 1/2) before January 1,
1988 and who was not a five percent (5%) owner of the
Participating Employer at any time during the Plan Year ending
with or within the calendar year in which such individual attained
age sixty-six and one-half (66 1/2) or any subsequent Plan Year.
7.04 PAYMENTS TO BENEFICIARIES
(a) If a Participant who has elected to receive benefits in the form
of an annuity dies before the Annuity Starting Date, payment of
his vested Account Balance shall be made to the surviving spouse
of the Participant in the form of a Qualified Pre-retirement
Survivor Annuity unless the Participant either has no spouse or
has designated another
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(Beneficiary in the manner described in this Section 7.04(a), or
the spouse elects to receive payment in a single lump sum. The
surviving spouse may elect to receive payment as soon as
administratively feasible after the Participant's death.
Notwithstanding anything to the contrary, if the Participant's
vested Account Balance is three thousand five hundred dollars
($3,500) or less, payment will be made to the surviving spouse in
a single lump sum as soon as administratively feasible following
the Participant's death. In order for the designation of a
Beneficiary other than the spouse to be valid, the designation
must have been made after the first day of the Plan Year in which
the Participant attains age thirty-five (35), the designation must
contain a waiver of the Qualified Pre-retirement Survivor Annuity,
and the Participant's spouse must consent in writing to the waiver
(of the Qualified Pre-retirement Survivor Annuity and to the
specific nonspouse Beneficiary designation. A valid spousal
consent shall be witnessed by either a representative of the Plan
or a notary public and shall be revocable by the spouse at any
time prior to the Annuity Starting Date. The Plan Administrator
shall provide to each Participant a written explanation of the
Qualified Pre-retirement Survivor Annuity within the applicable
period. With respect to any Participant, the applicable period
means whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year in which
the Participant attains age thirty-two (32) and ending with the
close of the Plan Year preceding the Plan Year in which the
Participant attains age thirty-five (35);
53
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(2) A reasonable period ending after the individual becomes a
Participant; or
(3) A reasonable period ending after Section 401(a)(11) of the Code
first applies to the Participant.
Notwithstanding the foregoing, in the case of a Participant who
separates from service before attaining age thirty-five (35), the
applicable period means the period beginning one (1) year before
the separation from service and ending one (1) year after such
separation. The written explanation of the Qualified
Pre-retirement. Survivor Annuity shall provide comparable notice
and information to that described in Section 7.02 with respect to
the Qualified Joint and Survivor Annuity.
A married Participant may designate a nonspouse Beneficiary prior
to the first day of the Plan Year in which the Participant attains
age thirty-five (35) if a written explanation of the benefit
provided under this Section 7.04 is given to the Participant by
the Plan Administrator within a reasonable period prior to the
time of the designation. Such early nonspouse Beneficiary
designation shall become invalid as of the first day of the Plan
Year in which the Participant attains age thirty-five (35). The
designation of a nonspouse Beneficiary shall be revoked
automatically upon the marriage or remarriage of a Participant.
Notwithstanding the foregoing, the spousal consent requirement
shall not apply if it is established to the satisfaction of the
Plan Administrator either that the spouse cannot be located or
that other circumstances set forth in regulations promulgated
under Section 417 of
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the Code which preclude the necessity of the spouse's
consent are present with respect to the Participant.
(b) A Participant who is not married or who has not elected the
annuity form of payment may designate a Beneficiary at any time.
If a Participant is married on the date of his death, the
Beneficiary of such Participant shall be his spouse unless the
Participant's spouse consents in writing not to be said
Beneficiary. The spouse's consent must acknowledge the effect of
such consent not to be the Participant's Beneficiary and such
written consent must be witnessed by either the Plan Administrator
or a notary public. The consent must be limited to a benefit for a
specific alternate Beneficiary. The designation of a nonspouse
Beneficiary shall be revoked automatically upon the marriage or
remarriage of a Participant. Notwithstanding the foregoing, this
paragraph (b) shall not apply if it is established to the Plan
Administrator's satisfaction either that the spouse cannot be
located or that other circumstances set forth in regulations
promulgated under Section 417 of the Code which preclude the
necessity of the spouse's consent are present with respect to the
Participant.
If a Participant is not married, has not elected the annuity form
of payment, or has designated a Beneficiary other than his spouse
in accordance with Section 7.04(a), upon his death, his vested
Account Balance shall be paid to his surviving spouse or other
designated Beneficiary in the form of a single lump sum payment as
soon as administratively feasible following the Participant's
death. If the Participant has elected the annuity form of payment
and his surviving spouse is his Beneficiary, his surviving spouse
may elect to receive payment in the form of a lump
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sum in lieu of the Qualified Pre-retirement Survivor Annuity
within a reasonable period before benefits commence. If a
designated Beneficiary shall die before the Participant, his
interest shall terminate, and, unless otherwise provided in the
Participant's designation, such interest shall be paid in equal
shares to those Beneficiaries, if any, who survive the
Participant.
Except as otherwise provided in paragraph (a), the Participant
shall have the right to revoke the designation of any Beneficiary
without the consent of the Beneficiary.
(c) If a Participant fails to designate a Beneficiary, if such
designation shall for any reason be illegal or ineffective, or if
no Beneficiary survives the Participant, his death benefits shall
be paid:
(1) To his surviving spouse;
(2) If there is no surviving spouse, to his descendants
(including legally adopted children and their descendants)
PER STIRPES; or
(3) If there is neither surviving spouse nor surviving
descendants, to the executor or other personal
representative of the Participant to be distributed in
accordance with the Participant's will or applicable law.
(d) Notwithstanding the foregoing provisions of this Section 7.04, in
the event of the Participant's death prior to the Annuity Starting
Date, the entire interest of the Participant will be distributed
within five (5) years after
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the death of the Participant, unless one (1) of the following
exceptions is met:
(1)(A) Any portion of the Participant's Account is payable to
(or for the benefit of) a designated Beneficiary;
(B) Such portion of the Participant's Account shall be
distributed over a period not extending beyond the life or
life expectancy of the designated Beneficiary; and
(C) Such distribution commences no later than one (1) year after
the date of the Participant's death.
(2)(A) The portion of the Participant's Account to which his
surviving spouse is entitled shall be distributed over a
period not extending beyond the life or life expectancy of
the surviving spouse; and
(B) Such distribution commences no later than the date on which
the Participant would have attained age seventy and one-half
(70 1/2).
If the Participant dies after the Annuity Starting Date, the remaining
portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
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7.05 DISTRIBUTION OF UNALLOCATED CONTRIBUTIONS
If on the date of termination of a Participant's employment the
Participating Employer shall be holding contributions made by or on
behalf of the Participant but not yet allocated to his Accounts, the
Participating Employer shall pay such amounts either directly to the
Participant (or his Beneficiary, as the case may be) or to the Trustee,
to be distributed by the Trustee in accordance with the method of
distribution determined under Section 7.01 or Section 7.04.
7.06 CERTAIN RETROACTIVE PAYMENTS
If the amount of the payment required to be made or commence on the date
determined in this Article VII cannot be ascertained by such date, a
payment may be made no later than sixty (60) days after the earliest
date on which the amount of such payment can be ascertained under the
Plan.
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ARTICLE VIII
LOANS AND OTHER WITHDRAWALS
8.01 AVAILABILITY OF LOANS
(a) Upon application by a Participant or a Party-in-Interest, the
Trustee may lend a Participant, on account of a qualifying
emergency, an amount which does not exceed the lesser of (1) fifty
thousand dollars ($50,000) reduced by the highest outstanding
balance of loans to the Participant or Party-in-Interest from the
Plan during the one (1) year period ending on the day before the
date on which such loan is to be made, or (2) one-half (1/2) of
the nonforfeitable value of his Account Balance, if any, under the
Plan as of the date on which the loan is approved.
(b) Notwithstanding Section 8.01(a) above, upon application by a
Participant or a Party-in-Interest, the Trustee may lend a
Participant an amount which does not exceed the lesser of:
(1) Twenty thousand dollars ($20,000) reduced by the highest
outstanding balance of loans to the Participant or
Party-in-Interest from the Plan during the one (1) year
period ending on the day before the date on which such loan
is made; or
(2) One-fourth (1/4) of the nonforfeitable value of his Account
Balance, if any, under the Plan as of the date on which the
loan is approved.
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(c) All loans shall follow a uniform, nondiscriminatory policy. Loans
shall not be made available to highly compensated employees, as
defined in Section 414(q) of the Code, in an amount greater than
the amount available to other Employees. For purposes of this
Article VIII, "Party-in-Interest" shall include former employees,
retirees, Alternate Payees, and Beneficiaries who are
parties-in-interest as defined in Section 3(14) of the Employee
Retirement Income Security Act of 1974. In the event a Participant
or Party-in-Interest is married at the time of the loan and has
elected to receive distribution of his Accounts in the form of an
annuity, the spouse of such Participant or Party-in-Interest must
consent to the loan and the possible reduction of the Account
Balance of the Participant or Party-in-Interest to satisfy the
loan. Such spousal consent must be in writing, must be made within
the ninety (90) day period prior to making the loan, must
acknowledge the effect of the loan, and must witnessed by either a
Plan representative or a notary public. The consent requirements
shall not apply if it is established to the satisfaction of the
Plan Administrator either that the spouse cannot be located or
that other circumstances set forth in regulations issued by the
Secretary of the Treasury which preclude the necessity of the
spouse's consent are present. Further spousal consent is not
required regardless of whether the Participant or
Party-in-Interest subsequently has a change in spouse or change in
marital status. Any renegotiation, extension, renewal, or other
revision of a loan shall be treated as a new loan, requiring a new
spousal consent in accordance with this paragraph.
(d) A distribution will be based on a qualifying emergency if the
distribution is on account of:
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(1) Expenses related to a death in the immediate family;
(2) Payment of tuition for the education of an immediate
family member;
(3) Expenses related to the disability of a Participant other
than Total and Permanent Disability;
(4) Expenses related to an illness in the immediate family;
and
(5) The purchase of a principal residence of the Participant.
(e) In addition to such rules and regulations as the Plan
Administrator may adopt, all loans shall comply with the following
terms and conditions:
(1) An application for a loan by a Participant or
Party-in-Interest shall be made in accordance with
procedures established by the Plan Administrator or its
designee whose action thereon shall be final. The Plan
Administrator shall specify the form of the application
and any supporting data required.
(2) The period of repayment for any loan shall be five (5)
years. Any loan used to acquire a dwelling unit which
within a reasonable time will be used as the principal
residence of the Participant or Party-in-Interest does not
have to be repaid within five (5) years but shall be
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paid in a time determined by the Plan Administrator. Loans
shall be repayable in substantially equal amortized
installments of both principal and interest payable not
less frequently than quarterly. Any loan described in this
Article VIII shall be considered an investment of the
Account from which it was borrowed. Such a Participant's
Account shall not share in the allocation of earnings
under Section 5.02 to the extent of such loan.
(3) Each loan shall bear interest at a rate which is not less
than the rate being charged by the area banking business
for similar, well-secured loans.
(4) Each loan shall be supported by collateral equal to no
more than fifty percent (50%) of the present value of the
Participant's or Party-in-Interest's Accounts. A loan
shall also be supported by the Participant's or
Party-in-Interest's promissory note for the amount of the
loan, including interest, payable to the order of the
Trustee. The promissory note shall require that the unpaid
principal and interest will (at the Trustee's option)
become due and payable if the loan payment is not made
within thirty (30) days after the due date of any
installment. In the event of default, foreclosure on the
note and attachment of security will not occur until a
distributable event occurs in the Plan.
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(5) No loans shall be made to any Shareholder-employee or
Owner-employee. For purposes of this Section, the term
"Shareholder-employee" means an Employee or officer of an
electing small business corporation who owns (or is
considered as owning within the meaning of Section
318(a)(1) of the Code), on any day during the taxable year
of such corporation, more than five percent (5%) of the
outstanding stock of the corporation.
8.02 MULTIPLE LOANS PROHIBITED
A Participant or Party-in-Interest shall not receive more than one (1)
loan at a time from the Trust. If a Participant or Party-in-Interest
borrows amounts under more than one (1) qualified plan maintained by the
Participating Employer, all the plans are treated as one (1) plan for
purposes of the borrowing restrictions outlined in Section 8.01.
Moreover, no distribution shall be made to a Participant or. his
Beneficiary or a Party-in-Interest unless and until all unpaid loans,
including accrued interest thereon, have been paid.
8.03 HARDSHIP WITHDRAWAL
(a) A Participant may receive a distribution based on financial
hardship of his Salary Reduction Contributions (and not any
earnings thereon) from his Salary Reduction Contribution Account;
however, income on Salary Reduction Contributions made to a Prior
Plan credited as of December 31, 1988 will continue to be eligible
for hardship withdrawals.
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(b) The Participant must request a hardship withdrawal in writing at
least thirty (30) days prior to the effective date of the
withdrawal and must make his request on a form approved by the
Plan Administrator.
(c) A distribution based upon financial hardship may be made only if
the Participant has an immediate and heavy financial need and
cannot exceed the amount required to satisfy such financial need
which may not be satisfied from other resources reasonably
available to the Participant. The determination of the existence
of an immediate and heavy financial need and the amount required
to be distributed to meet the need created by the hardship must be
made by the Plan Administrator based on the applicable facts and
circumstances in accordance with uniform and nondiscriminatory
standards applicable to all Participants. Notwithstanding the
preceding sentence, a Participant will be deemed to have an
immediate and heavy financial need only if the distribution is on
account of:
(1) Medical expenses described in Code Section 213(d) incurred
by the Participant, the Participant's spouse, or any of the
Participant's dependents (as defined in Code Section 152);
(2) The purchase (excluding mortgage payments) of a principal
residence of the Participant;
(3) Payment of tuition for the next semester or quarter of
postsecondary education for the Participant, his spouse,
children, or dependents; or
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(4) The need to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of
the Participant's principal residence.
Further, the distribution will be deemed necessary to satisfy the
financial need if both of the following requirements are satisfied:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant; and
(2) The Plan Administrator has reasonably relied upon the
Participant's representation that the need cannot be
relieved:
(A) Through reimbursement or compensation by insurance or
otherwise;
(B) By reasonable liquidation of the Participant's
assets, to the extent that such liquidation would not
itself cause an immediate and heavy financial need;
(C) By cessation of elective contributions under the
Plan; or
(D) By other distributions or nontaxable (at the time of
the loan) loans from plans maintained by the
Participating Employer or by any other employer, or
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by borrowing from commercial sources on reasonable
commercial terms.
8.04 WITHDRAWALS AFTER AGE FIFTY-NINE AND ONE-HALF (59 1/2)
(a) A Participant who has attained age fifty-nine and one-half (59
1/2) may elect in writing to withdraw the entire value of his
Salary Reduction Contribution Account or any portion thereof for
any reason.
(b) The Participant must request the distribution at least thirty (30)
days prior to the effective date of the withdrawal and must make
his request on a form approved by the Plan Administrator.
8.05 VOLUNTARY EMPLOYEE CONTRIBUTIONS
(a) A Participant may elect in writing to withdraw the entire value of
his Voluntary Employee Contribution Account or any portion
thereof.
(b) The Participant must request the withdrawal at least thirty (30)
days prior to the effective date of the withdrawal and must make
his request on a form approved by the Plan Administrator.
8.06 SPOUSAL CONSENT TO WITHDRAWALS
In the event a Participant is married at the time of any withdrawal and
has elected to receive distribution of his Accounts in the form of an
annuity, the Participant's spouse must consent to the withdrawal within
the ninety (90) day period preceding the date of the withdrawal. Such
spousal consent must be in writing, must
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acknowledge the effect of the withdrawal, and must be witnessed by either a Plan
representative or a notary public.
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ARTICLE IX
ROLLOVERS AND TRANSFERS
9.01 ROLLOVERS
Any Employee, regardless of whether or not he has become a Participant
in the Plan pursuant to Article II, may, subject to obtaining the prior
approval of the Plan Administrator, at any time transfer (or cause to be
transferred) to the Trust Fund:
(a) Up to the entire amount of money and other property received from
another qualified trust under Section 401(a) of the Code which
constitutes a qualifying rollover distribution within the meaning
of Section 402(a)(5) of the Code, provided that such amount must
be received by the Trustee within sixty (60) days after the
Employee's receipt of such payment; and
(b) Up to the entire amount of money and other property received by
the Employee that was in an "individual retirement account" or an
"individual retirement annuity" (as defined in Section 408 of the
Code) which contains only those amounts described above in
paragraph (a) plus any earnings thereon.
The Employee shall furnish the Plan Administrator with a written
statement that the contribution to the Trust Fund is a rollover
contribution) together with such other statements and information as may
be required by the Plan Administrator in order to establish that such
contribution does not contain amounts from sources other than provided
above, and that such rollover contribution otherwise meets the
requirements of law. Acceptance by the Plan Administrator of any amount
under these provisions shall not be construed as a
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determination of the Employee's tax consequences by the Plan
Administrator.
9.02 TRANSFERS
The Trustee is hereby authorized to accept assets that represent an
Employee's interest (whether attributable to employer or employee
contributions) from another qualified trust under Section 401(a) of the
Code directly from such other trust's trustees, whether or not such
other plan is maintained by a Participating Employer.
No amount shall be transferred to this Plan from any other plan if the
accrued benefit payable to the Participant under such other plan must be
provided in the form of a qualified joint and survivor annuity or if a
qualified pre-retirement survivor annuity must be provided to the
surviving spouse of such Participant with respect to such accrued
benefit.
9.03 ROLLOVER ACCOUNT
The Company shall direct the Trustee to establish and maintain a
Rollover Account in the name of each Employee who elects to transfer or
roll over amounts into the Trust Fund pursuant to the provisions of this
Article IX. The Rollover Account shall be maintained by the Trustee for
the exclusive benefit of the Employee, shall be credited with earnings
thereon as provided by Section 5.02, and shall at all times be fully
vested and nonforfeitable.
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ARTICLE X
TOP-HEAVY PROVISIONS
10.01 EFFECTIVE DATE
Notwithstanding anything herein to the contrary, the following
provisions shall apply and shall supersede any conflicting Plan
provisions with respect to any Plan Year beginning after December 31,
1983 in which this Plan is deemed to be Top-heavy.
10.02 DEFINITIONS
DETERMINATION DATE means, with respect to any Plan Year, the last
calendar day of the immediately preceding Plan Year or, in the case of
the first Plan Year, the last calendar day of the first Plan Year.
KEY EMPLOYEE means any Employee or former Employee (or any Beneficiary
of such Employee) who, at any time during the Plan Year or any of the
four (4) immediately preceding Plan Years (or, if fewer, the total
number of Plan Years during which the Plan has been in effect) is or
was:
(a) An officer of the Participating Employer or an Affiliate whose
compensation exceeds fifty percent (50%) of the amount in effect
under Section 415(b)(1)(A) of the Code for such Plan Year;
(b) One (1) of the ten (10) Employees whose compensation exceeds the
amount in effect under Section 415(c)(1)(A) of the Code and who
owns (or is considered to own under Section 318 of the Code) one
(1) of the largest interests in the Participating Employer or an
Affiliate;
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(c) A five percent (5%) owner of the Participating Employer; or
(d) A one percent (1%) owner of the Participating Employer whose
annual compensation from the Participating Employer and Affiliates
exceeds one hundred fifty thousand dollars ($150,000).
An officer is defined as an actual officer of the Participating Employer
or an Affiliate; provided, however, that not more than the greater of
three (3) Employees or ten percent (10%) of the Employees (but in no
event more than fifty (50) Employees) shall be considered as officers in
determining whether the Plan is Top-heavy.
NONKEY EMPLOYEE means any Employee who is not a Key Employee.
PERMISSIVE AGGREGATION GROUP means the Required Aggregation Group of
plans plus any other plan or plans of the Participating Employer or an
Affiliate which, when considered as a group with the Required
Aggregation Group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
REQUIRED AGGREGATION GROUP means the group of:
(a) Each qualified plan of the Participating Employer or an Affiliate
in which at least one (1) Key Employee participates; and
(b) Any other qualified plan of the Participating Employer or an
Affiliate which enables a plan described in paragraph (a) above to
meet the requirements of Section 401(a)(4) or Section 410 of the
Code.
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TOP-HEAVY
The Plan shall be deemed to be Top-heavy for any Plan Year if, as of the
Determination Date for such Plan Year, any of the following conditions
exists:
(a) If the Top-heavy Ratio for the Plan exceeds sixty percent (60%)
and the Plan is not part of a Required Aggregation Group of plans
or a Permissive Aggregation Group of plans;
(b) If the Plan is part of a Required Aggregation Group of plans (but
is not part of a Permissive Aggregation Group of plans) and the
Top-heavy Ratio for the group of plans exceeds sixty percent
(60%); or
(c) If the Plan is part of a Required Aggregation Group of plans and
part of a Permissive Aggregation Group of plans and the Top-heavy
Ratio for the Permissive Aggregation Group of plans exceeds sixty
percent (60%).
TOP-HEAVY RATIO
(a) If the Participating Employer or an Affiliate maintains one (1) or
more defined contribution plans (including any simplified employee
pension plan) and the Participating Employer or Affiliate has not
maintained any defined benefit plan which, during the five (5)
Plan Year period ending on the Determination Date, has or has had
any accrued benefits, the Top-heavy Ratio for the Plan or for the
Required Aggregation Group or the Permissive Aggregation Group, as
appropriate, shall be a fraction, the numerator of which is the
sum of the account balances of all Key Employees under the
aggregated defined contribution plans as of the Determination Date
(including any
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part of any account balance distributed in the five (5) Plan Year
period ending on the Determination Date) and the denominator of
which is the sum of all account balances (including any part of
any account balance distributed in the five (5) Plan Year period
ending on the Determination Date) of all Participants as of the
Determination Date, both computed in accordance with Section 416
of the Code. The numerator and denominator of the Top-heavy Ratio
shall be adjusted to reflect any contribution not actually made as
of the Determination Date, but which is required to be taken into
account on that date under Section 416 of the Code.
(b) If the Participating Employer or an Affiliate maintains or has
maintained one (1) or more defined contribution plans (including
any simplified employee pension plan) and the Participating
Employer or Affiliate maintains or has maintained one (1) or more
defined benefit plans which, during the five (5) Plan Year period
ending on the Determination Date, has or has had any accrued
benefits, the Top-heavy Ratio for the Required Aggregation Group
or the Permissive Aggregation Group, as appropriate, shall be a
fraction, the numerator of which is the sum of the account
balances of all Key Employees under the aggregated defined
contribution plans and the present value of the accrued benefits
of all Key Employees under the aggregated defined benefit plans as
of the Determination Date, and the denominator of which is the sum
of the account balances of all Participants under the aggregated
defined contribution plans and the present value of the accrued
benefits of all Participants under the aggregated defined benefit
plans as of the Determination Date, determined in accordance with
Section 416 of the Code. The numerator and denominator of the
Top-heavy Ratio shall be adjusted
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for any distribution of an account balance or accrued benefit made
in the five (5) Plan Year period ending on the Determination Date
and any contribution due but unpaid as of the Determination Date.
(c) For purposes of paragraphs (a) and (b) above, the value of the
account balances and the present value of the accrued benefits
shall be determined as of the most recent Valuation Date occurring
within the twelve (12) month period ending on the Determination
Date, except as provided in Section 416 of the Code for the first
and second Plan Years of a defined benefit plan. Effective January
1, 1987, the accrued benefits of Nonkey Employees shall be
determined under the method which is used for accrual purposes for
all plans of the Participating Employers and Affiliates or, if
there is no such method, then as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under the
fractional accrual rate of Code Section 411(b)(1)(C). The account
balances and the accrued benefits of a Participant who is not a
Key Employee but who was a Key Employee in a prior Plan Year or,
effective for Plan Years beginning on and after January 1, 1985,
who has not performed any services for the Participating Employer
under the Plan at any time during the five (5) Plan Year period
ending on the Determination Date shall be disregarded. The
calculation of the Top-heavy Ratio and the extent to which
distributions, rollovers, and direct transfers are taken into
account shall be made in accordance with Section 416 of the Code.
When aggregating plans, the value of the account balances and the
present value of the accrued benefits shall be calculated with
reference to the Determination Dates that fall within the same
calendar year.
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VALUATION DATE means the same valuation date used for computing plan
costs for minimum funding, regardless of whether an actuarial valuation
is performed that year.
10.03 SPECIAL CODE SECTION 415 LIMITATIONS
For purposes of Section 5.06, in any Plan Year during which the Plan is
deemed to be Top-heavy and in which the Participating Employer also
maintains a defined benefit plan which is deemed to be Top- heavy, the
number 1.25 shall be replaced by the number 1.0 to the extent required
under Section 416(h) of the Code; provided, however, that such
adjustment shall not occur if the Top-heavy Ratio does not exceed ninety
percent (90%) and additional contributions or benefits are provided for
Nonkey Employees in accordance with the provisions of Sections
416(h)(2)(A) and (B) of the Code. In such case, a minimum accrued
benefit shall be provided under the defined benefit plan for each Nonkey
Employee covered under both plans equal to three percent (3%) of the
Participant's average compensation for the five (5) consecutive years
for which the Participant had the highest compensation, subject to a
maximum of thirty percent (30%) of such compensation.
10.04 MINIMUM ALLOCATION REQUIREMENTS
(a) The Company Contributions allocated on behalf of any Participant
who is not a Key Employee shall not be less than the lesser of
three percent (3%) of such Participant's compensation or the
largest percentage of Company Contributions allocated on behalf of
any Key Employee for that Plan Year, without, in either event,
taking into consideration any contributions or benefits under
Social Security or any similar legislation. The preceding
provisions shall not apply to any Participant who was not
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employed by a Participating Employer on the last day of the Plan
Year.
(b) The minimum allocation in paragraph (a) shall be made even though,
under other Plan provisions, the Participant would not otherwise
be entitled to receive an allocation, or would have received a
lesser allocation for the Plan Year because the Participant failed
to complete at least one thousand (1,000) Hours of Service, the
Participant's compensation was less than any stated amount, or the
Participant failed to make mandatory contributions to the Plan.
For purposes of computing the minimum allocation, compensation
shall mean compensation as defined in Section 5.05(d) of the Plan.
The minimum allocation above shall not apply to a Participant
covered under another defined contribution plan of a Participating
Employer if such Participant receives the minimum allocation under
such other plan.
(c) The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or 411(a)- (3)(D) of the
Code.
(d) For Plan Years beginning prior to January 1, 1989, amounts
contributed as Salary Reduction Contributions shall be counted
toward the minimum allocation required by this Section 10.04.
10.05 MINIMUM VESTING REQUIREMENTS
(a) For any Plan Year in which the Plan is Top-heavy, the Plan shall
have the following vesting schedule:
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<PAGE> 84
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(b) The vesting schedule contained in paragraph (a) above shall apply
to the Participant's total Company Contribution Account Balance,
including that portion which was allocated prior to the Plan Year
that the Plan became Top-heavy. However, such vesting schedule
shall apply only to the extent that it provides more favorable
vesting than Section 6.02.
(c) A shift to the vesting schedule contained in paragraph (a) ( above
shall be deemed to be an amendment to the vesting schedule
contained in Section 6.02.
(d) Anything to the contrary notwithstanding, this Section 10.05 shall
not apply to any Participant who has not received credit for an
Hour of Service after the Plan initially became Top-heavy.
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<PAGE> 85
ARTICLE XI
MANAGEMENT OF FUNDS
11.01 APPOINTMENT OF TRUSTEE
A Trustee shall be appointed by the Company to administer the Trust
Fund. The Trustee shall serve at the pleasure of the Company and shall
have the rights, powers, and duties set forth in the Trust Agreement.
All assets of the Trust Fund shall be held, invested, and reinvested by
the Trustee.
11.02 ASSETS OF TRUST
All contributions under this Plan shall be paid to the Trustee and,
except as provided in Section 11.03, all assets of the Trust Fund,
including income from investments and from all other sources, shall be
retained for the exclusive benefit of Participants, former Participants,
and their Beneficiaries, and shall be used to pay benefits to such
persons, or to pay expenses of administration of the Plan and Trust to
the extent not paid by the Company or Participating Employer.
11.03 REVERSION OF COMPANY CONTRIBUTIONS
At no time shall any part of the corpus or income of the Trust Fund be
used for or diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries.
Notwithstanding the above, contributions made by a Participating
Employer may be returned to a Participating Employer in the following
cases:
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<PAGE> 86
(a) If a contribution is made by a Participating Employer by a mistake
in fact, such contribution shall be returned to such Participating
Employer within one (1) year after the payment of the contribution
to the Trust Fund.
(b) If a contribution is conditioned on initial qualification of the
Plan under Section 410(a) of the Code, and if the Plan does not
qualify, then such contribution shall be returned to the
Participating Employer within one (1) year after the date of
denial of qualification of the Plan.
(c) If a contribution is conditioned upon the deductibility of the
contribution under Section 404(a) of the Code, then, to the extent
the deduction is disallowed, such a contribution shall be returned
to the Participating Employer within one (1) year after the
disallowance of the deduction if so requested by the Participating
Employer.
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<PAGE> 87
ARTICLE XII
ADMINISTRATION OF PLAN
12.01 PLAN ADMINISTRATOR
The Company shall be the Plan Administrator. The Company may appoint one
(1) or more persons to act as its agent or delegate to aid in carrying
out its administrative duties.
12.02 RIGHTS, POWERS, AND DUTIES OF PLAN ADMINISTRATOR
The Plan Administrator shall have such authority as may be necessary to
discharge its responsibilities under the Plan, including the following
rights, powers, and duties:
(a) The Plan Administrator shall adopt rules governing its procedures
not inconsistent herewith, and shall keep a permanent record of
its meetings and actions. The Plan Administrator shall administer
the Plan uniformly and consistently with respect to persons who
are similarly situated. The Plan Administrator shall maintain the
Accounts of Participants and Beneficiaries under the Plan or shall
cause them to be maintained under its direction.
(b) The Plan Administrator shall direct the Trustee in writing to make
payments from the Trust Fund to persons who qualify for such
payments hereunder. Such written order to the Trustee shall
specify the name of the person, his address, and the amount and
frequency of such payments.
(c) The Plan Administrator shall not take action or direct the Trustee
to take any action with respect to any of the benefits provided
hereunder which would be discriminatory
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<PAGE> 88
in favor of those Participants or Employees who are officers,
shareholders, or highly compensated Employees of a Participating
Employer.
(d) The Plan Administrator shall have the sole responsibility for the
administration of the Plan, and, except as herein expressly
provided, the Plan Administrator shall have the exclusive right to
interpret the provisions of the Plan and to determine any question
arising hereunder or in connection with the administration of the
Plan, including the remedying of any omission, inconsistency, or
ambiguity, and its decision or action in respect thereof shall be
conclusive and binding upon any and all Participants, former
Participants, Beneficiaries, heirs, distributees, executors,
administrators, and assigns, subject to the provisions of Article
XIII. Any final determination by the Plan Administrator, including
a final claims decision under Article XIII, shall be binding on
all parties. If challenged in court, such determination shall not
be subject to DE NOVO review.
(e) The Plan Administrator may employ such counsel and agents in such
clerical, medical, accounting, and other services as it may
require in carrying out the provisions of the Plan.
(f) Participants, former Participants, or their Beneficiaries shall be
notified by the Plan Administrator of their right to receive
benefits. The Plan Administrator shall establish a uniform
procedure for such notification.
(g) The Plan Administrator shall establish reasonable procedures to
determine whether a Domestic Relations Order is a Qualified
Domestic Relations Order. Such procedures
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<PAGE> 89
must be in writing, must provide for the prompt notification of
each person specified in the order as being entitled to payment of
benefits under the Plan, and must permit an Alternate Payee to
designate a representative for receipt of copies of notices that
are sent to the Alternate Payee with respect to a Domestic
Relations Order.
(h) The Plan Administrator may establish procedures which a
Participant must follow in verifying maternity or paternity leave
and the length thereof.
12.03 EXERCISE OF PLAN ADMINISTRATOR'S DUTIES
The Plan Administrator shall discharge its duties solely in the interest
of Participants, former Participants, and their Beneficiaries:
(a) For the exclusive purposes of providing benefits to such
Participants, former Participants, and Beneficiaries and, in the
discretion of the Company, defraying reasonable expenses of Plan
administration; and
(b) With the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct
of an enterprise of a like character and with like aims.
12.04 INDEMNIFICATION OF FIDUCIARIES
The Participating Employers shall indemnify all officers or
representatives of the Participating Employers and Employees assigned
fiduciary responsibility under Federal law to the extent that such
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<PAGE> 90
officers or representatives of the Participating Employers or Employees
incur loss or damage which may result from such officers' or
representatives' or Employees' duties, exercises of discretion under the
Plan, or any other acts or omissions hereunder. Such duties, exercises
of discretion, acts, or omissions shall not be indemnified by the
Participating Employers in the event that such loss or damage is
judicially determined or agreed by the officers or representatives of
the Participating Employers or Employees to be due to their respective
gross negligence or willful misconduct.
12.05 COMPENSATION
Any individual acting as agent of the Plan Administrator shall serve
without compensation for services as such, but all proper expenses
incurred by the individual incident to the functioning of the Plan shall
be paid by the Participating Employers.
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<PAGE> 91
ARTICLE XIII
CLAIMS PROCEDURES
13.01 CLAIMS REVIEW
Any Participant, former Participant, or Beneficiary of either who wishes
to request a review of a claim for benefits or who wishes an explanation
of a benefit or its denial may direct to the Plan Administrator a
written request for such review. The Plan Administrator shall respond to
the request by issuing a notice to the claimant as soon as possible but
in no event later than ninety (90) days from the date of the request.
This notice furnished by the Plan Administrator shall be written in a
manner calculated to be understood by the claimant and shall include the
following:
(a) The specific reason or reasons for any denial of benefits;
(b) The specific Plan provisions on which any denial is based;
(c) A description of any further material or information which is
necessary for the claimant to perfect his claim and an explanation
of why the material or information is needed; and
(d) An explanation of the Plan's claim appeals procedure.
If the claimant does not respond to the notice, posted by first-class
mail to the address of record of the Plan Administrator, within sixty
(60) days from the posting of the notice, the claimant shall be
considered satisfied in all respects. If the Plan Administrator fails to
respond to the claimant's written request for review within ninety (90)
days of its receipt, the claimant shall be
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<PAGE> 92
entitled to proceed to the claim appeals procedure described in Section
13.02.
13.02 APPEALS PROCEDURE
In the event that the claimant wishes to appeal the claim review denial,
the claimant or his duly authorized representative shall submit to the
Plan Administrator, within sixty (60) days of the posting of the notice,
a written notification of appeal of the claim denial. The notification
of appeal of the claim denial shall permit the claimant or his duly
authorized representative to utilize the following formal claim review
procedures:
(a) To review pertinent documents; and
(b) To submit issues and comments in writing to which the Plan
Administrator shall respond.
The Plan Administrator shall furnish a written decision on the appeal no
later than sixty (60) days after receipt of the notification of appeal,
unless special circumstances require an extension of the time for
processing the appeal. In no event, however, shall the Plan
Administrator respond later than one hundred twenty (120) days after a
request for a formal review. The decision on the appeal shall be in
writing and shall include specific reasons for the decision, and shall
be written in a manner calculated to be understood by the claimant and
contain specific reference to the pertinent Plan provisions on which the
decision is based.
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<PAGE> 93
ARTICLE XIV
AMENDMENT AND TERMINATION
14.01 TERMINATION
(a) It is the expectation of the Company and each Participating
Employer that it shall continue this Plan and the payment of
contributions hereunder indefinitely, but the continuation of the
Plan is not assumed as a contractual obligation of the Company or
of any Participating Employer, and the right is reserved by the
Company and each Participating Employer at any time to permanently
discontinue its contributions hereunder. In the event that the
Plan is terminated in whole or in part or if contributions by the
Company or any Participating Employer are permanently
discontinued, the interest of all affected Participants shall be
fully vested and nonforfeitable.
(b) This Plan may be terminated by the Company at any time when, in
its judgment, business, financial, or other good causes make such
termination necessary. In addition, each Participating Employer
may terminate the Plan with respect to its Employees at any time.
Any such termination shall become effective upon the execution and
delivery by the Company or Participating Employer to the Trustee
of a written instrument signed on its behalf by its authorized
representative and. stating the fact that the Plan is terminated.
(c) Upon complete termination of the Plan, further payment of Company
Contributions to the Trust shall cease. Upon termination of the
Plan with respect to a Participating Employer, further payment of
that Participating Employer's
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<PAGE> 94
contributions to the Trust shall cease. The Plan Administrator
shall notify each affected Participant of the termination of the
Plan. Each affected Participant shall be entitled to receive the
entire amount of his Account Balances and the Trustee shall make
payment to each such Participant of such amount.
14.02 RIGHT TO AMEND, MODIFY, CHANGE, OR REVISE PLAN
The Company, by appropriate action, may at any time and from time to
time amend, modify, change, or revise this Plan in whole or in part by
notice thereof in writing delivered to the Trustee, and each
Participating Employer shall be bound thereby; provided, however:
(a) That no amendment shall have the effect of vesting in the Company
or any Participating Employer any interest in or control of any
funds, securities, or other property subject to the terms of the
Trust;
(b) That no amendment shall authorize or permit at any time any part
of the corpus or income of the Trust Fund to be used for or
diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries, except as provided in
Section 11.03;
(c) That no amendment shall have any retroactive effect as to deprive
any Participant, former Participant, or Beneficiary of any benefit
already accrued, save only that no amendment made in conformance
with the provisions of the Code or any other statute relating to
employees' trusts, or of any official regulation or rulings issued
pursuant thereto, shall be considered prejudicial to the rights of
any Participant or Beneficiary; and
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<PAGE> 95
(d) That no amendment shall eliminate an optional form of benefit or
decrease an Account Balance.
14.03 MERGER AND CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS
In the case of any merger or consolidation with or transfer of assets
and liabilities to any other plan, provisions shall be made so that each
Participant in the Plan on the date thereof (if the Plan then
terminated) would receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately prior to the merger,
consolidation, or transfer (if the Plan had terminated).
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<PAGE> 96
ARTICLE XV
MISCELLANEOUS
15.01 NO CONTRACT OF EMPLOYMENT
Nothing herein contained shall be construed to constitute a contract of
employment between a Participating Employer and any Employee. The
employment records of the Participating Employer and the Trustee's
records shall be final and binding upon all Employees as to liability
and participation.
15.02 RESTRICTIONS UPON ASSIGNMENTS AND CREDITORS' CLAIMS
No interest of any person or entity in or right to receive distributions
from the Trust Fund shall be subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind, nor may any such interest or right to receive
distributions be taken, either voluntarily or involuntarily, for the
satisfaction of the debts of or other obligations or claims against such
person or entity. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any benefit payable
with respect to a Participant pursuant to a Domestic Relations Order
unless such order is determined to be a Qualified Domestic Relations
Order. A Domestic Relations Order entered before January 1, 1985 shall
be treated as a Qualified Domestic Relations Order if payment of
benefits pursuant to the order has commenced as of such date and may be
treated as a Qualified Domestic Relations Order if payment of benefits
has not commenced as of such date, even though the order does not
satisfy the requirements of Section 414(p) of the Code.
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<PAGE> 97
15.03 RESTRICTION OF CLAIMS AGAINST TRUST
The Trust under this Plan and the Trust Agreement from its inception
shall be a separate entity aside and apart from the Company and each
Participating Employer and its assets. The Trust and the corpus and
income thereof shall in no event and in no manner whatsoever be subject
to the rights or claims of any creditor of the Company or any
Participating Employer. Neither the establishment of the Trust, the
modification thereof, the creation of any fund or account, nor the
payment of any benefits shall be construed as giving any Participant or
any other person whomsoever any legal or equitable rights against the
Company, any other Participating Employer, or the Trustee unless the
same shall be specifically provided for in this Plan.
15.04 BENEFITS PAYABLE BY TRUST
All benefits payable under the Plan shall be paid or provided for solely
from the Trust, and the Company and the Participating Employers do not
assume any liability or responsibility therefor.
15.05 SUCCESSOR TO COMPANY
In the event that any successor to the Company or Participating
Employer, by merger, consolidation, purchase, or otherwise, shall elect
to adopt the Plan, such successor shall be substituted hereunder for the
Company or for such Participating Employer upon filing in writing with
the Trustee of its election to do so.
15.06 APPLICABLE LAW
The Plan shall be construed and administered in accordance with ERISA
and with the laws of the Commonwealth of Delaware, to the extent that
such laws are not preempted by ERISA.
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<PAGE> 98
15.07 DATA
It shall be a condition precedent to the payment of all benefits under
the Plan that each Participant and surviving spouse must furnish to the
Plan Administrator such documents, evidence, or information as the Plan
Administrator considers necessary or desirable for the purpose of
administering the Plan, or to protect the Company, the Participating
Employers, or the Trustee.
15.08 INTERNAL REVENUE SERVICE APPROVAL
This Plan shall be effective as of the aforementioned Effective Date,
provided that the Company shall obtain a favorable determination letter
from the Internal Revenue Service that this Plan and the related Trust
Agreement qualify under Sections 401(a) and 501(a) of the Code. Any
modification or amendment of this Plan may be made retroactive as
necessary or appropriate in order to secure or maintain such
qualification.
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<PAGE> 99
FIRST AMENDMENT
TO
WERNER HOLDING CO. (DE), INC.
EMPLOYEE SAVINGS PLAN
WHEREAS, effective January 1, 1991, Werner Holding Co. (DE), Inc. (the
"Company") adopted the Werner Holding Co. (DE), Inc. Employee Savings P1 an (the
"Plan") for the exclusive benefit of its eligible employees; and
WHEREAS, the Company has reserved the right to amend the Plan; and
WHEREAS, pursuant to the authority reserved to the Corn 14.02 of the Plan, the
Company desires to amend the Plan to comply with the Tax Reform Act of 1986, as
amended, and certain other legislation.
NOW, THEREFORE, the Company hereby amends the Plan as follows, effective as
specified herein:
1. Effective January 1, 1994, the definition of Compensation in
Article I is amended in its entirety to read as follows:
COMPENSATION means the total amount of cash compensation paid to
an Employee by the Participating Employer in a Plan Year for
Federal income tax purposes, including commissions, bonuses,
overtime, and amounts deferred under a salary reduction
agreement pursuant to Section 401(K) or Section 125 of the Code,
but excluding any other extraordinary remuneration. If an Employee
becomes a Participant during a Plan Year, his Compensation in such
Plan Year, for purposes of determining the amount of the Company
Contributions contributed on his behalf pursuant to Section 4.04
of the Plan, shall be his Compensation for the full Plan Year
multiplied by a fraction, the numerator of which shall be his
months of Plan participation and the denominator of which shall be
twelve (12). For all other purposes, if an Employee becomes a
Participant during a Plan Year, his Compensation shall be his
Compensation for the full Plan Year. Effective for Plan Years
beginning January 1, 1989 and thereafter, excess of two hundred
thousand dollars ($200,000) shall be disregarded.
In addition to other applicable limitations set forth in the Plan,
and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994 the
annual Compensation of each Employee taken into account under the
Plan shall not exceed the OBRA 93 annual compensation limit. The
OBRA '93 annual compensation limit is one hundred fifty thousand
dollars ($150,000), as adjusted by the Commissioner for increases
in the cost-of-living in accordance with Section 401(a)(l7)(B)of
the Code. The cost-of-living adjustment in effect for a calendar
year applies to any period, not exceeding twelve (12) months, over
which Compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer
than twelve (12) months, the OBRA '93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the
number of months in the determination period, and the denominator
of which is twelve (12). For Plan Years beginning on or after
January 1 1994, any reference in this Plan to the limitation under
Section 401(a)(17) of the Code shall mean the OBRA '93 annual
compensation limit set forth in this provision. In determining the
Compensation of a Participant for purposes of this limitation, the
rules of Section 41 4(q)(6)of the Code relating to the treatment
of certain family members shall apply,
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<PAGE> 100
except that in applying such rules the term "family" shall include
only the spouse of die Participant and an lineal descendants of
the Participant who have not attained age nineteen (19) before the
close of the Plan Year. If; as a result of the application of such
rules, the adjusted one hundred fifty thousand dollar ($150,000)
limitation is exceeded, then the limitation shall be prorated
among the affected Participants in proportion to each such
Participant's Compensation, as determined this provision prior to
the application of this limitation.
For purposes of the limitation on allocations under Code Section
415, Compensation is further defined in Section 5.05 of the Plan.
2. Effective January 1, 1991, the last paragraph (i) under the
definition of PRIOR PLAN in Article I shall be deleted.
3. Effective January 1, 1991 Section 5.05(d) is amended in its
entirety and a new Section 5.05(e) is added to read as follows:
(d) Inclusions. Solely for the purpose of applying the
limitations of Section 5.05, the compensation of a
Participant includes:
(1) A Participant's wages, salaries, fees for
professional services, and other amounts received
(without regard to whether or not an amount is paid
in cash) for personal services actually rendered in
the course of employment with the Participating
Employer to the extent that the amounts are
includable in gross income (including, but not
limited to, commissions paid to salesmen,
compensation for services on the basis of a
percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances);
(2) In the case of a Participant who is an employee
within the meaning of Section 401(c)(1) of the Code
and the regulations thereunder the participant's
earned income (as described in Section 401(c)(2) of
the Code and the regulations thereunder);
(3) Amounts described in Sections 104(a)(3), 105(a), and
105(11) of the Code, but only to the extent these
amounts are includable in the gross income of the
Participant;
(4) Amounts paid or reimbursed by the Participating
Employer or moving expenses incurred by a
Participant, but only to the extent that these
amounts are not deductible by the Participant under
Section 217 of the Code;
(5) The value of a nonqualified stock option granted to
a Participant by the Participating Employer, but
only to the extent that the value of the option is
includable in the gross income of the Participant or
the taxable year in which granted; and
(6) The amount includable in the gross income of a upon
making the election described in Section 83(b) of
the
(e) Exclusions from compensation. Solely for the purpose of
applying the limitations of Section 5.05, the compensation
of a Participant excludes:
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<PAGE> 101
(1) Employer contributions to a plan of deferred
compensation which are not included in the
Participant's gross income for the taxable year in
which contributed, Employer contributions under a
simplified employee pension plan to the extent such
contributions are excluded from the Participant's
gross income, or any distributions from a plan of
deferred compensation;
(2) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the Participant either becomes freely
transferable or is no longer subject to substantial
risk of forfeiture;
(3) Amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified
stock option; and
(4) Other amounts which received special tax benefits,
or contributions made by the Employer (whether or
not under a salary reduction agreement) toward the
purchase of an annuity described in Code Section
403(b) (whether or not the amounts are actually
excludable from the gross income of the
Participant).
4. Effective January 1, 1993, a new Section 7.07 is added at the end
of Article VII to read as follows:
7.07 DIRECT ROLLOVERS
This Section applies to distributions made on or
after January 1, 1993. Notwithstanding any provision
of the Plan to the contrary that would otherwise
limit a Distributee's election under this Section, a
Distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any
portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by
the Distributee in a Direct Rollover.
For purposes of this Section 7.07, the following
definitions apply:
(a) ELIGIBLE ROLLOVER DISTRIBUTION: An Eligible
Rollover Distribution is any distribution of
all or any portion of the balance to the
credit of the Distributee, except that an
Eligible Rollover Distribution does not
include any distribution that is one (1) of a
series of substantially equal periodic
payments (not less frequently than annually)
made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life
expectancies) of the Distributee and the
Distributee's designated beneficiary, or for a
specified period of ten years or more; any
distribution to the extent such distribution
is required under Section 401 (a)(9) of the
is not includable in gross income (determined
without regard to the exclusion for net
unrealized appreciation with respect to
employer securities).
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<PAGE> 102
(b) ELIGIBLE RETIREMENT PLAN: An Eligible
Retirement Plan is an individual retirement
account described in Section 408(a) of the
Code, an individual retirement annuity
described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of
the Code or a qualified trust described in
Section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual
retirement account or individual retirement
annuity.
(c) DISTRIBUTEE: A Distributee includes an
Employee or former Employee. In addition, the
Employee's or former Employee's surviving
spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate
payee under a qualified domestic relations
order, as defined in Section 414(p) of the
Code, are Distributees with regard to the
interest of the spouse or former spouse.
(d) DIRECT ROLLOVER: A Direct Rollover is a
payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.
5. Effective January 1, 1994, Sections 8.03(c)(1) and 8.03(c)(3) are
amended to read as follows:
(1) Expenses for medical care described in Code Section
213(d) previously incurred by the Participant, the
Participant's spouse, or any dependents of the
employee (as defined in Code Section 152) or
necessary for these persons to obtain medical care
described in Code Section 213(d);
(3) Payment of tuition and related educational fees for
the next twelve (12) months of post-secondary
education for the Participant, or the Participants
spouse, children, or dependents (as defined in Code
Section 152).
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SECOND AMENDMENT TO WERNER HOLDING CO. (DE), INC.
EMPLOYEE SAVINGS PLAN
WHEREAS, effective January 1, 1991, Werner Holding Co. (DE), Inc., (the
"Company") adopted the Werner Holding Co. (DE), Inc. Employee Savings Plan (the
"Plan") for the exclusive benefit of its eligible employees and the eligible
employees of participating affiliates; and
WHEREAS, the Company has reserved the right to amend the Plan; and
WHEREAS, pursuant to the authority reserved to the Company in Section
14.02 of the Plan, the Company desires to amend the Plan to provide for one
hundred percent vesting under certain specified circumstances.
NOW, THEREFORE, the Company hereby amends the Plan as follows, effective
as specified herein:
1. Effective January 1, 1996, a new sentence shall be added to the
end of Section 6.01, to read as follows:
Notwithstanding the foregoing, any Participant who is an
active Employee of Florida Ladder Company on January 1,
1996 shall have a fully vested, nonforfeitable interest in
his Company Contribution Account on such date (regardless
of the number of completed Years of Vesting Service);
provided, however that this provision shall not apply to
any such Participant who is a "highly compensated
Employee" on such date.
<PAGE> 1
Exhibit 10.24
REINSURANCE AGREEMENT
(hereinafter called this "AGREEMENT")
between
MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY OF AMERICA
(hereinafter called "MIICA")
and
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
(hereinafter called the "REINSURER")
In consideration of the mutual covenants hereinafter contained and upon the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
TERM
This AGREEMENT is effective at 12:01 a.m. eastern standard time, the 31st day
March 1998.
ARTICLE II
TERRITORY
This AGREEMENT shall cover ULTIMATE NET LOSS occurring within the territorial
limits provided by the POLICIES reinsured hereunder.
ARTICLE III
BUSINESS REINSURED
A. Name of Insured: Manufacturer's Indemnity Insurance Company of America
B. Coverage Period: 12:01 a.m. eastern standard time May 1, 1997 to
11:59 p.m. eastern standard time, March 31, 1998.
C. Coverage(s): Per Coverage as described in the POLICIES attached hereto,
subject to per occurrence limits and a total aggregate limit as stated in
Article V of this AGREEMENT.
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<PAGE> 2
ARTICLE IV
DEFINITIONS
A. The term "POLICIES" as used in this Agreement shall mean the Policies listed
in Schedule A, which is attached hereto.
B. The term "LOSSES" as used in this AGREEMENT shall mean obligations to make
payments to claimants under the POLICIES reinsured hereunder.
C. The term "LOSSES PAID" as used in this AGREEMENT shall mean LOSSES actually
paid by or on behalf of MICCA.
D. The term "ALE" as used in this AGREEMENT shall have the same meaning as
ALLOCATED LOSS ADJUSTMENT EXPENSE which shall include all court costs, fees and
detective services; fees of independent adjusters or attorneys for investigation
or adjustment of claims beyond initial investigation; cost of employing experts
for preparation of maps, photographs, diagrams, chemical or physical analysis or
for advice, opinion or testimony concerning claims under investigation, in
litigation, or for which a Declaratory Judgment is sought; costs for legal
transcripts of testimony taken at coroner's inquests, criminal or civil
proceedings; costs for copies of any public records; costs of depositions and
court reported or recorded statements, and any other similar fees, costs or
expenses reasonably chargeable to the investigation, negotiation, settlement or
defense of a claim or loss or to the protection and perfection of the
subrogation rights of any insured covered by a policy issued hereunder. ALE
shall not include fees for adjusters or attorneys who are employees of MICCA or
its designated claims adjuster or fees for adjusters or attorneys on permanent
retainer.
E. The term "ALE PAID" as used in this AGREEMENT shall mean ALE actually paid by
or on behalf of MICCA.
F. The term "ULTIMATE NET LOSS" as used in this AGREEMENT shall mean LOSSES PAID
plus ALE PAID, but salvages and all other recoveries, excluding recoveries under
all reinsurance shall be deducted from ULTIMATE NET LOSS to arrive at the amount
of liability, if any, attached hereunder.
All salvages, recoveries, or payments recovered or received subsequent to loss
settlement hereunder, shall be applied as if recovered or received prior to any
aforesaid settlement and all necessary adjustments shall be made by the parties
hereto. Nothing in this clause shall be construed to mean that LOSSES PAID and
ALE are not recoverable hereunder, until MICCA `s ULTIMATE NET LOSS has been
ascertained.
G. The term "OUTSTANDING LOSS RESERVES" as used in this AGREEMENT shall mean
LOSSES and ALE reported to MICCA which have been reserved but unpaid at any
specified date.
2
<PAGE> 3
H. The term "IBNR" (Incurred But Not Reported) as used in this AGREEMENT shall
mean a reserve for liability for future payment on LOSSES which have already
occurred but have not yet been reported to MICCA and ALE applicable to such
LOSSES and shall also include expected future developments of OUTSTANDING LOSS
RESERVES.
I. The term "EXTRA CONTRACTUAL OBLIGATIONS" as used in this AGREEMENT shall mean
damages awarded by a court against MICCA or the REINSURER that are outside the
provisions of the POLICIES and such damages are due to MICCA or its designated
representative's bad faith, fraud, or gross negligence in the handling of a
loss.
J. The term "EXCESS OF POLICY LIMITS" as used in this AGREEMENT shall mean
damages awarded by a court against MICCA in favor of an Insured, due to MICCA's
or its designated representative's actual or alleged failure to settle a third
party claim against the Insured within the POLICIES limits by reason of bad
faith, fraud, or gross negligence.
ARTICLE V
INSURING CLAUSE
1. MICCA hereby obligates itself to cede to the REINSURER and the REINSURER
hereby obligates itself to accept as reinsurance One Hundred Percent (100%) of
the ULTIMATE NET LOSS (subject to the restrictions of aggregate limit, coverage
periods and ALE as stated below and excepting ULTIMATE NET LOSS specifically
excluded under Article VI of this AGREEMENT) for those amounts for which MICCA
is obligated under the POLICIES.
Coverage for ULTIMATE NET LOSS under this AGREEMENT shall be limited LOSSES PAID
after the effective date of this AGREEMENT and to those expenses for ALE
occurring or performed after the effective date of this AGREEMENT.
ULTIMATE NET LOSS under this AGREEMENT is subject to a per OCCURRENCE Limits and
Policy Aggregate Limits as stated in Schedule A.
ULTIMATE NET LOSS under this AGREEMENT is subject to a Total Program Aggregate
as specified in the Indemnity Agreement which is attached hereto.
3
<PAGE> 4
ARTICLE VI
EXCLUSIONS
This AGREEMENT does not cover:
A. Any risk not covered by the POLICIES.
B. EXTRA CONTRACTUAL OBLIGATIONS;
C. EXCESS OF POLICY LIMITS;
D. Any ex gratia payments.
ARTICLE VII
PREMIUM
The Premium due the REINSURER for the Reinsurance hereunder shall be thirty six
million two hundred sixty nine thousand three hundred twenty one dollars
($36,269,321.00) and is due at the inception of this Agreement. Payment of
Premium is a condition precedent to coverage under this AGREEMENT. The entire
Premium is fully earned as of the inception date and is not subject to return or
refund for any reason.
ARTICLE VIII
CLAIMS
The REINSURER agrees to abide by the loss settlements of MICCA, it being
understood, however, that when so requested, MICCA will afford the REINSURER an
opportunity to be associated with MICCA, at the expense of the REINSURER, in the
defense of any claim or suit or proceeding involving this reinsurance, and that
the REINSURER may cooperate in every respect in the defense or control of such
claim, suit or proceeding.
The REINSURER agrees that the LOSS settlements of MICCA are to be considered as
satisfactory proofs of LOSSES PAID. MICCA shall record and advise the REINSURER
as provided in the REPORTS AND REMITTANCES ARTICLE below.
4
<PAGE> 5
ARTICLE IX
REPORTS AND REMITTANCES
MICCA shall promptly notify the REINSURER of any event, development, accident,
occurrence or "disaster" which might result in a claim against the REINSURER for
which MICCA has established reserves in the amount of or in excess of two
hundred fifty thousand dollars ($250,000).
In addition, claims involving the following injuries or issues shall be reported
to the REINSURER immediately, regardless of any question of liability or
coverage under the policy: (1) fatalities; (2) paraplegia and quadriplegia; (3)
serious burns; (4) alleged brain damages or injuries; (5) amputation of an
extremity; (6) loss of hearing, sight, taste or smell; (7) loss of use of or
loss of function of vital organs; (8) multiple fractures; (9) cosmetic
deformities; (10) birth injuries; (11) all suits against MICCA alleging EXTRA
CONTRACTUAL OBLIGATION or EXCESS OF POLICY LIMITS exposure.
MICCA shall furnish to the REINSURER within 15 days after the end of each annual
quarter the following information:
1. Current accounts of the Gross and Net LOSSES PAID and Outstanding LOSSES,
including separately ALE.
2. A current statement of account indicating ULTIMATE NET LOSS due from the
REINSURER.
MICCA shall also periodically update and furnish to the REINSURER such other
reports or information as may reasonably be required by the REINSURER and
reasonably available to MICCA.
The REINSURER shall directly remit to MICCA amounts due for ULTIMATE NET LOSS,
within thirty business days after receiving the statement of account.
The reporting obligations under this section shall terminate at such date on
which the parties mutually agree that all losses under the POLICIES reinsured
hereunder have been paid or otherwise adjusted and closed, and there is no
further possibility that any future claims may arise (all applicable statutes of
limitation have expired); provided, however, that if thereafter any claim under
the reinsured POLICIES should be newly asserted or reopened, the obligations
under this section shall be reactivated by the parties and shall continue to
apply until such newly asserted or reopened claim(s) shall be finally
adjudicated.
5
<PAGE> 6
ARTICLE X
ERRORS AND OMISSIONS
Any inadvertent error, omission or delay in complying with the terms and
conditions of this AGREEMENT shall not be held to relieve either party hereto
from any liability which would attach to it hereunder if such delay, omission or
error had not been made, provided such delay, omission or error is rectified
immediately upon discovery.
ARTICLE XI
INSPECTION
MICCA shall place at the disposal of the REINSURER, and the REINSURER shall have
the right to inspect, at all reasonable times, through its authorized
representatives, all books, records and papers of MICCA in connection with the
reinsurance hereunder, or any claims in connection herewith.
ARTICLE XII
FOLLOW THE FORTUNES CLAUSE
The REINSURER's liability shall attach simultaneously with that of MICCA and
shall be subject in all respects to the same risks, terms, conditions,
interpretations, waivers, and to the same modification, alterations and
cancellations of the POLICIES, the true intent of this AGREEMENT being that the
REINSURER shall, in every case to which this AGREEMENT applies, follow the
underwriting fortunes of MICCA.
Nothing shall in any manner create any obligations or establish any rights
against the Reinsured in favor of any third parties or any person not a party to
this AGREEMENT.
ARTICLE XIII
INSOLVENCY
In the event of the insolvency of MICCA, all sums payable by the REINSURER under
this AGREEMENT shall be payable directly to MICCA or to its liquidator,
receiver, administrator or conservator on the basis of the liability of MICCA
under the AGREEMENT without diminution because of the insolvency of MICCA or
because the liquidator, receiver, administrator or conservator of MICCA has
failed to pay all or a portion of any claim. It is agreed, however, that the
liquidator, receiver, administrator or conservator of MICCA shall give written
notice to the REINSURER of the pendency of all claims against MICCA indicating
the policy reinsured, where any such claims would involve a possible liability
on the part of the REINSURER within a reasonable time after
6
<PAGE> 7
such claim is filed in the administration, conservation or liquidation
proceeding or in the receivership and that during the pendency of such claim the
REINSURER may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated any defense or defenses that it
may deem available to MICCA or its liquidator, receiver, administrator or
conservator. The expense thus incurred by the REINSURER shall be chargeable,
subject to the approval of the Court, against MICCA as part of the expense of
administration, conservation or liquidation to the extent of a pro rata share of
the benefit which may accrue to MICCA solely as a result of the defense
undertaken by the REINSURER.
Where two or more REINSURERS are involved in the same claim and a majority in
interest elect to interpose any defense to such claim, the expense shall be
apportioned in accordance with the terms the reinsurance contracts as though
such expense had been incurred by MICCA.
As to all reinsurance made, ceded, renewed or otherwise becoming effective under
this AGREEMENT, sums payable by the REINSURER under this AGREEMENT shall be
payable as set forth above by the REINSURER to MICCA or to its administrator,
conservator, liquidator or statutory successor, except as provided by Section
4118 of the New York Insurance Law or except (a) where any underlying contract
of insurance or reinsurance specifically provides another payee in the event of
the insolvency of MICCA and (b) where the REINSURER with the consent of the
direct insured(s) has assumed such policy obligations of MICCA as direct
obligations of the REINSURER to the payees under such POLICIES and in
substitution for the obligations of MICCA to such payees.
ARTICLE XIV
ARBITRATION CLAUSE
All disputes or differences arising out of the interpretation of this AGREEMENT
shall be submitted to the decision of two (2) Arbitrators, one to be chosen by
each party, and in the event the Arbitrators fail to agree, to the decision of
an Umpire to be chosen by the Arbitrators. The Arbitrators and Umpire shall be
disinterested active or retired executive officials of Fire or Casualty
Insurance or Reinsurance Companies. If either of the parties fails to appoint an
Arbitrator within one (1) month after being required by the other party in
writing to do so, or if the Arbitrators fail to appoint an Umpire, within one
(1) month of a request in writing by either of them to do so, such Arbitrator or
Umpire, as the case may be, shall at the request of either of them to do so,
such Arbitrator or Umpire, as the case may be, shall at the request of either
party be appointed by a Judge of the State Court of New York.
The Arbitration proceedings shall take place New York, New York. The applicant
shall submit its case within one (1) month after the appointment of the Court of
Arbitration, and the respondent shall submit his reply within one (1) month
after receipt of a claim. The Arbitrators and Umpire are relieved from all
judicial formality and may abstain from following the strict rules of law.
7
<PAGE> 8
The Arbitrators and the Umpire shall not award punitive damages. They shall
settle any dispute under this AGREEMENT according to an equitable rather than a
strictly legal interpretation of its terms and their decision shall be provided
to the parties in writing and shall be final and not subject to appeal.
Judgement may be entered upon the award of the Arbitrators in any court having
jurisdiction thereof.
Each party shall bear the expenses of its Arbitrator and shall jointly and
equally share with the other the expense of the Umpire and of the Arbitration.
This Article shall survive the termination of this AGREEMENT.
ARTICLE XV
TERMINATION
This Agreement will terminate upon execution of an Assumption Agreement of
MIICA's policies by National Union Fire Insurance Company of Pittsburgh, PA.
ARTICLE XVI
RESERVES
The REINSURER will maintain legal reserves for OUTSTANDING LOSS RESERVES, IBNR,
and future ALE.
ARTICLE XVII
OFFSET
The REINSURER shall have the right to offset any balance(s) due from MICCA under
this AGREEMENT. The REINSURER may exercise such right at any time whether the
balance(s) due are on account of premiums or losses or otherwise.
ARTICLE XVIII
NOTICE
Any notice or other communication required to be given hereunder shall be
effective only if in writing and shall be deemed sufficiently given only if sent
to the respective address shown below unless a change in address is received by
the notifying party.
8
<PAGE> 9
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
attn: Risk Finance
Operations Unit
70 Pine Street, 5th Floor
New York, NY 10270
MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY OF AMERICA
5775 Flatiron Parkway
Suite 205
Boulder, Colorado 80301
Attn: Nancy Schwencke
ARTICLE XIX
WARRANTIES
By accepting this Policy, the Insured agrees:
A. The statements in the Application and any other attached agreements or
endorsements, are accurate and complete. Those statements are based upon
representations MICCA has made to the REINSURER;
B. The loss portfolio submission package (including but not limited to, loss
data, historical incurred and paid loss triangles and historical claim count
triangles) provided by MICCA or the named insured under the POLICIES to the
REINSURER was prepared in good faith and on the basis of assumptions, methods,
data, tests and information believed by MICCA or the named insured to be valid
and accurate in all materials respects at the time such projections were
furnished to the REINSURER. Furthermore, MICCA and the named insured represent
that the loss portfolio submission package included loss data information that
accurately reflects the most current loss data for ULTIMATE NET LOSS within the
Coverage Period.
C. The REINSURER has issued this Policy in reliance upon the MICCA'S
representations.
9
<PAGE> 10
ARTICLE XX
MISCELLANEOUS
A. This AGREEMENT shall not be deemed to give any right or remedy to any third
party whatsoever unless said right or remedy is specifically granted to such
third party by the terms hereof.
B. This AGREEMENT shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
C. Nothing contained in this AGREEMENT shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provisions(s) of this AGREEMENT and any statute, law, ordinance or
regulation contrary to which the parties hereto have no legal right to contract,
the latter shall prevail; provided, however, that in such event the provision(s)
of this AGREEMENT so affected shall be curtailed and limited only to extent
necessary to permit compliance with the minimum legal requirement, and no other
provisions of this AGREEMENT shall be affected thereby, and all such other
provisions of this AGREEMENT shall continue in full force and effect.
D. This AGREEMENT contains the full and complete understanding and agreement
between the parties hereto with respect to the subject matter hereof, and the
parties acknowledge that neither is entering into this AGREEMENT in reliance
upon any term, condition, representation or warranty not stated herein and that
this AGREEMENT replaces any and all prior agreements whether oral or written,
pertaining to the subject matter hereof.
E. Any capitalized terms used but not defined herein shall have the same meaning
as defined in the POLICIES.
F. Whenever the text hereof requires the use of a singular or plural term it
shall include the appropriate plural term as the text of the instrument
requires.
G. All changes to this AGREEMENT must be in writing and agreed to by the
parties.
H. This AGREEMENT shall be governed by the laws of the State of New York and the
parties hereto do irrevocably submit to the non-exclusive jurisdiction of the
Courts in the State of New York and to the extent permitted by law the parties
expressly waive all rights to challenge or otherwise limit such jurisdiction.
I. No failure or delay by a party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
by their duly authorized representatives 31st day of March, 1998.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
By: /s/
-----------------------------------------------
Title:
--------------------------------------------
Address: 70 Pine Street New York, New York 10270
------------------------------------------
and in , , this day of , 19 .
------ ------ ------ ------- --
MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY OF AMERICA
By: /s/
-----------------------------------------------
Title:
--------------------------------------------
Address:
------------------------------------------
11
<PAGE> 12
SCHEDULE "A"
PRODUCT LIABILITY POLICIES
EACH AGGREGATE
POLICY NO. POLICY PERIOD OCCURRENCE LIMITS
- -------------------------------------------------------------------------------
MC 15188 May 1, 1988 to May 1, 1989 $250,000 1988 to
$1MM
- -------------------------------------------------------------------------------
MC 15188-1 May 1, 1989 to May 1, 1990 $250,000 1989 to 1990
MC 15188-2 May 1, 1989 to May 1, 1990 $250,000 $1MM
MC 15188-3 May 1, 1989 to May 1, 1990 $250,000
MC 15188-4 May 1, 1989 to May 1, 1990 $250,000
- -------------------------------------------------------------------------------
MC 15190-1 May 1, 1990 to May 1, 1991 $250,000 1990 to 1991
MC 15190-1 May 1, 1990 to May 1, 1991 $250,000 $1MM
MC 15190-3 May 1, 1990 to May 1 ,1991 $250,000
MC 15190-4 May 1, 1990 to May 1, 1991 $250,000
MC 15190-2 May 1, 1990 to May 1, 1991 $250,000
- -------------------------------------------------------------------------------
MC 15191-1 May 1, 1991 to May 1, 1992 $250,000 1991 to 1992
MC 15191-3 May 1, 1991 to May 1, 1992 $250,000 $20MM
MC 15191-4 May 1, 1991 to May 1, 1992 $250,000
MC 15191-2 May 1, 1991 to May 1, 1992 $250,000
- -------------------------------------------------------------------------------
MC 15192-1 May 1, 1992 to May 1, 1993 $1,000,000 1992 to 1993
MC 15192-4 May 1, l992 to May 1, 1993 $1,000,000 $25MM
MC 15192-2 May 1, 1992 to May 1, 1993 $1,000,000
MC 15192-3 May 1, 1992 to May 1, 1993 $1,000,000
- -------------------------------------------------------------------------------
MC 15193-1 May 1, 1993 to May 1, 1994 $1,000,000 1993 to 1994
MC 15193-4 May 1, 1993 to May 1, 1994 $1,000,000 $25MM
MC 15193-2 May 1, 1993 to May 1, 1994 $1,000,000
MC 15193-3 May 1, 1993 to May 1, 1994 $1,000,000
- -------------------------------------------------------------------------------
MC 15194-1 May 1, 1994 to May 1, 1995 $1,000,000 1994 to 1995
MC 15194-4 May 1, 1994 to May 1, 1995 $1,000,000 $30MM
MC 15194-3 May 1, 1994 to May 1, 1995 $1,000,000
- -------------------------------------------------------------------------------
MC 15195-1 May 1, 1995 to May 1, 1996 $1,000,000 1995 to 1996
MC 15195-4 May 1, 1995 to May 1, 1996 $1,000,000 $30MM
MC 15195-3 May 1, 1995 to May 1, 1996 $1,000,000
- -------------------------------------------------------------------------------
MC 15196-1 May 1, 1996 to May 1, 1997 $1,000,000 1996 to 1997
MC 15196-4 May 1, 1996 to May 1, 1997 $1,000,000 $30MM
- -------------------------------------------------------------------------------
MC 15197-1 May 1, 1997 to March 31, 1998 $1,000,000 1997 to 1998
MC 15197-4 May 1, 1997 to March 31, 1998 $1,000,000 $30MM
MC 15197-4 May 1, 1997 to March 31, 1998 $1,000,000
- -------------------------------------------------------------------------------
PPL011 November 1, 1988 to Continuous policies $25,000,000
- -------------------------------------------------------------------------------
PPLO21 November 1, 1989 to Continuous policies $5,000,000
- -------------------------------------------------------------------------------
PPL03l November 1, 1989 to Continuous policies $5,000,000
- -------------------------------------------------------------------------------
<PAGE> 1
Exhibit 10.25
AGREEMENT
(hereinafter "Agreement")
by and between
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
(hereinafter called the "Company")
and
MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY OF AMERICA
(hereinafter called "MIICA")
and
ZURICH REINSURANCE (NORTH AMERICA), INC.
MUNICH AMERICAN REINSURANCE COMPANY
SWISS REINSURANCE AMERICA CORPORATION
(formerly North American Reinsurance Corporation)
SCOR REINSURANCE COMPANY
AMERICAN RE-INSURANCE COMPANY
(hereinafter called the "Reinsurers")
WHEREAS, the Company and MIICA have entered into a Reinsurance Agreement
pursuant to which MIICA is ceding liabilities reinsured under certain policies
of Reinsurance (listed in Schedule A, the "Reinsurance") issued by the
Reinsurers to MIICA;
WHEREAS, it is the intent of the parties hereto that effective as of 12:01
a.m., March 31, 1998 (the "Effective Date"), the Company shall assume all
rights, duties, and obligations of MIICA with respect to the Reinsurance issued
by the Reinsurers to MICCA.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained and upon the terms and conditions hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I
ASSUMPTION OF RIGHTS, DUTIES AND LIABILITIES
MIICA hereby transfers and assigns to the Company and the Company hereby
accepts and assumes, all of MIICA's rights, duties and obligations with
respect to the Reinsurance. The parties agree that as of the Effective Date
the Company shall have the right to receive 100% of the reinsurance
coverage under the Reinsurance in all respects as if the Company rather
than MIICA were the original party to the Reinsurance.
<PAGE> 2
ARTICLE II
ERRORS AND OMISSIONS
Any inadvertent error, omission or delay in complying with the terms and
conditions of this Agreement shall not be held to relieve either party
hereto from any liability which would attach to it hereunder if such delay,
omission or error had not been made, provided such delay, omission or error
is rectified as soon as practicable upon discovery.
ARTICLE III
ARBITRATION CLAUSE
All disputes or differences arising out of the interpretation of this
Agreement shall be submitted to the binding decision of two (2)
Arbitrators, one to be chosen by each party, and in the event the
Arbitrators fail to agree, to the decision of an Umpire to be chosen by the
Arbitrators. The Arbitrators and Umpire shall be disinterested active or
retired executive officials of Fire or Casualty Insurance or Reinsurance
Companies. If either of the parties fails to appoint an Arbitrator within
one (1) month after being required by the other party in writing to do so,
or if the Arbitrators fail to appoint an Umpire, within one (1) month of
receipt of a request in writing by either of them to do so, such Arbitrator
or Umpire, as the case may be, shall at the request of either of them to do
so, such Arbitrator or Umpire, as the case may be, shall at the request of
either party be appointed by a Judge of the State Court of New York.
The Arbitration proceedings shall take place New York, New York. The
applicant shall submit its case within one (1) month after the appointment
of the Court of Arbitration, and the respondent shall submit his reply
within one (1) month after receipt of a claim. The Arbitrators and Umpire
are relieved from all judicial formality and may abstain from following the
strict rules of law.
The Arbitrators and the Umpire shall not award punitive damages. They shall
settle any dispute under this Agreement according to an equitable rather
than a strictly legal interpretation of its terms and their decision shall
be provided to the parties in writing and shall be final and not subject to
appeal. Judgement may be entered upon the award of the Arbitrators in any
court having jurisdiction thereof.
Each party shall bear the expenses of its Arbitrator and shall jointly and
equally share with the other the expense of the Umpire and of the
Arbitration.
This Article shall survive the termination of this Agreement.
<PAGE> 3
ARTICLE IV
NOTICE
Any notice or other communication required to be given hereunder shall be
effective only if in writing and shall be deemed sufficiently given only if
sent to the respective address shown below unless a change in address is
received by the notifying party.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
attn: Risk Finance
Operations Division
70 Pine Street, 5th Floor
New York, NY 10270
ZURICH REINSURANCE (NORTH AMERICA), INC.
- --------------------------------------
- --------------------------------------
MUNICH AMERICAN REINSURANCE COMPANY
- --------------------------------------
- --------------------------------------
SWISS REINSURANCE AMERICA CORPORATION
(formerly North American Reinsurance Corporation)
- --------------------------------------
- --------------------------------------
SCOR REINSURANCE COMPANY
- --------------------------------------
- --------------------------------------
MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY OF
AMERICA
- --------------------------------------
- --------------------------------------
AMERICAN RE-INSURANCE COMPANY
- --------------------------------------
- --------------------------------------
<PAGE> 4
ARTICLE V
MISCELLANEOUS
A. This Agreement shall not be deemed to give any right or remedy to any
third party whatsoever unless said right or remedy is specifically
granted to such third party by the terms hereof.
B. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
C. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and wherever there is any
conflict between any provisions(s) of this Agreement and any statute,
law, ordinance or regulation contrary to which the parties hereto have
no legal right to contract, the latter shall prevail; provided,
however, that in such event the provision(s) of this Agreement so
affected shall be curtailed and limited only to extent necessary to
permit compliance with the minimum legal requirement, and no other
provisions of this Agreement shall be affected thereby, and all such
other provisions of this Agreement shall continue in full force and
effect.
D. This Agreement contains the full and complete understanding and
Agreement between the parties hereto with respect to the subject matter
hereof, and the parties acknowledge that neither is entering into this
Agreement in reliance upon any term, condition, representation or
warranty not stated herein and that this Agreement replaces any and all
prior agreements whether oral or written, pertaining to the subject
matter hereof.
E. Whenever the text hereof requires the use of a singular term it shall
include the appropriate plural term as the text of the instrument
requires.
F. All changes to this Agreement must be in writing and agreed to by the
Parties.
G. To the extent that any issues or disputes fall outside Article III of
this Agreement, this Agreement shall be governed by the laws of the
State of New York and the parties hereto do irrevocably submit to the
non-exclusive jurisdiction of the Courts in the State of New York and
to the extent permitted by law the parties expressly waive all rights
to challenge or otherwise limit such jurisdiction.
I. No failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
J. It is understood and agreed that this Agreement is a manuscript
agreement that has been negotiated at arm's length and on equal footing
as between the parties
<PAGE> 5
hereto, and that any dispute concerning the meaning of this Master
Policy, or any term or condition hereof, shall be resolved without
reference to the doctrine of contra proferentem or any related or
similar doctrine.
K. Each of the parties hereto represents that it has not assigned any of
its rights under the Policies, and the signatories to this Agreements
represent that they are fully authorized to execute the agreements and
releases set forth herein on behalf of the respective parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives in New York, New York this
_________ day of , 19_.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address: 70 Pine Street New York, New York 10270.
------------------------------------------
ZURICH REINSURANCE (NORTH AMERICA), INC. (formerly known as
Zurich Reinsurance Centre, Inc.)
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
------------------------------------------
MUNICH AMERICAN REINSURANCE COMPANY
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
------------------------------------------
<PAGE> 6
SWISS REINSURANCE AMERICA CORPORATION
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
------------------------------------------
SCOR REINSURANCE COMPANY
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
------------------------------------------
AMERICAN RE-INSURANCE COMPANY
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
------------------------------------------
MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY OF AMERICA
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
------------------------------------------
<PAGE> 7
SCHEDULE A
Reinsurance Coverage
- -------------------------------------------------------------------------------
YEARS REINSURANCE COMPANY REINSURER'S
COVERAGE PARTICIPATION
- -------------------------------------------------------------------------------
1991 to 1992 $20MM N. American 50% of $20MM
Munich Re 50% of $20MM
- -------------------------------------------------------------------------------
1992 to 1993 $25MM N. American 50% of $20MM
Munich Re 50% of $20MM
SCOR
- -------------------------------------------------------------------------------
1993 to 1994 $25MM Munich Re 50% of first $20MM
N. American 50% of first $20MM
SCOR Re 5 x $20MM
- -------------------------------------------------------------------------------
1994 to 1995 $30MM Munich Re 50% of first $20MM
N. American 50% of first $20MM
SCOR 5 x $20MM
Zurich 5 x $25MM
- -------------------------------------------------------------------------------
1995 to 1996 $30MM Munich Re 50% of first $20MM
N. American 50% of first $20MM
SCOR 5 x $20MM
Zurich 5 x $25MM
- -------------------------------------------------------------------------------
1996 to 1997 $30MM Munich Re 50% of first $20MM
Swiss Re 50% of first $20MM
SCOR 5 X $20MM
Zurich 5 x $25MM
- -------------------------------------------------------------------------------
1997 to 1998 $30MM Swiss Re 50% of first $20MM
American Re 50% of first $20MM
SCOR 5 x $20MM
American Re 5 x $25MM
- -------------------------------------------------------------------------------
Legend
o All reinsurance is excess of one million dollar retention
o Munich Re = Munich American Reinsurance Company
o N. American = North American Reinsurance Corporation
o Swiss Re = Swiss Reinsurance America Corporation
o SCOR = SCOR Reinsurance Company
o Zurich = Zurich American Reinsurance Company
<PAGE> 1
Exhibit 10.26
ASSUMPTION AGREEMENT
(hereinafter "Agreement")
by and between
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
(hereinafter called the "Company")
and
MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY OF AMERICA
(hereinafter called "MIICA")
and
WERNER HOLDING CO. (PA), INC.
(hereinafter called "Werner")
WHEREAS, it is the intent of the parties hereto that effective as of 12:01
a.m., March 31, 1998 (the "Effective Date"), the Company shall assume all
rights, duties, and obligations of MIICA with respect to certain policies of
insurance (listed in Schedule A and attached hereto, the "Policies") issued by
MIICA to Werner and its subsidiaries and that MIICA shall be relieved of all
insurance obligations and risks transferred hereunder.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained and upon the terms and conditions hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I
ASSUMPTION OF RIGHTS, DUTIES AND LIABILITIES
MIICA hereby transfers and assigns to the Company and the Company hereby
accepts and assumes, all of MIICA's rights, duties, liabilities and
obligations with respect to the Policies. The parties agree that the
Company shall be bound by and undertakes to perform MIICA's obligations
under the Policies in all respects as if the Company rather than MIICA were
the original party to the Policies.
ARTICLE II
RELEASE AND CONSENT TO NOVATION
Werner hereby consents and agrees to the Company's assumption of MIICA's
rights, duties, liabilities and obligations with respect to the Policies.
In consideration of such assumption, Werner hereby releases and discharges
MIICA from any and all liability of whatever kind or character arising out
of or in connection with the Policies.
Page 1
<PAGE> 2
ARTICLE III
COVERAGE RESTRICTIONS
Coverage for Property Damage and Bodily Injury under the Policies shall be
limited to damages arising from an Occurrence which happened during the
Policy Periods described in the Policies and is subject to the restrictions
of Per Occurrence and Policy Aggregate Limits as stated in Schedule A.
Coverage under this Agreement is further restricted by the Total Program
Aggregate as stated below and to the exclusions under Article VI of this
Agreement.
Notwithstanding the terms of the Policies, coverage for Property Damage and
Bodily Injury is subject to a Total Program Aggregate Limit as stated in
the Indemnity Agreement attached hereto as Ex. B. Under no circumstances
shall the total liability of the Company under this Agreement exceed the
Total Program Aggregate Limit as stated in the Indemnity Agreement.
Notwithstanding the terms of the Policies, coverage for Property Damage and
Bodily Injury under the Policies shall not include damages incurred and
paid by Werner and/or MICCA prior to the Effective Date. Coverage for
Supplementary Payments with respect to any claim or suit shall be limited
to work performed or costs and expenses incurred after the Effective Date.
ARTICLE IV
INDEMNIFICATION
The Company agrees to indemnify, defend, and hold MIICA and Werner harmless
from any and all losses, liabilities, damages, actions, claims, demands,
judgments, or expenses arising from or related to the Company's assumption
of MIICA's rights, duties, liabilities and obligations under the Policies,
but solely for those matters ocurring after the Effective Date.
Werner agrees to indemnify, defend and hold the Company harmless from any
and all losses, liabilities, damages, actions, claims, demands, judgments,
or expenses arising from or related to any of MIICA's liabilities or
obligations under policies of insurance not covered by this Agreement.
Page 2
<PAGE> 3
ARTICLE V
CLAIMS HANDLING
Werner represents and warrants that, as of the effective date of this
Agreement, claims under the Policies are being handled by Werner Holding
Company, Inc. a/k/a Pheonix Management Services, Inc. (the "Claims
Handlers"), and Werner agrees that it shall not amend, modify or waive the
provisions of any of its current agreements with the Claims Handlers (to
the extent such provisions affect the handling of claims included within
the liabilities assumed by the Company under this Agreement) without the
Company's prior written consent.
ARTICLE VI
CONSIDERATION
The consideration for the Company's assumption of MIICA's obligations,
duties and liabilities under this Agreement, shall be $_____________
payable by MIICA to the Company concurrently with the execution and
delivery of this Agreement. Receipt of the consideration by the Company is
a condition precedent to the Company's assumption of MIICA's obligations,
duties and liabilities under this Agreement.
ARTICLE VII
EXCLUSIONS
This Agreement does not apply to and will not cover:
1) Damages awarded by a court against Werner or the Claims Handlers where
such damages are outside the provisions of the Policies and such damages
are due to bad faith, fraud, or gross negligence of Werner or the Claims
Handlers in the handling of a loss;
2) Any risk not covered by the Policies;
3) Any ex gratia payments.
ARTICLE VIII
ACCESS TO RECORDS
MIICA shall allow the Company or its agents or authorized representatives
to inspect, at all reasonable times, or deliver to the Company upon request
all records of MIICA relevant to claims, losses or legal proceedings which
involve or are likely to involve the Policies assumed hereunder by the
Company.
Page 3
<PAGE> 4
ARTICLE IX
ERRORS AND OMISSIONS
Any inadvertent error, omission or delay in complying with the terms and
conditions of this AGREEMENT shall not be held to relieve either party
hereto from any liability which would attach to it hereunder if such delay,
omission or error had not been made, provided such delay, omission or error
is rectified as soon as practicable upon discovery.
ARTICLE X
ARBITRATION CLAUSE
All disputes or differences arising out of the interpretation of this
AGREEMENT shall be submitted to the binding decision of two (2)
Arbitrators, one to be chosen by each party, and in the event the
Arbitrators fail to agree, to the decision of an Umpire to be chosen by the
Arbitrators. The Arbitrators and Umpire shall be disinterested active or
retired executive officials of Fire or Casualty Insurance or Reinsurance
Companies. If either of the parties fails to appoint an Arbitrator within
one (1) month after being required by the other party in writing to do so,
or if the Arbitrators fail to appoint an Umpire, within one (1) month of
receipt of a request in writing by either of them to do so, such Arbitrator
or Umpire, as the case may be, shall at the request of either of them to do
so, such Arbitrator or Umpire, as the case may be, shall at the request of
either party be appointed by a Judge of the State Court of New York.
The Arbitration proceedings shall take place New York, New York. The
applicant shall submit its case within one (1) month after the appointment
of the Court of Arbitration, and the respondent shall submit his reply
within one (1) month after receipt of a claim. The Arbitrators and Umpire
are relieved from all judicial formality and may abstain from following the
strict rules of law.
The Arbitrators and the Umpire shall not award punitive damages. They shall
settle any dispute under this AGREEMENT according to an equitable rather
than a strictly legal interpretation of its terms and their decision shall
be provided to the parties in writing and shall be final and not subject to
appeal. Judgement may be entered upon the award of the Arbitrators in any
court having jurisdiction thereof.
Each party shall bear the expenses of its Arbitrator and shall jointly and
equally share with the other the expense of the Umpire and of the
Arbitration.
This Article shall survive the termination of this AGREEMENT.
Page 4
<PAGE> 5
ARTICLE XI
TERMINATION
It is agreed that neither party to this AGREEMENT may terminate this
AGREEMENT.
ARTICLE XII
NOTICE
Any notice or other communication required to be given hereunder shall be
effective only if in writing and shall be deemed sufficiently given only if
sent to the respective address shown below unless a change in address is
received by the notifying party.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
attn: Risk Finance
Operations Division
70 Pine Street, 5th Floor
New York, NY 10270
WERNER HOLDING CO. (PA.), INC.
MANUFACTURERS INDEMNITY AND INSURANCE COMPANY OF AMERICA
ARTICLE XIII
MISCELLANEOUS
A. This Agreement shall not be deemed to give any right or remedy to any
third party whatsoever unless said right or remedy is specifically
granted to such third party by the terms hereof.
B. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
C. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and wherever there is any
conflict between any provisions(s) of this Agreement and any statute,
law, ordinance or regulation
Page 5
<PAGE> 6
contrary to which the parties hereto have no legal right to contract,
the latter shall prevail; provided, however, that in such event the
provision(s) of this Agreement so affected shall be curtailed and
limited only to extent necessary to permit compliance with the minimum
legal requirement, and no other provisions of this Agreement shall be
affected thereby, and all such other provisions of this Agreement shall
continue in full force and effect.
D. This Agreement contains the full and complete understanding and
agreement between the parties hereto with respect to the subject matter
hereof, and the parties acknowledge that neither is entering into this
Agreement in reliance upon any term, condition, representation or
warranty not stated herein and that this Agreement replaces any and all
prior agreements whether oral or written, pertaining to the subject
matter hereof.
E. Any capitalized terms used but not defined herein shall have the same
meaning as defined in the Policies.
F. Whenever the text hereof requires the use of a singular term it shall
include the appropriate plural term as the text of the instrument
requires.
G. All changes to this Agreement must be in writing and agreed to by the
Parties.
H. To the extent that any issues or disputes fall outside Article IX of
this Agreement, this Agreement shall be governed by the laws of the
State of New York and the parties hereto do irrevocably submit to the
non-exclusive jurisdiction of the Courts in the State of New York and to
the extent permitted by law the parties expressly waive all rights to
challenge or otherwise limit such jurisdiction.
I. No failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
J. It is understood and agreed that this Agreement is a manuscript
Agreement that has been negotiated at arm's length and on equal footing
as between the parties hereto, and that any dispute concerning the
meaning of this Master Policy, or any term or condition hereof, shall be
resolved without reference to the doctrine of contra proferentem or any
related or similar doctrine.
K. Each of the parties hereto represents that it has not assigned any of
its rights under the Policies, and the signatories to this Agreements
represent that they are fully authorized to execute the agreements and
releases set forth herein on behalf of the respective parties hereto.
Page 6
<PAGE> 7
The remainder of this page is left intentionally blank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives in New York, New York this _________
day of , 19_.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address: 70 Pine Street New York, New York 10270.
-------------------------------------------
WERNER HOLDING CO. (PA.), INC.
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
-------------------------------------------
MANUFACTURERS INDEMNITY AND INSURANCE COMPANY OF
AMERICA
By: /s/
------------------------------------------------
Title:
---------------------------------------------
Address:
-------------------------------------------
Page 7
<PAGE> 1
Exhibit 10.27
NOVATION AND ASSUMPTION AGREEMENT
(hereinafter "Agreement")
by and between
INSURANCE COMPANY OF NORTH AMERICA
(hereinafter called "CIGNA")
and
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
(hereinafter called "National Union")
AND
WERNER HOLDING CO. (PA), INC.
(hereinafter called "Werner")
WHEREAS, it is the intent of the parties hereto that effective as of
12:01 a.m., March 31, 1998 (the "Effective Date"), National Union shall assume
all rights, duties, and obligations of CIGNA with respect to the
Products/Completed Operations hazard provided under certain policies of
insurance (listed in Schedule A, the "Policies") issued by CIGNA to Werner and
its subsidiaries, and that CIGNA shall be relieved of all insurance obligations
and risks transferred hereunder;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained and upon the terms and conditions hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I
ASSUMPTION OF RIGHTS, DUTIES AND LIABILITIES
CIGNA hereby transfers and assigns to National Union and National Union
hereby accepts all of CIGNA's rights, and assumes direct and sole liability to
all policyholders for all of CIGNA's duties, liabilities and obligations with
respect to the Products/Completed Operations hazard of the Policies only. The
parties agree that National Union shall be bound by and undertakes to perform
such obligations in all respects as if National Union rather than CIGNA were the
original issuer of and party to the Policies; and that CIGNA shall be and hereby
is relieved of all duties, liabilities and obligations with respect to the
Products/Completed Operations hazard of the Policies only, including liability
for claims incurred but not yet reported and for claims reported but not yet
paid as of the Effective Date.
<PAGE> 2
ARTICLE II
RELEASE & CONSENT TO NOVATION
Notwithstanding the Coverage Restrictions set forth in Articles III and VII
below, Werner hereby agrees to release and forever discharge CIGNA, its
directors, officers, employees, agents, attorneys, representatives, successors
and assigns, from any and all claims, demands, actions, liabilities,
obligations, duties, or causes of action, known or unknown which Werner has,
might have had, or might have in the future, arising out of or connected with,
in whole or in part, any event, act omission, or transaction relating in any way
to the Products/Completed Operations hazard of the Policies.
ARTICLE III
COVERAGE RESTRICTIONS
Coverage provided by National Union pursuant to its assumption of
liabilities and obligations hereunder shall be per the original terms and
conditions of the Policies, provided, however, that coverage for Property Damage
and Bodily Injury under the Policies shall be limited to damages arising from an
Occurrence which happened during the Policy Periods described in the Policies
and is subject to the restrictions of aggregate limit as stated below and to the
exclusions under Article VII of this Agreement. Notwithstanding the terms of the
Policies, coverage for Property Damage and Bodily Injury under the Policies
shall not include damages incurred and paid by CIGNA prior to the Effective
Date. Coverage for Supplementary Payments with respect to any claim or suit
shall be limited to work performed or costs and expenses incurred after the
Effective Date.
Notwithstanding the original terms of the Policies, coverage provided by
National Union for Property Damage and Bodily Injury is subject to an absolute
aggregate limit as stated in the Indemnity Agreement attached hereto as Schedule
B. Under no circumstances shall the total liability of National Union under this
Agreement exceed the absolute aggregate limit as stated in the Indemnity
Agreement.
Notwithstanding the original terms of the Policies, coverage provided by
National Union for Property Damage and Bodily Injury is subject to per
occurrence limits as described in the Schedule A attached hereto.
ARTICLE IV
CONSIDERATION
The consideration for National Union's assumption of CIGNA's obligations,
duties and liabilities under this Agreement shall be $548,038.00 payable by or
on behalf of CIGNA to National Union concurrently with the execution and
delivery of this Agreement and
<PAGE> 3
the execution of a certain commutation agreement between CIGNA and Manufacturers
Indemnity and Insurance Company of America. Receipt of the consideration by
National Union is a condition precedent to National Union's assumption of
CIGNA's obligations, duties and liabilities under this Agreement.
Werner here acknowledges and agrees that CIGNA's agreement to transfer to
National Union, its rights, duties, obligations and liabilities hereunder
benefits Werner and constitutes good and adequate consideration to Werner for
the release provided by Werner herein. Werner further acknowledges and
represents that it has had a full opportunity to obtain legal advice and counsel
regarding its rights under the Policies and under this Agreement and that it is
executing this Agreement after obtaining such counsel or after knowing waiver of
same. Werner further represents that it has read this Agreement in its entirety
and fully understands its content and effect.
ARTICLE V
INDEMNIFICATION
National Union agrees to indemnify, defend and hold CIGNA, Werner and their
directors, officers, employees, agents, representatives, successors or assigns
harmless from and against any losses, liabilities, damages, actions, claims,
demands, judgments or expenses asserted or incurred after the Effective Date and
arising out of or connected with, in whole or in part, any event, act, omission,
or transaction, relating in any way to CIGNA's transfer and assignment or
National Union's acceptance, assumption or performance of CIGNA's rights,
duties, obligations and liabilities assumed hereunder. Indemnification of Werner
and its directors, officers, employees, agents, representatives, successors or
assigns under this Article shall not apply to the exclusions covered in Article
VII below.
ARTICLE VI
CLAIMS HANDLING
Werner represents and warrants that, as of the Effective Date of this
Agreement, claims under the Policies are being handled by Werner a/k/a Phoenix
Management Services, Inc. (the "Claims Handlers"), and Werner agrees that it
shall not amend, modify or waive the provisions of any of its current agreements
with the Claims Handlers (to the extent such provisions affect the handling of
claims included within the liabilities assumed by National Union under this
Agreement) without National Union's prior written consent.
-3-
<PAGE> 4
ARTICLE VII EXCLUSIONS
As between National Union and Werner, this Agreement does not apply to and
will not cover:
1. Any risk not covered by the Policies;
2. Any ex gratia payments; and
3. Damages awarded by a court against Werner or the Claims Handlers where such
damages are outside the provisions of the Policies and such Damages are due
to bad faith, fraud or gross negligence of Werner or the Claims Handlers in
the handling of a loss.
ARTICLE VIII
ACCESS TO RECORDS
CIGNA shall allow National Union or its agents or authorized
representatives to inspect, at all reasonable times, or deliver to National
Union upon request all records of CIGNA relevant to claims, losses or legal
proceedings which involve or are likely to involve the Policies assumed
hereunder by National Union.
ARTICLE IX
ERRORS AND OMISSIONS
Any inadvertent error, omission or delay in complying with the terms and
conditions of this Agreement shall not be held to relieve either party hereto
from any liability which would attach to it hereunder if such delay, omission or
error had not been made, provided such delay, omission or error is rectified as
soon as practicable upon discovery.
ARTICLE X
ARBITRATION CLAUSE
All disputes or differences arising out of the interpretation of this
Agreement shall be submitted to the binding decision of three (3) arbitrators,
one to be chosen by each party, and an umpire to be chosen by the arbitrators.
The arbitrators and umpire shall be disinterested active or retired executive
officials of fire or casualty insurance or reinsurance companies. If either of
the parties fails to appoint an arbitrator within one (1) month after being
required by the other party in writing to do so, or if the arbitrators fail to
appoint an umpire, within (1) month of receipt of a request in writing by either
of them to do so, such arbitrator or umpire, as the case may be, shall at the
request of either of them to do so, such arbitrator or umpire, as the case may
-4-
<PAGE> 5
be, shall at the request of either party be appointed by a judge of the State of
New York.
The arbitration proceedings shall take place in New York, New York. The
applicant shall submit its case within one (1) month after the appointment of
the Court of Arbitration, and the respondent shall submit his reply within one
(1) month after receipt of a claim. The arbitrators and umpire are relieved from
all judicial formality and may abstain from following the strict rules of law.
The arbitrators and umpire shall not award punitive damages.. They shall
settle any dispute under this agreement according to an equitable rather than a
strictly legal interpretation of its terms and their decision shall be provided
to the parties in writing and shall be final and not subject to appeal, in the
absence of fraud or other wrongful conduct. Judgement may be entered upon the
award of the arbitrators in any court having jurisdiction thereof.
Each party shall bear the expenses of its arbitrator and shall jointly and
equally share with the other the expense of the umpire and of the arbitration.
This Article shall survive the termination of this Agreement.
ARTICLE XI
TERMINATION
It is agreed that no party to this Agreement may terminate this Agreement.
ARTICLE XII
NOTICE
Any notice or other communication required to be given hereunder shall be
effective only if in writing and shall be deemed sufficiently given only if sent
to the respective address shown below unless a change in address is received by
the notifying party.
CIGNA
TO:
WERNER
TO:
NATIONAL UNION
TO:
-5-
<PAGE> 6
ARTICLE XIII
MISCELLANEOUS
A. This Agreement shall not be deemed to give any right or remedy to any
third party whatsoever unless said right or remedy is specifically
granted to such third party by the terms hereof.
B. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
C. Nothing contained in this Agreement shall be construed, so as to
require the commission of any act contrary to law, and wherever there
is any conflict between any provision(s) of this Agreement and any
statute, law, ordinance or regulation contrary to which the parties
hereto have no legal right to contract, the latter shall prevail;
provided, however, that in such event the provision(s) of this
Agreement so affected shall be curtailed and limited only to extent
necessary to permit compliance with the minimum legal requirement, and
no other provisions of this Agreement shall be affected thereby, and
all such other provisions of this Agreement shall continue in full
force and effect.
D. This Agreement contains the full and complete understanding and
agreement between the parties hereto with respect to the subject
matter hereof, and the parties acknowledge that neither is entering
into this Agreement in reliance upon any term, condition,
representation or warranty not stated herein and that this Agreement
replaces any and all prior agreements whether oral or written,
pertaining to the subject matter hereof.
E. Any capitalized terms used but not defined herein shall have the same
meaning as defined in the Policies.
F. Whenever the text hereof requires the use of a singular term it shall
include the appropriate plural term as the text of the instrument
requires.
G. All changes to this Agreement must be in writing and agreed to by the
parties.
H. This Agreement shall be governed by the laws of the State of New York.
I. No failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder.
-6-
<PAGE> 7
J. It is understood and agreed that this Agreement is a manuscript
Agreement that has been negotiated at arm's length and on equal
footing as between the parties hereto, and that any dispute concerning
the meaning of this Agreement or any term or condition hereof, shall
be resolved without reference to the doctrine of contra preferentum or
any related or similar doctrine.
K. Each of the parties hereto represents that it has not assigned any of
its rights under the Policies, and the signatories to this Agreement
represent that they are fully authorized to execute the agreements and
releases set forth herein on behalf of the respective parties hereto.
L. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall be
considered one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives on this 31st day of March,
1998.
INSURANCE COMPANY OF NORTH AMERICA
By: /s/
-----------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
WERNER HOLDING CO. (PA), INC.
By: /s/
-----------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, P.A.
By: /s/
-----------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
-7-
<PAGE> 8
Schedule A
LIST OF LIABILITY POLICIES
<TABLE>
<CAPTION>
- ------------------------------- ------------------------------------------------------------ ---------------------
Excess Policy Statutory Company Policy Term
- ------------------------------- ------------------------------------------------------------ ---------------------
<S> <C> <C>
XCP G0663770A Insurance Company of North America 05/01/88-89
- ------------------------------- ------------------------------------------------------------ ---------------------
XCP G06638934 Insurance Company of North America 05/01/89-90
- ------------------------------- ------------------------------------------------------------ ---------------------
XCP G13965481 Insurance Company of North America 05/01/90-91
- ------------------------------- ------------------------------------------------------------ ---------------------
XCP G06639707 Insurance Company of North America 05/01/91-92
- ------------------------------- ------------------------------------------------------------ ---------------------
</TABLE>
-8-
<PAGE> 1
Exhibit 10.28
COMMUTATION AGREEMENT
(hereinafter "this Agreement")
THIS AGREEMENT is made and entered into to be effective as of the 31st day
of March, 1998, by and between Insurance Company of North America, Pacific
Employers Insurance Company and CIGNA Insurance Company of Illinois (hereinafter
collectively the "Company"), and Manufacturers Indemnity and Insurance Company
of America, a Colorado company (hereinafter the "Reinsurer").
WITNESSETH THAT:
WHEREAS, some or all of the entities comprising the Company and the
Reinsurer entered into certain reinsurance agreements (hereinafter collectively,
the "Reinsurance Agreement"), pursuant to which the Company ceded to the
Reinsurer a stated portion of the Company's liability for losses incurred under
the Company's workers' compensation and employer's liability insurance policies
listed on Exhibit A hereto (the " WC Policies") and the liability insurance
policies listed on Exhibit B hereto (the "Liability Policies")(the WC Policies
and Liability Policies shall collectively be referred to herein as the
"Policies"); and
WHEREAS, the Company and the Reinsurer wish to cancel and commute the
Reinsurer's liabilities under the Reinsurance Agreements on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. The Company hereby agrees to commute and release the Reinsurer from all
further reinsurance liabilities under the Reinsurance Agreements with respect to
losses and related allocated claims expense arising under the Policies (the
"Commuted Liabilities"). The Company and the Reinsurer hereby agree that all of
their respective rights, duties and obligations under the Reinsurance Agreement
with respect to the Commuted Liabilities are herewith commuted and canceled, and
release and discharge one another from any further liability or obligation with
respect thereto. The Company's said commutation, cancellation, release and
discharge of the Reinsurer is subject to the Company's receipt of payment in
full of the amount set forth in Paragraph 2 below.
2. The Reinsurer shall transfer cash reserves to the Company in the amount
of US$486,969 as consideration for the Company's release and commutation of
Reinsurer's liabilities for the WC Policies as set forth herein; provided,
however, that this amount shall include $61,967 currently held by the Company as
a Paid Loss Deposit Fund and $3,572 recently paid to the Company by the
Reinsurer as a reinsurance payment. The Reinsurer shall transfer
<PAGE> 2
cash reserves to the Company in the amount of US$ 548,038.00 as consideration
for the Company's release and commutation of Reinsurer's liabilities for the
Liability Policies as set forth herein. Such amounts shall be payable
immediately upon the parties' execution of this Agreement.
3. The Reinsurer agrees to cooperate in good faith in the defense of all
claims for which liability has been commuted by the Company hereunder and to
make available to the Company all files, records, reports and other information
in its possession pertaining to such claims.
4. This Commutation Agreement shall be governed and construed in accordance
with the laws of the State of New York.
5. (a) All disputes or differences arising out of the interpretation of
this Agreement shall be submitted to the binding decision of three (3)
arbitrators, one to be chosen by each party, and an umpire to be chosen by the
arbitrators. The arbitrators and umpire shall be disinterested active or retired
executive officials of fire or casualty insurance or reinsurance companies. If
either of the parties fails to appoint an arbitrator within one (1) month after
being required by the other party in writing to do so, or if the arbitrators
fail to appoint an umpire, within (1) month of receipt of a request in writing
by either of them to do so, such arbitrator or umpire, as the case may be, shall
at the request of either of them to do so, such arbitrator or umpire, as the
case may be, shall at the request of either party be appointed by a judge of the
State of New York.
(b) The arbitration proceedings shall take place in New York, New York. The
applicant shall submit its case within one (1) month after the appointment of
the Court of Arbitration, and the respondent shall submit his reply within one
(1) month after receipt of a claim. The arbitrators and umpire are relieved from
all judicial formality and may abstain from following the strict rules of law.
(c) The arbitrators and umpire shall not award punitive damages.. They
shall settle any dispute under this agreement according to an equitable rather
than a strictly legal interpretation of its terms and their decision shall be
provided to the parties in writing and shall be final and not subject to appeal,
in the absence of fraud or other wrongful conduct. Judgement may be entered upon
the award of the arbitrators in any court having jurisdiction thereof.
(d) Each party shall bear the expenses of its arbitrator and shall jointly
and equally share with the other the expense of the umpire and of the
arbitration.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement on
the dates set forth below, but to be effective on the 31st day of March, 1998.
-2-
<PAGE> 3
Manufacturers Indemnity and Insurance Insurance Company of North America
Company of America
- ------------------------------ ------------------------------
Name: Name:
Title: Title:
------------------------ ------------------------
Date: Date:
------------------------- -------------------------
Pacific Employers Insurance Company CIGNA Insurance Company of Illinois
- ------------------------------ ------------------------------
Name: Name:
Title: Title:
------------------------ ------------------------
Date: Date:
------------------------- -------------------------
-3-
<PAGE> 4
EXHIBIT A TO COMMUTATION AGREEMENT
LIST OF WC POLICIES
Commutation Agreement - Policy Listing
<TABLE>
<CAPTION>
---------------------------- ------------------------------------------------------------ ---------------------
Workers Compensation Statutory Company Policy Term
---------------------------- ------------------------------------------------------------ ---------------------
<S> <C> <C>
RSC C1 8146472 Insurance Company of North America 05/01/88-89
RSC C1 8146484 CIGNA Insurance Company of Illinois 05/01/88-89
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 3059991 Pacific Employers Insurance Company 05/01/89-90
RSC C3 3060002 CIGNA Insurance Company of Illinois 05/01/89-90
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 5332777 Pacific Employers Insurance Company 05/01/90-91
RSC C3 5332789 CIGNA Insurance Company of Illinois 05/01/90-91
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 6897314 Pacific Employers Insurance Company 05/01/91-92
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 8469447 Pacific Employers Insurance Company 05/01/92-93
---------------------------- ------------------------------------------------------------ ---------------------
</TABLE>
-4-
<PAGE> 5
EXHIBIT B TO COMMUTATION AGREEMENT
LIST OF LIABILITY POLICIES
<TABLE>
<CAPTION>
---------------------------- ------------------------------------------------------------ ---------------------
Excess Policy Statutory Company Policy Term
---------------------------- ------------------------------------------------------------ ---------------------
<S> <C> <C>
XCP G0663770A Insurance Company of North America 05/01/88-89
---------------------------- ------------------------------------------------------------ ---------------------
XCP G06638934 Insurance Company of North America 05/01/89-90
---------------------------- ------------------------------------------------------------ ---------------------
XCP G13965481 Insurance Company of North America 05/01/90-91
---------------------------- ------------------------------------------------------------ ---------------------
XCP G06639707 Insurance Company of North America 05/01/91-92
---------------------------- ------------------------------------------------------------ ---------------------
</TABLE>
-5-
<PAGE> 1
Exhibit 10.29
INDEMNITY AGREEMENT
(HEREINAFTER "AGREEMENT")
This INDEMNITY AGREEMENT is made effective as of this 31st day of March,
1998 by and between NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.,
(hereinafter called the "COMPANY') and WERNER HOLDING CO. (PA), INC.
(hereinafter called "WERNER").
WHEREAS, the COMPANY and MANUFACTURER'S INDEMNITY AND INSURANCE COMPANY
OF AMERICA (hereinafter "MICCA" entered into an Reinsurance Agreement (a copy of
which is attached hereto as Exhibit A and hereinafter referred to as the
"REINSURANCE") whereby the COMPANY reinsured all of MICCA's obligations
(hereinafter "PRODUCTS LOSSES"), subject to certain coverage limitations, under
certain policies of products liability insurance referenced in the REINSURANCE.
WHEREAS, the COMPANY, WERNER and Travelers Indemnity Company of Hartford
(hereinafter "TRAVELERS") entered into a Novation Agreement (a copy of which is
attached hereto as Exhibit B and hereinafter referred to as the "TRAVELERS
NOVATION") whereby the COMPANY agreed to assume all of WERNER's obligations
(hereinafter "RETENTION AMOUNTS") under certain Agreement Letters referenced in
the NOVATION.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. The COMPANY has agreed to accept: 1) one hundred percent
(100%) of the PRODUCTS LOSSES, net of reinsurance as further described in
Section 2 below; and 2) one hundred percent (100%) of the RETENTION AMOUNTS;
with the total of the MICCA PRODUCTS LOSSES and RETENTION AMOUNTS being subject
to an absolute aggregate limit of seventy five million dollars ($75,000,000.00)
(hereinafter the "TOTAL PROGRAM AGGREGATE LIMIT"). Under no circumstances shall
the total liability of the Company for the total of PRODUCTS LOSSES and the
RETENTION AMOUNTS exceed the TOTAL PROGRAM AGGREGATE LIMIT.
SECTION 2. It is understood that for purposes of this AGREEMENT that the
COMPANY is accepting one hundred percent of PRODUCTS LOSSES for those layers
which are not reinsured by the reinsurance agreements as listed in the Schedule
C attached hereto. The portions of PRODUCTS LOSSES covered by the reinsurance
agreements listed in Schedule C are not included as PRODUCTS LOSSES under this
Agreement and as such will not erode the seventy five million dollar overall
aggregate described in this Indemnity Agreement.
SECTION 3. WERNER hereby agrees to indemnify and reimburse, within ten
(10) business days of demand, the COMPANY against any and all liability, loss,
damage or expense, including without limitation, reasonable attorney's fees, and
allocated and unallocated loss adjustment expense, arising from all manner of
action, suits, claims for sums of money, and demands brought or made against the
COMPANY for all PRODUCTS LOSSES and RETENTION AMOUNTS in excess of the TOTAL
PROGRAM AGGREGATE LIMIT.
<PAGE> 2
SECTION 4. This AGREEMENT shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
SECTION 5. This AGREEMENT contains the full and complete understanding
and agreement between the parties hereto with respect to the subject matter
hereof, and the parties acknowledge that neither is entering into this AGREEMENT
in reliance upon any term, condition, representation or warranty not stated
herein and that this AGREEMENT replaces any and all prior agreements whether
oral or written, pertaining to the subject matter hereof.
SECTION 6. All changes to, and waivers of any provision of, this
AGREEMENT must be in writing and agreed to by the parties hereto.
SECTION 7. No failure or delay by a party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
SECTION 8. Notwithstanding anything to the contrary, the parties agree
that the TOTAL PROGRAM AGGREGATE LIMIT shall be inclusive of all Supplementary
Payments related to the PRODUCTS LOSSES and all attorney's fees and allocated or
unallocated loss adjustment expenses related to the RETENTION AMOUNTS.
SECTION 9. This Agreement shall be governed by the laws of the State of
New York and the parties hereto do irrevocably submit to the non-exclusive
jurisdiction of the Courts in the State of New York and to the extent permitted
by law the parties expressly waive all rights to challenge or otherwise limit
such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be
executed by their duly authorized representatives in New York, New York as of
the date first above written.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.,
By: /s/
---------------------------------
Name:
Title:
WERNER HOLDING CO. (PA), INC.
By: /s/
---------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.30
NOVATION AGREEMENT
THIS AGREEMENT is made effective as of the 31st day of March, 1998 by and among
The Travelers Indemnity Company of Hartford, Connecticut and each of its
property, casualty insurance subsidiaries and affiliates, but only to the extent
such companies have issued policies or are performing services under the
Agreement Letters (hereinafter referred to as "Travelers"). Werner Holding
Company (Pa.), Inc. and its subsidiaries of Greenville, Pennsylvania
(hereinafter referred to as "Werner") and National Union Fire Insurance Company
of Pittsburgh, Pennsylvania (hereinafter referred to as "National Union").
WHEREAS, Travelers and Werner have entered into one or more Agreement Letters as
listed in "Exhibit A", attached hereto and incorporated by reference
(hereinafter referred to as the "Agreement Letters"), which Agreement letters
reference Insurance Policies issued by Travelers to Werner (hereinafter
referred to as "Policies"); and
WHEREAS, the parties wish to contemporaneously substitute National Union in
place of Werner as a party under the Agreement Letters and to discharge and
release Werner from its obligations under the said Agreement Letters; and
WHEREAS, in consideration for National Union entering into this Agreement,
Werner has agreed to pay National Union on March 31, 1998, the amount of
$4,202,641.00.
NOW, THEREFORE, in consideration of the covenants set forth herein, the parties
agree as follows:
Article 1. NOVATION
-------------------
Contemporaneously with the discharge and release of Werner under Article 3.
herein, National Union shall be substituted in all respects and for all
purposes in place and stead of Werner as party to the Agreement Letters and
National Union shall thereby assume all the rights, liabilities and Obligations
of Werner arising under or related to the Agreement Letters as if such
Agreement Letters had been originally entered into with National Union,
provided that all monies due and owing from National Union to Travelers under
the Agreement Letters will be payable pursuant to the Interim Funding Program
(Exhibit B) and the Electronic Funding Program (Exhibit C), both attached
hereto and incorporated by reference. Nothing herein shall operate to amend or
modify any other term or condition of the Agreement Letters with the exception
of how the claim handling charges will be paid. These charges will be
collected and calculated as described in Article 2.C. "Obligations" is defined
in this Agreement in the same way as it is in the Agreement Letters.
1
<PAGE> 2
Article 2. OTHER CONDITIONS TO RELEASE
---------------------------------------
A. On or before the date first above written, National Union agrees to
provide Travelers with a Letter of Credit naming Travelers as
beneficiary, which is satisfactory to Travelers in form, content and
issuer, and which otherwise meets all the requirements of the Agreement
Letters. The Letter of Credit will be in the initial amount of
$1,000,000, and will secure all Obligations of Werner to Travelers under
the Agreement Letters which are being assumed by National Union.
B. Werner will pay to Travelers the outstanding Obligations under the
Agreement Letters which are, or will be, due and owing on the effective
date first above written. Travelers will calculate the amount of such
outstanding Obligations no later than April 6, 1998, and payment will be
made by Werner to Travelers via wire transfer, within one (1) day of the
date Travelers notifies Werner of the amount of the outstanding
Obligations.
C. On or before the date first above written National Union agrees to pay
Travelers $500,000 for claim handling charges. Travelers will not bill
National Union for additional claim handling charges until the aggregate
paid losses portion of Obligations for all policies listed in Exhibit A
exceed $14,500,000, with each paid loss limited to $250,000. If and
when this occurs, Travelers will bill and National Union will pay a 12.7%
claim handling factor for any paid loss excess of $14,500,000, applicable
to the first $250,000 of each loss. These additional claim handling
charges will be collected under the Electronic Funding Program as set
forth in Exhibit C.
Article 3. RELEASE
------------------
In consideration of the substitution of National Union and the mutual covenants
contained herein, and once the contingencies referenced in Article 2 above have
been met and this Agreement has been executed, Travelers agrees that Werner's
duty to pay and perform any of its liabilities and Obligations, including, but
not limited to, any Deductible Losses, Deductible Administrative Expense
Reimbursement amounts, premiums, premium taxes, assigned risk overburden charges
and miscellaneous charges of whatever nature and kind, pursuant to the Agreement
Letters, shall erase and terminate.
Any Letters of Credit previously provided to Travelers by Werner to secure
Obligations under the Agreement Letters will be returned to the bank which
issued the Letters of Credit within five (5) business days of the date the
Agreement is executed by all parties, or of the date that Travelers receives
from National Union the Letter of Credit referenced in Article 2, whichever is
later. All prepaid premium, deductible deposits and other similar escrow-type
accounts provided by Werner to Travelers pursuant to the Agreement
2
<PAGE> 3
Letters will be returned to Werner within five (5) business days of receipt by
Travelers of the deposit amount referenced in Exhibit B from National Union.
Upon return of the Letters of Credit to the issuing bank, and upon return of
the escrows to Werner, and once this Agreement has been executed, Werner agrees
that all premiums, premium taxes, assigned risk overburden charges, and
miscellaneous charges of whatever nature or kind (whether actual or estimated)
previously paid by or on behalf of Werner in respect of the Agreement Letters,
shall be deemed to be, and Werner hereby agrees that such charges are earned,
and that Travelers shall have no further obligation to account for or return
such premiums and other payments to Werner.
After all of the above has taken place, Travelers and Werner each mutually
release and forever discharge the other, their successors, assigns, agents,
officers, affiliates, employees, directors and attorneys from any and all
claims, demands, causes of action, judgments, suits, debts, covenants,
contracts, controversies, agreements, provisions, awards, proceedings, costs,
fees and expenses, whether or not now known or unknown, suspected or
unsuspected, or claimed, which they ever had, now have or claim to have had
against the other from the beginning of the world to the date of this Agreement
related in any way to the Agreement Letters, including, but not limited to, any
claim or dispute relating to any prior billing or calculation of Obligations or
any insurance claim paid pursuant to the Policies prior to the date of this
Agreement, provided that, Travelers continues to have a duty to defend and pay
on behalf of Werner, up to the applicable limits of liability of the Policies,
and Werner continues to have a duty to cooperate with Travelers in the exercise
of Travelers aforementioned duty to defend and to pay on behalf of Werner.
Article 4. GENERAL
-------------------
A. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
B. This Agreement shall constitute the entire agreement between the parties
hereto related to the subject matter hereof, and may not be amended,
except by written amendment executed by each of the parties.
C. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Connecticut and the parties hereto do
irrevocably submit to the non-exclusive jurisdiction of the State of
Connecticut. To the extent permitted by law, the parties expressly
waive all rights to challenge or otherwise limit such jurisdiction.
D. All disputes or differences arising out of the interpretation of this
Agreement shall be submitted to the binding decision of two (2)
Arbitrators, one to be chosen by each party, and in the event the
Arbitrators fail to agree, to the decision of an Umpire to be chosen by the
Arbitrators. The Arbitrators and Umpire shall be
3
<PAGE> 4
disinterested active or retired executive officials of Fire or Casualty
Insurance or Reinsurance Companies. If either of the parties fails to
appoint an Arbitrator within one (1) month after being required by the
other party in writing to do so, or if the Arbitrators fail to appoint an
Umpire, within one (1) month of receipt of a request in writing by either
of them to do so, such Arbitrator or Umpire, as the case may be, shall at
the request of either party be appointed by a Judge or a state court of
Connecticut.
The Arbitration proceedings shall take place in Stamford, Connecticut.
The applicant shall submit its case within one (1) month after the
appointment of the Court of Arbitration, and the respondent shall submit
his reply within one (1) month after receipt of a claim. The Arbitrators
and Umpire are relieved from all judicial formality and may abstain from
following the strict rules of law.
The Arbitrators and the Umpire shall not aware punitive damages. They
shall settle any dispute under this Agreement according to an equitable
rather than a strictly legal interpretation of its terms and their
decision shall be provided to the parties in writing and shall be final
and not subject to appeal. Judgment may be entered upon the award of the
Arbitrators in any court having jurisdiction thereof.
Each party shall bear the expenses of its Arbitrator and shall jointly
and equally share with the other the expense of the Umpire and of the
Arbitration.
This Article shall survive the termination of this Agreement.
E. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any statute, law,
ordinance or regulation contrary to which the parties hereto have no
legal right to contract, the latter shall prevail; provided, that in such
event the provision of this Agreement so affected shall be curtailed and
limited only to the extent necessary to permit compliance with the
minimum legal requirement, and no other provisions of this Agreement
shall be affected thereby, and all such other provisions of this
Agreement shall continue in full force and effect. In the event this
provision of the Agreement is invoked, and any money is required to be
paid or returned by either Travelers or Werner to the other which was not
contemplated by this Agreement, then that paying or returning party may
void the mutual releases by and between Travelers and Werner set forth
herein.
F. This Agreement may be executed and delivered in multiple counterparts,
each of which, when so executed and delivered, shall be an original, but
such counterparts shall together constitute but one and the same
instrument and agreement.
[Remainder of page intentionally blank. Next page is signature page.]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement by their
respective authorized offices.
THE TRAVELERS INDEMNITY COMPANY
By: /s/ ?????
-----------------------------
Title: Executive Vice President
--------------------------
WERNER HOLDING COMPANY (PA.), INC.
By: /s/ Donald W. Resnick
-----------------------------
Title: CFO
--------------------------
NATIONAL UNION FIRE INSURANCE COMPANY
By: /s/ Robert ???????
-----------------------------
Title: Vice President
-------------------------
5
<PAGE> 6
EXHIBIT A
---------
AGREEMENT LETTERS AND POLICY NUMBERS
Agreement Letter Date Policy Period Policy #s Type of Policy
- ------------------------------------------------------------------------
August 22, 1997 5/1/97 - 98 UC4J-UB-844G752-8 Workers Comp
UDC2JUB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UC2J-UE-844G751-6 Workers Comp
July 25, 1996 5/1/96 - 97 UC4J-UB-844G752-8 Workers Comp
UC2J-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UC2J-UB-844G751-6 Workers Comp
December 4, 1995 5/1/95 - 96 UC4J-UB-844G752-8 Workers Comp
UC2J-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UC2J-UB-844G751-6 Workers Comp
November 18, 1994 5/1/94 - 95 UDSJ-UB-844G752-8 Workers Comp
UC2J-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UCJ2-UB-844G751-6 Workers Comp
February 21, 1994 5/1/93 - 94 UDSJ-UB-844G752-8 Workers Comp
UDRJ-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2J-UB-844G751-6 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
6
<PAGE> 7
EXHIBIT B
---------
Interim Payment Terms
---------------------
1. National will pay Travelers $36,000 per week, commencing as of April 3,
1998 and each succeeding Friday thereafter, until the Electronic Funding
Program in Exhibit C is established and is operational, at which point the
payments of $36,000 per week will be terminated immediately. Travelers
will use this money to pay all Losses (defined as it is in Exhibit C), plus
Allocated Loss Adjustment Expenses, times the applicable Claims Handling
Factor. These weekly payments will continue to be made without regard to
the monthly adjustments referenced in 3. below.
2. Travelers shall require prepaid Losses and Allocated Loss Adjustment
Expenses in the amount of $58,000 ("Escrow Deposit"), such amount to be
paid by National Union to Travelers on or prior to the "as of" date at the
inception of this Agreement. This amount represents Travelers estimate of
Losses and Allocated Loss Adjustment Expenses for eight days. Travelers
reserves the right to increase the amount of prepaid Losses and Allocated
Loss Adjustment Expenses if its actuarial estimates indicate that such an
increase in necessary. Any such increase shall be based on Travelers'
actuarial estimate of eight (8) days worth of Losses and Allocated Loss
Adjustment Expenses. National Union shall provide such additional prepaid
Losses and Allocated Loss Adjustment Expenses to Travelers, in accordance
with the terms of Travelers notice that such additional payments are
required.
3. On the first business day after monthly Loss information is available, and
monthly thereafter, Travelers will compare the amounts paid by National
Union pursuant to paragraphs 1. and 2. above with amounts paid by Travelers
as Losses, plus Allocated Loss Adjustment Expenses. If the former amount is
greater than the latter, Travelers will return the difference to National
Union. If the former amount is less than the latter, National Union will
pay the shortfall to Travelers. Such payments will be made within three (3)
business days of the calculation being performed. Such monthly calculation
will continue until the Electronic Funding Program in Exhibit C is
established and is operational.
4. These payment terms under this Exhibit B will remain in place until the
Electronic Funding Program in Exhibit C is established and is operational.
As of that date, this Agreement will be governed by the payment procedures
set forth in Exhibit C of this Agreement. Travelers will, as of that date,
compare any remaining prepaid Losses and Allocated Loss Adjustment Expenses
collected under this Exhibit, after payment of Losses and Allocated Loss
Adjustment Expenses, with the deposit amount required under Exhibit C. If
the former amount is greater than the latter, Travelers will return the
difference to National Union within three (3)
7
<PAGE> 8
business days. If the former amount is less than the latter, National Union
will pay the shortfall to Travelers within three (3) business days.
8
<PAGE> 9
EXHIBIT C
---------
Electronic Funding Program
The following is a description of the terms and procedures under which The
Travelers Electronic Funding Program with National Union is established and
operated.
Travelers will make payment of retrospectively-rated and Deductible Losses,
as defined in the Agreement Letters (hereinafter referred to as "Losses") on
National Union's behalf under the insurance program with Werner utilizing
checks drawn against a bank account of The Travelers Indemnity Co. or one of
its affiliates.
In order to facilitate the weekly funding process, National Union will specify
a bank and account ("Source Account") against which weekly Automated Clearing
House ("ACH") debits will be drawn by a bank selected by Travelers ("Processing
Bank") in payment of Losses. National Union will also provide authorization to
The Travelers to direct its Processing Bank to draw ACH debit transactions
against National Union's Source Account for this payment. Travelers will provide
National Union with a sample authorization letter to be signed by National
Union which authorizes Travelers to direct its Processing Bank to draw ACH
debit transactions against National Union's Source Account. Travelers will also
provide National Union with an example of the banking industry form to be
provided by National Union to Travelers' Processing Bank to identify the Source
Account codes and the Source Account's bank ABA code.
Each week Travelers will be notified of the total Losses which have been paid.
In addition Travelers Loss systems will generate charges for Allocated Loss
Adjustment Expenses and the applicable Claims Handling Factor charges (which
Claims Handling Factor charges will be collected pursuant to Article 2.C. of
this Agreement), as well as corrections as a result of edits on each Loss
payment. This data will be processed through Travelers TRACER system to
determine the resulting charge for the week based upon the Werner Insurance
program and such data will be simultaneously delivered to National Union. Once
determined this charge will be sent electronically to Travelers Processing Bank
with instructions to draw an ACH debit on National Union's Source Account. The
draw on the ACH debit account by Travelers shall not occur more frequently
than once per week without the written permission of National Union.
Travelers shall produce and provide to National Union, a quarterly report
identifying Losses and reserves plus applicable Allocated Loss Adjustment
Expenses by claim. In addition, at the end of each month Travelers will produce
reports that will identify the claim charges and Travelers will provide these
reports to National Union by the sixth (6th) business day of the following
month.
For the Electronic Funding Program Travelers requires that National Union
deposit with Travelers at the inception of this Agreement an amount equal to
eight days worth of
9
<PAGE> 10
Losses and Allocated Loss Adjustment Expenses for National Union's program with
Travelers (currently estimated at $58,000). Periodically Travelers will perform
an analysis of Loss activity, based upon data from the TRACER system, in order
to determine the adequacy of the deposit amount. In the event that any such
analysis indicates that an increase in the deposit is required, Travelers will
provide National Union with documentation of the analysis and notification of
the amount of increase in the deposit, which increase shall also be based on
Travelers actuarial estimate of eight (8) days worth of Losses and Allocated
Loss Adjustment Expenses. Three business days after National Union is notified
Travelers will instruct its Processing Bank to draw an additional ACH debit
against National Union's Source Account and transfer this amount to Travelers
which will be added to National Union's deposit balance.
10
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference of our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements of Werner Holding Co.
(PA), Inc. dated February 10, 1998, in Amendment No. 1 to the Registration
Statement (Form S-4 No. 333-46607) and related Prospectus of Werner Holding Co.
(DE), Inc. for the registration of $135,000,000 in Senior Subordinated Notes due
2007.
/s/ Ernst & Young LLP
Cleveland, Ohio
April 13, 1998
